do you want to bet on this crisis being bigger that $1t?
If Bank of America collapses, I’ve got a bunch of great BofA jokes to make.
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If the inflation is a result of the Ukraine war, then yes, should ignore. Trying to use your tool in a situation where it doesn’t apply at best just shifts the costs of war around and more likely makes the problem worse. Laid out my logic on that so agree to disagree if you aren’t convinced.
If inflation is because he held rates too low for too long then a) we agree this is happening because he fucked up and b) he has a responsibility to manage the bubble he created responsibly rather than trying to fix his mistake of creating the bubble by immediately popping it.
OK, and then what about the people who can’t afford to heat their homes, put food on the table, etc? Be realistic, subsidies to help the poor would have to get through Manchin and Sinema.
The rate was ~0 from late 2008 to early-mid 2016. That’s Bernanke and Yellen, and that has a lot to do with this IMO. He left it at 0 from April 2020 to Feb 2022, give or take? Yeah too long, but he shares that blame with the predecessors who did it way longer.
IMO there’s a lot of blame to go around, but it largely stems from a chain of events wherein the rate was held artificially low for way too many years between 2008 and 2022, which created a huge bubble in the stock market, in VC-backed tech in particular, and led to risky behavior by SVB… and I doubt this is the last of it we’ll see, but hopefully most isn’t in banking for obvious reasons. Meanwhile we saw deregulation, which didn’t help. We saw regulatory capture by the wealthy, which didn’t help. We have a dysfunctional political system which means that a lot of problems that SHOULD be solved legislatively CAN’T be solved legislatively, so the executive branch or other institutions like the Fed end up trying to solve them.
It’s all a huge shit show, and it is all interconnected around income/wealth inequality and regulatory capture.
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That’s how hopeless it is, he was one of the “good” or at least “better” guys. I have a hard time blaming him. I think it’s probably a natural reaction to try to get your bag once you see how utterly fucked the entire system is, and how hopeless it all is.
Isn’t inflation a lot lower the past few months but 6.4% over the year?
It peaked at like 9% iirc, it’s currently at 6.4%, and yes it’s yoy.
Boy, the CEO of Truist picked a hell of a morning to announce his retirement.
the inflation argument almost always assumes that 2% inflation target is healthy, or even optimal, given that pretty much the ONLY tool we have is the Fed setting the prime rate. i.e. economy will be back to where we want it IF and WHEN inflation is ~2. but, to me it seems weird that we are so attached to it as a magic threshold. maybe 2% for 9 years out of 10 feels good, but that last year makes inflation regress to an average of 4% for the decade. is that better than having a more stable target of 4% to begin with?
there is data that makes us feel good about 2%, but it is more or less collectively made up in everyone’s ADHD minds. like they don’t mind losing 2 cents of their dollars in a savings account, as long as they can stay employed and retirement checks don’t start looking like a pittance without active management. so interest rates have to stay high enough for everyone to trust that will always be the case.
on the other hand, interest rates should also be low enough to finance any new tech or industry whenever we need it (eg massive investments are needed to make housing more energy efficient, or promote renewables, electric cars, etc). don’t even get me started at how private money ignores funding basic science, and we end up fighting political battles to finance anything with social value.
yet it would take a gigantic shift for everyone to be more or less “okay” with 4%. psychology is a part of it, but consumers might need to plan expenses weeks or months ahead of time, even if using credit for purchases, while investing at least some savings into marginally higher yield and risk.
So we all own a bank now? That’s cool. Check me out, I’m a banker lol.
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Just bought C at $45.16, and hedged it with puts on TFC with a 4/21 strike. Figure there’s no world where Citi crashes and Truist doesn’t go out of business, Citi is way better capitalized than Truist. Plenty of worlds where Citi goes up and Truist crashes/goes under, and if both come through ok, the puts are just a small drag on my returns on Citi.
Berkshire (Buffett) were still in a $2.5B position in C as of 12/31.
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Also just bailed on KT (Korea Telecom), it has some significant exposure to K Bank, which has exposure to crypto banking.
Oregon Trail EZ Mode ACTIVATED!
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Ohhh a headline about Fannie Mae and risky mortgage-backed securities. I’ve seen this one before!
I can only see the first couple graphs, anyone have a Bloomberg Law subscription by any chance? @Jman220 ?
No, sorry, fuck bloomberg.
Just by thinking about it I can confirm that Fannie and Freddie have a shit ton of those unrealized Powell created paper losses I was talking about. They are owned by the govt and exist to guarantee all those home mortgages at <3% that Powell encouraged everyone to take out just a year or two year ago. Current market price for mortgages is 6-7% so all those mortgages Fannie/Freddie guaranteed are obviously way underwater.
How will those massive paper losses manifest in the real world? Stay tuned to the next episode of Powell Burns Everything Down to find out.
This is the move I think I disagree with. I think KT stock is still super cheap even if you remove K bank entirely from the picture, which probably isn’t happening.
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It was the CEO of a Truist subdivision that retired today, not the CEO of the entire company.
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Truist has a lot of exposure to MBS. Now, if held to maturity they’re (mostly) fine because they’re (mostly) government-backed. But approx $60B of their approx $72B of assets available for sale are mortgage-backed securities. If there’s a liquidity crisis for mortgage-backed securities and a run on Truist, they’re fucked.
Yes, my bad. Securities, though. Still suspect timing IMO. Like maybe that was planned, but still… looks bad. And I’m a newb at reading banking annual reports, but theirs looks bad to me if there’s a risk of a liquidity crunch for mortgage-backed securities, because I think they’re going to need to sell some if there’s any sort of run.
I assume every bank worked around the clock over the weekend to review their capitalization and their holdings.