Posts with tag fed


Guest Writer, September 14 2022

There's an encouraging sign that Americans view painfully high inflation as a temporary phenomenon, according to Courtenay Brown and Neil Irwin.

It comes in the form of another sharp drop last month in how steep consumers expect inflation to be in the upcoming years, as shown in the New York Fed's latest Survey of Consumer Expectations.

Expectations for the level of inflation over the next year fell by about half a percentage point in August – a historic monthly decline in the survey's nine-year history and second only to July's record-breaking drop.

Consumers' expectations for year-ahead price increases for gasoline also saw another sharp drop. Now, consumers expect gas prices to be roughly the same a year from now.

The Fed's huge fear is that consumer expectations for steep inflation will become a mainstay of the economy, which could force them to act in ways that would help inflation spiral upward. 

For what it's worth, that worst-case scenario doesn't appear to be materializing.

Respondents also aren't nudging up expectations for higher wages in the future. For the eighth straight month, earnings growth expectations held at 3%.

Even as inflation expectations move in the right direction, the survey shows consumers expect inflation to be much higher than the Fed's 2% target in the years to come.

Economists expect that the CPI – out tomorrow – will show that prices fell by -0.1% in August.

Core inflation – which strips out more volatile food and energy prices – is expected to have risen by 0.3%, matching July’s pace.

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TRICK OR TREAT? Gouls and Goblins Handing Out Higher Interest Rates

Guest Writer, November 2 2022

As you were handing out candy to – or walking the ghostly neighborhood among – the Nemos, Princess Ariels and Lightning McQueens, the Gouls and Goblins were scheming.

In fact, the fix is in – for another 75-basis point hike in the Fed Funds interest rate, that is. The horror of it all!

Even though 11% of Fed futures traders believe the Fed will raise its target rate by a mere 50 basis points on Wednesday, a 4th-straight increase of 0.75 percentage points is locked in. 

The Federal Reserve just can’t help itself.

But Courtenay Brown and Neil Irwin say the more important thing to watch is what Fed Head Jerome Powell says at his post-meeting presser about what comes next.

They add that Powell and Co. face “a delicate balance” between signaling to Wall Street on the one hand that they will eventually slow down to “a more cautious pace of tightening” – without appearing to no longer being as committed to bringing down inflation on the other.

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Bob Rinear, November 12 2022

So, we talked about two things this past Wednesday, 1) are we looking at a “melt up” into year end and 2) what were we going to get with the CPI.

My feeling was simple. This is what I said:  “So, the median call is for the CPI to come in +7.9%. The question is, what happens if it's higher or lower? If we get a lower reading of say 7.6 this market will rally hard. Maybe it would be short lived, but up we would go. “

Well I missed by a tenth, the report came in at +7.7%. And what happened? The market went nuts. We had the futures trading up 1000 points on the DOW before the open and we put in a 1,200 point DOW day.

Why? The current theory is that inflation has peaked, and this will give the Feds the green light to just do maybe one more 50 basis point hike and then go into pause mode. They thought the concept was just marvelous and they ran with it. Bigly so to speak.

First off let’s get a few things straight. The inflation we’re suffering from wasn’t because of overheated buying by us peon’s. It has TWO root causes. 1) the insane money printing/QE baloney the feds have been hammering us with for 12 years and 2) the insane supply chain disruptions resulting from them unleashing their bioweapon bullshit on us.

The money creation IS the very textbook definition of inflation. You don’t have to be a fellow of Lucasion mathematics to understand that. In fact if you go to and look up the word inflation, this is what you find:


Economics. a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency

And there you have it. An increase in the volume (amount/printing) resulting in the loss of value of the existing currency. Bingo, give the dictionary a big cigar.

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Guest Writer, December 14 2022

As the Federal Reserve converges on the nation’s capital this week for its last policymaking meeting of 2022, consumer inflation expectations are falling again.

According to the New York Fed’s latest Survey of Consumer Expectations, consumers expect a median inflation rate of 5.2% in the year ahead. That’s almost 0.75 percentage points lower than what they expected in October.

Over the next three years, consumers expect a median rate of 3% – a tenth of a percentage point lower than in October. And their median expectation over 5 years is slightly down at 2.3%.

The move downward reverses an increase in expectations shown in the prior month that, if unbroken, would certainly have given the Fed an excuse to continue with their 75 basis point rate hikes well into the new year. 

The NYFed’s monthly survey is “a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads.”

According to the NYFed, “Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month.”

As it is, there’s no guarantee that Powell & Co. will step down their aggressive tightening on Wednesday with a presumed 50bp increase – although Fed Funds futures traders believe there’s 75% chance of that.

That would take rates to a range of 4.25%-4.50% – up from 0%-0.25% before the campaign to rein in non-transitory inflation began in March. 

As Courtenay Brown and Neil Irwin point out, perception is usually reality – that is, if consumers believe high prices will stick around, they can (and usually do) become a reality; the same goes for expected lower inflation.

Turns out that October's jump now appears to have been a blip on the radar screen of an otherwise months-long downward trend of inflation expectations – consistent with rising prices at the gas pump. 

Fortunately, for consumers, the cost of crude oil and gas has been falling since late spring/early summer and is now an average $3.26 a gallon across the country (it was $4.99 in mid-June), according to AAA.

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Fed Tightening to Get to 2% Inflation Could Add 9 Million to Jobless Rolls

Guest Writer, December 17 2022

Critics, second guessers and Monday morning quarterbacks are speaking out en masse since the Fed’s 50 basis point rate hike on Wednesday.

In perusing mainstream headlines and articles since then, I’ve found that 9.5 out of 10 of op-ed writers, economists and other pundits believe that Chair Jerome Powell and his policymaking colleagues are on the verge of sending the economy into a recession.

They say, no ifs, ands or buts about it. The only question is, How deep and prolonged will the downturn and resulting pain be? In other words, forget about any soft landing.

The consensus of the naysayers is that the Fed started their quantitative tightening too little, too late. This side also argues that:

(1)  The Fed’s projection of last year’s inflation surge being transitory was naïve (at best) and potentially catastrophic (at worst); and

(2)  As a result, they kept interest rates too low for too long and kept buying Treasuries and mortgage-backed securities when they should have stopped that much earlier.

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Distressed Debt Jumps 300% in 2022

Guest Writer, January 4 2023

Sorry for the cliché, but the more things change, the more they remain the same. 

Nowhere is this more painfully obvious than in the financial industry – where cracks are expanding in already porous credit dykes all over the world.

You think we'd have learned from the disastrous effects of the Great Recession 15 years ago.

But after additional years of excess from banks stuck with piles of buyout debt, a pension blow-up in the UK and real-estate troubles in China, South Korea and more recently the U.S., we’re finding again that what’s past is prologue.

Thanks to global central bank rate hiking, cheap money is quickly becoming a thing of the past. 

Distressed debt in the U.S. alone jumped more than 300% in 12 months, according to Bloomberg News.

Plus, high-yield issuance is much more challenging in places like Europe, and leverage ratios have reached record levels.

The aggressive rate hikes have dramatically changed the landscape for lending – stressing credit markets and pushing economies toward recessions, a scenario that markets have yet to price in.

Nearly $650 billion of bonds and loans are distressed, according to Bloomberg. 

It’s all adding up to the biggest test of the stress tolerance of corporate credit since the 2008 financial crisis and may be the spark for a wave of coming defaults.

Will Nicoll, chief investment officer at M&G, said, “It is very difficult to see how the default cycle will not run its course, given the level of interest rates.”

Banks say their wider credit models are proving robust so far, but they’ve begun setting aside more money for missed payments.

Loan-loss provisions at systematically important banks surged 75% in the 3rd quarter compared to 2021 – a clear indication they’re preparing for payment issues and defaults.

Most economists see at least a moderate GDP slump over the coming year. 

Some, like Paul Singer of Elliott Management, however, fear a deep recession could cause significant credit issues because the global financial system is “vastly over-leveraged.” 

Citigroup economists believe rolling recessions are likely across the globe next year, with the U.S. likely to slip into one by the middle of next year.

Mike Scott at Man GLG warned that “markets seem to be expecting a soft landing in the U.S. that may not happen.”

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Upside Down

Bob Rinear, January 6 2023

The equities market is a very strange beast, it truly is. Let's take Friday for example.

The fed has been pretty straight forward in telling you that they are going to hike rates until they get up and over 5%. Despite the howls from the market participants, Powell has also said that there would be no rate cuts in 2023.

But Wall street doesn't believe him. See, they've got all this history about the Fed, and for decades the play was always the same. Fed hikes rates to cool down an economy, overshoots, panics and then starts cutting rates.

When rates are being cut, stocks move higher. Why? Companies can borrow more money at a cheaper price. They can use that money to buy up their own shares, and thus reduce the float and therefore push the stock price higher.

Wall street LOVES low rates and the evidence is easy to see. Look at what the DOW has done since 2010. After the 08/09 financial crisis, the fed went into panic mode and printed money like madmen. Do you know where the DOW was in 2010? 

No, really.... think about this for a minute. The DOW Jones has been in existence since 1896. Did you know it was that old? Yessirree it is. And from 1896 all the way to 2010 the best it could do, was end the year at 10,600.  That's it. 10K in over 100 years.

From 2010 to 2022 it made it to 34,561.  Now the back of the cocktail napkin tells me that this is a gain of about 24,000 points.

So, if it took 114 years to go from its humble beginning of 12 stocks, to the current 30 stocks in 2010 and only gained 10K points... why did we gain 24K points in just 12 years? What changed?

You all know the answer to this riddle. Zero interest rates and trillions of freshly minted/printed dollars, that's what.  If the fed is cutting rates, and/or keeping them there, AND printing trillions at the same time, the market gets orgasmic and up it goes. We have the proof, it's there in black and white.

But the fed has changed course now, and has been aggressively hiking rates. Well that's sort of peeing in their punchbowl and they hate it. That's why in 2022 we saw the S&P down 20% and the debt heavy NASDAQ down 34%. 

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Two Things

Bob Rinear, January 28 2023

Well maybe a few more than two. But first off, did you all see Biden promising 31 more tanks to Ukraine? I watched his 20 minute word salad speech and I was speechless.  They want this war to go on and on and on. They want all the spending they can squeeze out of this, and boy the money is flowing.

It took me a long time…over two hours. But I wanted to look up the first time I said that when the economy is in the toilet, they will spark a war, open the debt gates and spend their way out of the hole. Well it was all the way back during the NASDAQ meltdown, and sure enough, we went into Iraq over the BS of weapons of mass destruction. 20 years ago. I probably said it sometime in the 90’s also, but got tired of searching.

Once the war time spending hits, they can spend their way out of most recessions. Well, they’ve done it again. They set up the Ukraine since 2013 to be the area ( patsy) for the next multi billion dollar war spending spree. So it worked. They pushed and pushed Russia to the point where Putin did what any world leader would do…he snapped and pushed back.

That was and is the plan and the reason all these politicians are saying things like “what ever it takes” concerning helping Ukraine win. Listen folks, these people don’t give a rats ass about the Ukrainian people. They do like the Ukrainian chemicals, rare earths, and oil and gas…but the people? To the politicians they’re just as expendable as the people in Libya, Iraq, Sudan, Yemen, Palestine, and a hundred other places. Cannon fodder, nothing more. Oh and a good place to launder their millions of dollars…they do like that too.

But they’re playing a very dangerous game this time around. Russia isn’t Iraq or Libya. Russia isn’t Vietnam or Afghanistan. Russia is a very formidable opponent. So, while they’re all in on this  war because of the debt that the Central banks can create and the money that gets spent on more armaments…if it gets out of control, we are in WWIII, with the death and destruction that brings. War is a racket, as quoted by Gen. Smedly Butler so long ago. Well this is one of their biggest rackets ever. 

Okay, so lets me get back to market land. This coming week is yet another two day FOMC meeting, where they will determine what they’re going to do with interest rates. Then, on the second day of the meeting, Powell himself will give a Q&A press conference, where he’ll get asked 25 times “when are you going to pause and when are you going to cut rates.”  Both of which he will dance around in Fed speak. He’s not as good as Mumbles Greenspan, but he’s pretty deft at it.

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The Federal Reserve just can’t seem to help itself

Guest Writer, February 4 2023

The Fed, the Bank of England and the European Central Bank all raised interest rates this week again to fresh multi-year highs. 

They just can’t seem to help themselves.

At the same, they each suggested or explicitly warned that there is more tightening coming plus a willingness to hold their policies at hawkish levels for a while.

They just can’t seem to help themselves.

Let’s focus on the Fed. Inflation and all of its major drivers fell in the last half of 2022. 

I’m not going to say it fell sharply, steeply or significantly, because some prices have come down – some even sharply, some just a tad – and some have not at all. 

The so-called price deceleration occurred despite the pace of economic growth, which picked up in the second half of the year and unemployment remained fairly static.

We know that the goal of the Fed’s statutory dual mandate is to balance the risks of inflation versus the benefits of solid economic growth and maximum unemployment. 

Jeremy Bivens points out that currently, “the benefits of low unemployment are enormous, and the risks of inflation are retreating rapidly.” 

Here’s what he wrote before the Fed’s 25-basis point rate hike on Wednesday:

“If the Fed lets the current recovery continue [quickly] by not raising interest rates further at this week’s meeting, 2023 could turn out to be a great year for the economic fortunes of American families.

“It is time for the Fed to stand pat on interest rate increases and wait to see how the lagged effects of past increases enacted in 2022 will filter through to the economy. 

“Continuing to raise rates in the early stretches of 2023 will be a clear mistake and pose an unneeded threat to growth in the next year.”

He envisioned a Powell press conference after a meeting at which the Fed decided to leave rates alone, emphasizing these points:

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IS THE FED REPEATING ITS MISTAKES OF THE PAST? The Full Impact of Tightening Is Yet to be Felt

Guest Writer, February 11 2023

Ambrose Evans Ambrose-Pritchard writes in The Telegraph that “monetary tightening is like pulling a brick across a rough table with a piece of elastic. 

“Central banks tug and tug: nothing happens. They tug again: the brick leaps off the surface into their faces.”

            Or as economist Paul Krugman puts it, the task is like trying to operate complex machinery in a dark room wearing thick mittens. 

Lag times, blunt tools, and bad data all make it impossible to execute a beautiful soft-landing.

Way back in late 2007, the economy went into recession, a lot earlier than originally thought and almost a year before the demise of not-too-big-to-fail Lehman Brothers. 

But the Federal Reserve apparently didn’t know – or acknowledge – that at the time.

The initial data release was way off base, as it frequently is at certain points in the business cycle. 

The Fed’s main predictive model was showing an 8% risk of recession at the time. Today, by the way, it’s under 5%. Evans-Pritchard remarks, “It never catches recessions and is beyond useless.”

Fed officials later complained they wouldn’t have taken their hawkish stance on inflation the next year had the data told them what was accurately happening in real time.

And, more importantly, they wouldn’t have set off the chain reaction leading the global financial system to come crashing down. 

Evans-Pritchard, however, ponders that had the Fed and its peers overseas paid more attention – or any attention for that matter – to the quickly evolving slowdown in the first half of 2008, they would have seen what was coming. 

So, where does that leave us today as the Fed, European Central Bank and Bank of England hike rates at the fastest pace and more aggressively in four decades, with massive QT as icing on their cake?

According to Evans-Pritchard, the monetarists are again crying the apocalypse is coming! They’re accusing central banks of inexcusable errors: 

First, they unleashed the high inflation of the early 2020s with an explosive monetary expansion.

Then, they swung to the other extreme of monetary contraction – disregarding both times the standard quantity theory of money.

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When It Sucks To Be Right

Bob Rinear, February 25 2023

When you’ve been writing articles for as long as I have, and in some (many) of them you make predictions, you know you will win some and lose some. You simply hope to win more than you lose.

My thesis on inflation and the Fed has been right unfortunately. Some of the catchy little phrases I’ve used is “it’s different this time” and I’ve gone to great lengths to suggest that this current fed, is NOT going to be bullied by the market.

In fact, one of the more comical things I’ve seen in the last 3 months has been the so called “experts” on the market, explaining how the Fed MUST pivot towards cutting rates, and how they most certainly will. Yet time after time, whether it’s Powell, or Mester, or Bullard or whomever…they simply say “higher for longer.”  And then the experts go off in a huff and a puff.

The world we live in right now, is crazier than at any time in my life. We, (Humanity) is being attacked as never before. I mention the WEF ( World Economic Forum) a lot, because in years past the globalist scumbags tried to keep their plans secret. From the Club of Rome, the Builderbergers, the CFR, etc, all kept their dirty little agenda’s hidden from the public. But not Satan-Klaus and his band. They tell you right to your face how much they hate you and want you dead.

Hey at LEAST they’re telling you the truth. They are all in on population reduction, eliminating your choice of food, what kind of travel you can or can’t do, taking over your healthcare, setting up 15 minute cities, eliminating dairy farms, cattle ranches and on and on. Right in your face.

But other than them, 99.9% of everything else you’re told is pure BS. Safe and effective comes to mind. Or Trump was a Russian plant, or we didn’t blow up the Nordstream pipeline, or Iraq having WMD’s, or Russia had no incentive to invade Ukraine, or Russia is paving the way to conquer Europe, or there’s 89 genders, or ivermectin is dangerous and doesn’t work,  or, or, or, or etc ad-infinitum. You get it. Everything’s a lie.

So, if everything is a lie ( amazingly except what the WEF says they want to do to you) it’s awful hard to figure out fact from fiction. The gift of discernment is very important in trying to understand the ultimate goals of the various agenda’s.

When it comes to the Fed and hiking rates, I am on the record in these pages back  in March of last year, as saying that inflation would be more than people expected, and last longer than people expected and that the fed was going to use rate hikes to fight this inflation. Oh, and just so you understand, my theory is that they’re using inflation as the cover for rate hikes.

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Guest Writer, March 1 2023

A major study out last Friday finds that the Federal Reserve has never reduced inflation from high levels, much like today’s, without causing a recession.

The paper was written by a group of leading economists, with three current Fed officials addressing its conclusions at a conference on monetary policy.

When inflation takes off, as it has over the past two years, the Fed normally reacts by raising interest rates – sometimes forcefully – to try to put the brakes on price increases and cool the economy in the process. 

The higher rates, directly or indirectly, make mortgages, car loans, credit card debt and commercial lending more expensive.

But sometimes – again, like today – inflation remains stubbornly high, requiring even higher rates to rein it in. 

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Are Markets Bewitched by The FED as Business Buys Into “Higher For Longer”

Guest Writer, March 8 2023

Investors have itchy fingers these days – or perhaps it’s just the way they have their high frequency computer algorithms programmed. 

Either way, it’s why analysts like Felix Salmon see markets “trembl[ing] at the Fed's every twitch.” And yet, he points out, it doesn't seem to be having much effect on the economy.

Salmon adds that the Fed's main policy tool — even more important than setting interest rates or printing money — is the trust that Americans have in it to do the right thing. 

According to recent surveys, a majority of Americans believes the U.S. is in an ongoing recession that the Fed has not only failed to prevent but is seen as having caused it (or is on the verge of causing it).

Analysts say the economy is running hotter than it should be, that the job market remains tight with headline unemployment at historic lows, and that mixed signals abound about the scope of the coming downturn.

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End Games

Bob Rinear, March 18 2023

How does one be proud of something they’ve done or said, without looking boastful? It’s not easy, because it will usually appear that you’re patting yourself on the back to get attention.

Well, I want attention. Not for being right, but for alerting people to what the hell is going on out there.

I had this conversation the other day with a good friend. He’s tried to tell people about what’s really going on with things… from the jabs, to the banking system to the WEF, to CBDC’s and most don’t want to hear it.

Trust me I know. Ask me how I know.

So, when Powell started hiking rates, I said over and over “this is not to fight inflation, he’s hiking rates into a shaky economy to crush the middle class, cause things to break, consolidate power”

And I’ve been right. Bravo, good job and all that crap. My point is that like so many things I’ve stated over the past 30 years, some/most of it seems insane to the “normal” people. For instance when I write these articles, I often amuse myself by asking myself how many people are going to roll their eyes, call me a nut and simply discard what I’ve said. Usually it’s a lot.

So, Powell hiked and hiked, going from 0 to 5% faster than any hike schedule in modern history. His cover was inflation, which is horsecrap. That’s the excuse for his hiking rampage, not the reason. The reason was just shown to you in living color this week.

Central bankers aren’t stupid they’re simply evil. They knew damn well that keeping rates artificially suppressed for over a decade would cause trouble down the road. They also know that jacking rates as fast and high as they have would cause duration instability in many banks, especially smaller regional banks. Yet they did it.

Now banks are blowing up. Why? Because when rates were zero, banks would have no choice but to buy long dated bonds, just to get a lousy 1.5%. But when they got pushed to 5%, the bonds on their books went down mark to market. ( Bond yield and price are inversely related. Thus, as the price goes up, the yield decreases, and vice versa. This relationship exists because the bond's coupon rate is fixed, which requires the price in secondary markets to change to align with prevailing interest rates in the market.)

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Are We In A 2008 Remix?

Guest Writer, April 1 2023

Courtenay Brown and Neil Irwin open their Friday column with these startling headline-like declarations: 

“Sunday night bank bailouts on both sides of the Atlantic. Joint announcements by global central banks. Fear and uncertainty sweeping markets.”

Brown and Irwin say the last 10 days have felt similar to the 2008 Great Recession. 

But there are crucial differences, they point out, that lower the risk that recent events will have “the same seismic impact on the world economy” as back then.

Undoubtedly, the still-unfolding run on bank deposits has raised the odds of a recession, especially with a Fed’s hellbent focus on bringing down inflation at virtually whatever cost. 

Crisis? What Crisis?

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Guest Writer, April 5 2023

A lot of news competing for our attention – financial, political and otherwise – as a new week unfolds:

  • For the first time in our nation’s history, a former U.S. president has been indicted and will be arraigned in NYC tomorrow;
  • Over 1,100 FDIC-insured U.S. banks were trading in risky derivatives in the 4th quarter, according to the Office of the Comptroller of the Currency;
  • Just four banks – Goldman Sachs, JPMorganChase, Citigroup and Bank of America – held 88% of those derivatives’ face values, according to Pam and Russ Martens of Wall St. on Parade;
  • OPEC+ announced a one million barrel per day cut in oil production, sending prices through the roof;
  • Home prices suddenly jump after several months of falling. Is a sellers' market about to return?

But here’s the story I want to highlight today:

David Hollerith reports today that depositors pulled another $126 billion out of U.S. banks in the week ending March 22nd – primarily from the nation's largest institutions.

The largest 25 banks in the U.S. by asset size lost $90 billion (on a seasonally adjusted basis), according to the Fed.

Smaller banks, which suffered a huge run the previous week as regional lenders Silicon Valley and Signature Banks were going bust, were able to stabilize their assets, gaining back $6 billion.

Total industry deposits fell to $17.3 trillion, down 4.4% from the same week a year ago – the lowest level since July 2021.

Hollerith says the new numbers reinforce some trends that were already in place.

For example, deposits had been falling at all banks before the Silicon Valley failure in the first two months of 2023. Deposits for all banks were also down 5% annually in last year’s 4th quarter.

Many observers attribute this systemic shift to pressure being applied by the Fed’s aggressive (obsessive?) campaign to bring down inflation closer to its 2% target.

During the early part of the pandemic, when interest rates were virtually zero, banks were drenched in deposits.

When the Fed started raising those rates last March to cool the economy, customers who had deposits began seeking out places with higher yields.

The first year-over-year deposit decline for all banks came in the 2nd quarter of 2022.

As we’ve pointed out, some of this money has been flowing to money market funds, which are offering investors a rate of return in the range of 4-5%.

Since January 1st, investors have poured over $500 billion into those funds, according to too big to fail Bank of America.

That’s the highest quarterly inflow since a peak earlier in the pandemic, and another $60 billion was added to these funds in the past week.

Government and banking officials have been working to prevent massive deposit outflows in the aftermath of last month’s bank failures.

Federal regulators pledged to cover all depositors at both banks they seized, hoping that would calm any panic, and also promised to help other regional banks if needed.

Eleven megabanks also decided to provide another troubled regional lender, First Republic, with $30 billion in uninsured deposits to stabilize its dire situation.

The challenge that outflowing deposits create for all banks is that if they raise rates on their deposits to keep or attract customers, their profits fall, making shareholders wary.

But if they lose too many customers, as SVB did, they lose critical assets and may have to sell assets, like long-term Treasuries, at a loss to cover withdrawals.

SVB customers withdrew $42 billion in one day, leaving the bank with a negative cash balance of $958 million, forcing regulators to seize the bank, which was the 16th largest in the U.S.

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Guest Writer, April 15 2023

The government’s Producer Price Index for March, out today, showed that wholesale prices out and out declined from February – a possible sign, some say, of further cooling in prices in the coming months.

Axios’ Courtenay Brown and Neil Irwin say the latest numbers highlight a shift in America's inflation dynamics – namely, falling energy prices earlier this year, which is putting downward pressure on overall inflation.

The PPI, which is a measure of the change in the cost of suppliers' goods and services, fell 0.5% in March after a flat reading the month before.

The index is up 2.7% year-over-year through March (PPI peaked at more than 11% last June).

A good chunk of last month’s decline is a result of plunging energy prices that fell 6.4% in March (they’ve been rising again since then). Food prices rose 0.6%, after three straight months of declines.

Economist Bill Adams at Comerica says, "PPI surprised to the downside, but its details show the release is unlikely to bring the Fed off of the inflation fighting warpath." 

That’s a sentiment shared by others. Over two-thirds (68%) of CME Fed futures traders see another 25-basis point rate hike announcement at the end of the next FOMC meeting on May 3rd.

Adams explained, "March's slowdown was concentrated in goods prices, especially energy goods. 

“By contrast, core services prices are still running hotter in year-over-year terms than they were between last April and January."

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Sometimes What They Say is Enough - Sound & Resilient

Guest Writer, May 10 2023

“The banking system is sound and resilient.”

That’s what the Federal Reserve’s press release said on Wednesday in the statement announcing another 25 basis point interest rate hike.

Sound and resilient.

A few hours later, multiple media sources reported that PacWest Bank is exploring strategic options, including a possible sale.

Is PacWest the Next to Fail?

Shares of PacWest stock were already down about 80% since February. After the news hit, the stock took another 50% nosedive.

In fact, since January 1st, its share price has tanked – having fallen from $22.95 to a new 52-week low of $3.17 as of yesterday’s market close.

Bloomberg’s Joe Wiesenthal noted in his Thursday column that “overall, the ‘banking system’ may be sound and resilient, but there's clearly anxiety surrounding individual banks that hasn't gone away.”

PacWest sank over 50% in early trading and was halted multiple times because of volatility.

At the same time, Tennessee-based First Horizon Bank also fell 33% after the regional lender and TD Bank announced that they were terminating their merger agreement.

The banks jointly said that the move was because of uncertainty around when (not if) TD would receive regulatory approval for the deal and was not related to First Horizon.

Other notable declines included a drop of 38% for Western Alliance and 12% for Zions Bancorp. The SIPDER S&P Regional Banking ETF (KRE) was down more than 5%.

Western Alliance’s fall came despite the company advising Wednesday evening that deposits have grown since the end of March.

KBW CEO Tom Michaud said, “That hasn’t taken the heat off of the stock, or the bond prices. Investors are very nervous.

“And I think what they’re nervous about is the fact that Silicon Valley lost 75% of their deposits in 36 hours. There’s not a bank in the world that could really sustain that.”

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Why I’ve been Harping on Water

Bob Rinear, October 4 2023

Tuesday the yield on the ten year hit 4.757%.  Just three weeks ago the market would have a hissy fit plunge when it came close to just  4.3%

For months on end I’ve been suggesting that some form of credit market/debt market “event” was going to happen and if/when it does, all hell will break out. But, what could it be? The Japan carry trade collapse? A major bank has to “bail in” it’s depositors to save itself? A massive commercial real estate default? I don’t know which one, but something’s lurking out there.

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Banks Fueling Financial Disaster

Guest Writer, November 15 2023

Once again, Pam and Russ Martens have grabbed our attention with another zinger.

In today’s Wall Street on Parade newsletter, they feature Michael Hsu, the acting director of the Office of the Comptroller of the Currency (OCC).

The OCC charters, regulates, and supervises national banks, federally chartered savings associations and federal branches and agencies of foreign banks in the U.S.

They stand beside the Federal Reserve as a major regulator of banking institutions.

Specifically, the Martens write about how Hsu “undermined [already declining] public trust in the U.S. banking system” when he approved JPMorgan Chase’s acquisition of failed First Republic Bank in May.

(By now, readers know that JPMorgan Chase is America’s largest – and, by some measures, the riskiest – bank in the nation.)

The Martens go on to note that Hsu’s response to that “collapse in public trust” was to, yes, issue a survey measuring public trust in, yes (again), banks.

The Martens tie much of Americans’ lack of trust to the number of unlawful acts committed by the largest of the too big to fail banks over the last 23 years.

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