I'm pretty happy with where "we" were led and where "we" are tbh. I'm sorry you're having a rough time in Biden's America.
nice nuts
the implicit federal safety net for banks (and non-bank broker-dealers,) hyperinflated credit, the carried interest loophole and interest rate arbitrage over the last 14 years have led us to where we are now
I'm pretty happy with where "we" were led and where "we" are tbh. I'm sorry you're having a rough time in Biden's America.
I wasn't speaking for myself, I was speaking to the macro situation.
Big timing and towel snapping is about all you do beside posting
Fed Starts Experiment of Letting $8.9 Trillion Portfolio Shrink
https://www.bloomberg.com/news/artic...rtfolio-shrink
The Fed is capping monthly runoff at $47.5 billion -- $30 billion for Treasuries and $17.5 billion for mortgage-backed securities -- until September. Those thresholds will then double to a combined $95 billion. That compares to a peak of $50 billion a month when the Fed performed the exercise starting in 2017.
This is going to be an interesting experiment
nuts and bolts of the BOE's short term pension fund bailout
Right know there is something like 900 billions dollars in Credit Card debt in America as the Fed raises rates the crash will be following real close.
Positioning for a pause in rate hikes?
The embedded explainer is eye-opening
Credit Swisse appears to be circling the drain. Deutsche Bank isn't doing so great either. BOE and the Fed have warned of systemic risks, the next year or two could be interesting.
after a lost decade, the hangover.
in retrospect, the Fed's unexplained repo ops in 2019 were a sign of something badly awry. Why shovel $Ts out the to the banks in just a few months?
Also, when banks mistrust their counterparties, they stop lending. It would appear a liquidity problem has its nose inside the tent, and once again the exposure of banks and nonbanks to illiquid assets is a major factor.
https://www.ruffer.co.uk/en/thinking...the-green-lineanother force is acting to drain bank liquidity – ironically, a creation of the Fed itself. The ‘reverse repo’ facility (RRP) allows intermediaries to place funds overnight at the Fed, secured against US Treasury collateral. This otherwise innocuous corner of the payments architecture is important because it provides access to the Fed’s balance sheet for non-banks, specifically the $4.5 trillion money market mutual fund (MMMF) industry. Over $2.2 trillion of funds are now parked at the Fed each evening via the RRP, the vast bulk of which comes from the MMMF sector.
MMMFs’ use of the RRP drains reserves out of the banking system, dollar for dollar. In short, it gets us to the liquidity biting point faster than QT alone. How much faster is uncertain, but demand for RRP access is growing (see chart) – and likely to keep on doing so. When interest rates are rising, cash investors switch into MMMFs because they increase their rates faster than the banks, making them more attractive. And as funds invested in MMMFs grow, so will the desire to place those funds in the Fed’s RRP.
Last edited by Winehole23; 10-08-2022 at 02:12 AM. Reason: to illiquid assets
Capitalism imploded in 2008-9. Keeping systemically important firms on a QE/ZIRP drip for 13 years has amplified fragility and deprived economies of productive investment. Rapidly rising interest rates will reveal who's swimming naked as liquidity vanishes and debt burdens grow.
https://thethreadtimes.com/zombie-ca...is-unravelling
price discovery can be delayed, but not forever
credit default swaps
thinly sourced at WSJ, but maybe something to watch out for
https://seekingalpha.com/article/454...reatening-turnPension funds adopted the so-called liability-driven investment strategy, or LDI, to address regulatory changes and help to close the gap between assets and liabilities. But the strategy faltered as interest rates surged and bond prices fell, forcing more selling and driving prices still lower. 'A vicious cycle kicks in and pension funds are selling and selling,' said Calum Mackenzie, an investment partner at pension-fund adviser Aon PLC. 'What you start to see is a death spiral'… Some of the more than $1.8 trillion worth of corporate pension plans in the U.S. are also facing margin calls."
BlackRock was tapped to manage the Fed's SPVs in March of 2020 and also supervised its (then) unprecedented purchasing of corporate bonds.
https://www.cato.org/blog/feds-corpo...pseudo-markets
Nouriel Roubini predicts a long, stagflationary recession
https://www.project-syndicate.org/co...oubini-2022-10For a year now, I have argued that the increase in inflation would be persistent, that its causes include not only bad policies but also negative supply shocks, and that central banks’ attempt to fight it would cause a hard economic landing. When the recession comes, I warned, it will be severe and protracted, with widespread financial distress and debt crises. Notwithstanding their hawkish talk, central bankers, caught in a debt trap, may still wimp out and settle for above-target inflation. Any portfolio of risky equities and less risky fixed-income bonds will lose money on the bonds, owing to higher inflation and inflation expectations.
How do these predictions stack up? First, Team Transitory clearly lost to Team Persistent in the inflation debate. On top of excessively loose monetary, fiscal, and credit policies, negative supply shocks caused price growth to surge. COVID-19 lockdowns led to supply bottlenecks, including for labor. China’s “zero-COVID” policy created even more problems for global supply chains. Russia’s invasion of Ukraine sent shockwaves through energy and other commodity markets. And the broader sanctions regime – not least the weaponization of the US dollar and other currencies – has further balkanized the global economy, with “friend-shoring” and trade and immigration restrictions accelerating the trend toward deglobalization.
Everyone now recognizes that these persistent negative supply shocks have contributed to inflation, and the European Central Bank, the Bank of England, and the US Federal Reserve have begun to acknowledge that a soft landing will be exceedingly difficult to pull off. Fed Chair Jerome Powell now speaks of a “softish landing” with at least “some pain.” Meanwhile, a hard-landing scenario is becoming the consensus among market analysts, economists, and investors.
It is much harder to achieve a soft landing under conditions of stagflationary negative supply shocks than it is when the economy is overheating because of excessive demand. Since World War II, there has never been a case where the Fed achieved a soft landing with inflation above 5% (it is currently above 8%) and unemployment below 5% (it is currently 3.7%). And if a hard landing is the baseline for the United States, it is even more likely in Europe, owing to the Russian energy shock, China’s slowdown, and the ECB falling even further behind the curve relative to the Fed.
Are we already in a recession? Not yet, but the US did report negative growth in the first half of the year, and most forward-looking indicators of economic activity in advanced economies point to a sharp slowdown that will grow even worse with monetary-policy tightening. A hard landing by year’s end should be regarded as the baseline scenario.
IMF warns of instability risks
it continues under Brandon, too.
until, of course, whenever we have to face the consequences and mark illiquid assets and debts to market.
"who's got the deuce in their briefcase?"
eventually, in principal and practice, you can run out of bigger fools to sell it to. when that happens, the exit is too small and failures to pay start to cascade through the economy. they used to call it panic.
some open-end commercial real-estate funds in the UK have already gated redemptions.
https://www.nakedcapitalism.com/2022...al-system.htmlSo heavy was the selling that three of the UK’s largest commercial property fund managers — Schroders, which runs the the £2.7 billion UK Real Estate fund; Columbia Threadneedle (£2.3 billion Pooled Property fund), and BlackRock (£3.5 billion UK Property fun) — as well as a smaller fund run by CBRE have admitted that they could not meet the pace of redemptions.
In response, Schroders announced it will make some redemptions originally due on Monday this week as late as July next year. For its part, Columbia Threadneedle said volatile market conditions had forced it to switch from daily to monthly payouts. BlackRock has also imposed new restrictions on withdrawals. All told, around £9 billion of assets have been affected.
This is not the first time that volatile market conditions have forced property fund managers in the UK to gate their funds. In June 2016, in the aftermath of the Brexit vote, six commercial real estate (CRE) funds suspended redemptions. The same happened in March 2020, when the virus crisis was just beginning. At that time, 10 open-end property funds in the UK slammed their doors shut on investors, citing concerns about asset valuation. Between them they managed some £11 billion of assets.
For the moment, it is only ins utional investors that have been affected by the newly gated funds. The hope is that it will stay that way and that the funds will once again be able to reopen their doors once the dust settles, as happened in 2016 and 2020.
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