Is The Bottom Almost Here?

[SHDL]

My only thought about AI is that it seems bad for office RE

[Gregmal]

13 minutes ago, SHDL said:

My only thought about AI is that it seems bad for office RE

Is there anything that isn’t these days? 

Edited March 19, 2023 by Gregmal

[SHDL]

Just now, Gregmal said:

Is there anything that isn’t these days? 

fair point

[Castanza]

19 minutes ago, SHDL said:

My only thought about AI is that it seems bad for office RE

Not if you’re homeless lol 

[Gregmal]

6 minutes ago, Castanza said:

Not if you’re homeless lol 

Did we just find a fix for the NYC/CA homeless problem? Get rid of the worthless finance people and overpaid tech bros and help fix these rotting cities. Besides, most of the smart ones already left.

[Viking]

At the 24 minute mark the hosts provide a good summary of the differences in accounting for banks between the US and Europe. Bottom line, Europe stress tests the bank for interest rate risk (across their entire business) and the US does not. They say JPM is one of the few US banks that runs/published its total interest rate risk.
 

They also feel the real issue at many regional banks in US is credit risk. They account for 80% of all commercial loans; these loans tend to be concentrated (so when issues arise, these banks tend to blow up). 
 

i appreciate getting a European perspective on the current financial crisis.

 

 

[Spooky]

21 hours ago, Gregmal said:

Off topic…

 

https://www.cnbc.com/2023/03/19/elizabeth-warren-jerome-powell-has-failed-as-federal-reserve-chair-.html

 

I don’t totally agree with everything she’s saying, but the totality of the circumstance, ranging from Powell being Trump appointed, to the optics of everything, down to it being the banks he is responsible for regulating ultimately being the casualties of his reckless rate hike crusade, I think this guys days are numbered. He s a total failure. He fell for it. And after bragging about the health of the banking system…bringing it down because he couldn’t be patient with things he himself admitted required patience due to their lagging effects…this guy is a disaster and will be viewed as the clown he is by those that write the books.

Her opinion piece in the NYT was good I thought. Also you might enjoy this piece: https://www.project-syndicate.org/commentary/predictable-silicon-valley-bank-collapse-by-joseph-e-stiglitz-2023-03

[Gregmal]

4 minutes ago, Spooky said:

Her opinion piece in the NYT was good I thought. Also you might enjoy this piece: https://www.project-syndicate.org/commentary/predictable-silicon-valley-bank-collapse-by-joseph-e-stiglitz-2023-03

It’s spot on. I hate agreeing with her because of who she is, but it’s 100% accurate. This was both unnecessary, and farcically derived. If we are talking about putting company executives in jail for some of these total fuckups, we should talk about putting people like Powell there as well. You sit here contradicting yourself every time you speak…admit rate hikes have lagging effects, show total impatience with things that require patience, display total subservience to a certain ultra elite and influential crowd(like Larry Summers and Bill Ackman), and then almost blow up the same banking system you regulate after having told us it is healthier than ever, while putting normal people at risk of incredible hardship….and barely making a difference in this whole inflation fight thing, which was gonna work itself out with or without you. Fuckin clown.

[changegonnacome]

57 minutes ago, Gregmal said:

It’s spot on. I hate agreeing with her because of who she is, but it’s 100% accurate.

 

I find myself, like you, agreeing with people at certain times, on certain subjects.....whom I know deep down are kind of lunatics. It used to worry me! But I take it as a badge of honor.....it shows a certain level of independent thought......I know people, we all do, where their opinion can be completely predicted based on their political leanings & what TV news channel they watch. They are prisoners of their dogma.

 

Now on E.Warren's view.....she's right on one thing......the G.Cohen, Jay Clayton & Powell blessed row back on sub-$250bn stress tests/regulation was dumb.....but big picture US regulation versus EU regulation turned out to be dumb.....not stressing a banks balance sheet in its totality by 200bps move in rates up or down to see its effect on capital allowed for a duration delusion to take hold......the US GAAP bank accounting rules in the US it seems incentivized banks also not to hedge their treasury/MBS portfolios...crazy stuff....lots of unintended consequences spilling out of the system right now.

 

I disagree with her on interest rates & inflation.....which wont surprise anyone......Elizabeth ought to keep her mouth shut.....long rates matter to her constituency most.........they buy homes on the back of long rates....the US gov funds social programs on the back of the long bond.......and during this inflationary bout long rates have moved up of course but if there was to be a sense that inflation was NOT under control or likely to get out of control, say via meddling print money politicians like Warren, they would spike ever higher......perversely hurting her constituency most. Thats to say nothing on the disproportionate damaging effects inflation has on that same group.

[Gregmal]

See Jay fell for the rhetoric and those within his sphere who were pushing it. Why couldn’t he use some common sense? The ultimate tell of a dishonest take on the inflation is the “it’s their mandate” and “so what keep zirp forever” responses. It’s not all or nothing, especially at such as high level. Saying 5% inside 6 months or whatever is insane isn’t saying they should have stayed at 0%. Or saying 3-4% is fine isn’t violating this “mandate” as well. We keep hearing about these comparisons to the 70s…well guess what? If we applied some common sense and say, capped these hikes to 250-300 bps on a TTM basis, you know….so we could actually be data dependent and see the lagging effects…we d still be at a 10% FF within a few years and back at peak Volker levels many years sooner than it took back then. It’s just that the chumps like Summers, who I am certain is also getting paid by hedge funds for “advisory” work, told him he needed to go bananas to be credible and defeat inflation…yup, it’s as dumb as it sounds and was all along.

[Saluki]

26 minutes ago, Gregmal said:

See Jay fell for the rhetoric and those within his sphere who were pushing it. Why couldn’t he use some common sense? The ultimate tell of a dishonest take on the inflation is the “it’s their mandate” and “so what keep zirp forever” responses. It’s not all or nothing, especially at such as high level. Saying 5% inside 6 months or whatever is insane isn’t saying they should have stayed at 0%. Or saying 3-4% is fine isn’t violating this “mandate” as well. We keep hearing about these comparisons to the 70s…well guess what? If we applied some common sense and say, capped these hikes to 250-300 bps on a TTM basis, you know….so we could actually be data dependent and see the lagging effects…we d still be at a 10% FF within a few years and back at peak Volker levels many years sooner than it took back then. It’s just that the chumps like Summers, who I am certain is also getting paid by hedge funds for “advisory” work, told him he needed to go bananas to be credible and defeat inflation…yup, it’s as dumb as it sounds and was all along.

Some guy who tracks private planes is reporting that 20 private planes have flown to Omaha recently from different regional banking centers and DC. It could be too that uncle Warren is working on some kind of deal with multiple banks to give his imprimatur to boost confidence in them in exchange for some preferred shares as he did with BAC and Goldman.  

[changegonnacome]

Problem for Fed/Jay is once it was clear we had an inflation problem that wasn't transitory but rather entrenched.....the FED had to get restrictive....the only restrictive Fed funds rate that I'm aware of is one where FF exceeds the inflation rate......the FED IMO had to race to ~5% there was no other choice............it had to set into the system a REAL interest rate (inflation adjusted) that was either neutral or restrictive to stop the expansion of credit fueled spending.......we have or are close to that now.

 

Inflation IMO is contemporaneously floating around ~4.5%........they'll likely do 25bps Wednesday..........we'll get to 5% then on FF.....~0.5% into restrictive territory........and frankly this banking crisis will likely do the rest of the heavy lifting for them....... in terms of stemming the flow of incremental credit/spend into the economy as banks, regional and otherwise, pay more to maintain deposits, raise rates & credit standards resulting in a pull back in credit creation and demand.

 

The speed at which the reduced credit creation feeds through into unemployment is the interesting piece of this......the headlines reminiscent of 2008....has probably reminded alot of business owners/execs of that period......and they will act accordingly with increased caution......certainly as regards incremental hires......which you would expect to see in JOLTS data in the next couple of months if true.

[yesman182]

On 3/19/2023 at 11:52 AM, changegonnacome said:

 

Me too....its the noblest of professions IMO...as anybody finds out when a loved one is sick in hospital.

 

As it pertains to nursing or medical in general....the risk-reward is skewed making it likely the last thing to get AI'd I think......even when technically it could via AI & robotics......the medical malpractice bar is so high....that a system needs to really show 2x 5x the level of proficiency of a human before it would be let sub for nurses etc.

 

In fact AI/robotics would hopefully augment what nurses do best and I'm sure would love to do more of if time allowed & paperwork/menial tasks shrank....which is the social/caring aspect of their jobs....making the sick/elderly feel comfortable, putting them at ease etc......

I think AI will be able to better detect when a patient is about to crash. All these people hooked up to all these machines. My wife works in a hospital and they have a person who watched vitals of all of the critically ill in the hospital. That job will be better preformed by a computer. 

[yesman182]

32 minutes ago, Saluki said:

Some guy who tracks private planes is reporting that 20 private planes have flown to Omaha recently from different regional banking centers and DC. It could be too that uncle Warren is working on some kind of deal with multiple banks to give his imprimatur to boost confidence in them in exchange for some preferred shares as he did with BAC and Goldman.  

When people visit Berkshire do they literally walk in the front door like they are walking into a Walmart? Should I drive to Omaha and just live stream people walking in and out of the office building, lol. 

[Gregmal]

I think 25 or 0 will tell you more about Powell than anything material otherwise. 25 and done who cares. But from a practicality point of view, there’s no need for another one. By summer you’ll easily see sub 4 CPI and probably sub 2 real inflation. So to me, if we see 25 this time, all it tells me is that this guy is still easily manipulated and still a total slave to the “credibility” crowd, even if it means unnecessarily jeopardizing the rest of us.

[changegonnacome]

3 hours ago, Gregmal said:

think 25 or 0 will tell you more about Powell than anything material otherwise. 25 and done who cares. But from a practicality point of view, there’s no need for another one.

 

The more interesting question will be wether Powell.....'hangs tough'......as the banking crisis mutates into a recession and rising unemployment.....the book says, to put inflation in the grave and bury it so it doesn't come back, he needs to hang tough even while unemployment goes to 5%+ & the world screams in his face to get the punch bowl back out.

 

You might not like Jay or you think he's an idiot who's made a shed full of mistakes......but outside a guy I know who empties grease traps for a living......I consider Jay to have one of the worse jobs in America right now. Damned if you do, damned if you dont.

 

 

Edited March 20, 2023 by changegonnacome

[Gregmal]

He's got a pretty easy job right now if he plays it right. He's got 12+ months of guaranteed CPI contraction and "I just hiked rates like no one in history" to fall back on, which any halfwit would probably be able to parlay into 12-18 months of just sitting tight and being "data dependent". Its almost a certainty now that CPI will be close to negative by August or so. 

[Sweet]

Powell is getting a bad rap, but many of the problems are those he inherited.

 

Policy makers and central bankers kept rates at near zero for nearly 15 YEARS.  Some of those years rates needed to be low but not for 15 years.

 

Lawmakers shut the economy down for covid, and handed out free money to everyone to just go buy whatever, a double whammy for inflation.  

Now everyone is freaking out because interest rates are 4 and a bit percent?

 

 

[Gregmal]

23 minutes ago, Sweet said:

Now everyone is freaking out because interest rates are 4 and a bit percent?

Nah people are freaking out because the guy who told us rate hikes have a lagging effect on the economy, and that the banks are not only healthier than ever but more than able to withstand a recession….something we should be able to take at face value given the fact that he is tasked with regulating them….went from 0-5 in less than a year and caused a banking crisis. If that doesn’t scream inept I don’t know what does. 
 

And this isn’t Monday morning QB stuff either; plenty, and I mean plenty of people, right around November were saying that 4 is ok, but he’s getting awfully close to going overboard. And what did Jerry do? Ratchet up the rhetoric and even talk about reaccelerating hikes and terminal rates….Fuckin moron.

Edited March 20, 2023 by Gregmal

[ASTA]

Terry Smith (fundsmith funds)

Having spent the first decade of my career working in a bank and then becoming a top-rated bank analyst*, I find that people often express surprise that I never invest in bank shares.

 

https://www.ft.com/content/831cee08-7250-44e4-b992-8b8d1ec1c516

[vinod1]

1 hour ago, Sweet said:

Powell is getting a bad rap, but many of the problems are those he inherited.

 

Policy makers and central bankers kept rates at near zero for nearly 15 YEARS.  Some of those years rates needed to be low but not for 15 years.

 

Lawmakers shut the economy down for covid, and handed out free money to everyone to just go buy whatever, a double whammy for inflation.  

Now everyone is freaking out because interest rates are 4 and a bit percent?

 

 

 

Every idiot who underperforms blames the fed. This has been the theme for the last decade.

[Gamecock-YT]

6 hours ago, ASTA said:

Terry Smith (fundsmith funds)

Having spent the first decade of my career working in a bank and then becoming a top-rated bank analyst*, I find that people often express surprise that I never invest in bank shares.

 

https://www.ft.com/content/831cee08-7250-44e4-b992-8b8d1ec1c516

ditto. The amount of black boxes that people high up weren’t even aware of would be pretty shocking to most people.

[Sweet]

8 hours ago, Gregmal said:

Nah people are freaking out because the guy who told us rate hikes have a lagging effect on the economy, and that the banks are not only healthier than ever but more than able to withstand a recession….something we should be able to take at face value given the fact that he is tasked with regulating them….went from 0-5 in less than a year and caused a banking crisis. If that doesn’t scream inept I don’t know what does. 
 

And this isn’t Monday morning QB stuff either; plenty, and I mean plenty of people, right around November were saying that 4 is ok, but he’s getting awfully close to going overboard. And what did Jerry do? Ratchet up the rhetoric and even talk about reaccelerating hikes and terminal rates….Fuckin moron.

Isn’t the real problem that the rates were at near zero for so long, and that some banks didn’t understand interest rate risk?

 

And isn’t the cause the covid lockdowns and the Treasury writing a cheque to everyone?

 

Powell is given a mandate by Congress, one of which is an inflation target, and he has only a few levers to pull.
 

He sat on his hands for a few months thinking inflation would go away and it didn’t - and got criticised for doing so.

 

Even after these supposedly historic rate rises we are only at 4%.

 

Banks can be the safest they have ever been AND you can still have these problems, it’s not mutually exclusive.

 

I don’t think Powell has done a good job and I don’t think he has done a bad job.  He’s just done the job his role is mandated.

 

He is responding to a problem largely made in by policy makers, although he should be blamed for sitting at near zero for so long.

 

[Gregmal]

3 hours ago, Sweet said:

Isn’t the real problem that the rates were at near zero for so long, and that some banks didn’t understand interest rate risk?

I am not sure it’s one way or another but can not fathom that all of a sudden 90% of the banks suck and even BofA is a bad bank. It’s hard to imagine no one there with their fancy degrees and 3 letter designations saw this coming, but it’s also on the regulators who more or less made them hold these things and then chose to rapidly devalue them. Patience is all that was required…it’s still the answer. No one says you cant hike to 20% in due time. But going from a 5 mph school zone to a 70 mph highway in 1/4 mile just doesn’t work. No one has patience or the ability to look more than a few months down the road anymore, and that in and of itself is somewhat troubling as well.

Edited March 21, 2023 by Gregmal

[mattee2264]

All Powell is really doing is making up for being far too slow to normalize interest rates after COVID was managed. 

We are just seeing the tide come in and therefore seeing who has been swimming naked. 

 

And while the headline news looks bad it is nothing that cannot really be handled. It is a good thing if banks exercise a bit more caution with lending. Especially when you consider how many crappy companies have been able to keep the lights on thanks to easy money and cheap credit. There is always QE by stealth to plug any holes and this is a war that the Fed is quite capable of fighting given its experience during the GFC and banks are far better capitalized than back then. 

 

Markets certainly aren't worried. We are still close to 4000 on the SPY and most major banks are well above their various lows in 2015, 2018, 2020 and so on. If people struggle to get mortgages for overpriced properties and a few zombie businesses go bankrupt and we continue to sort the wheat from the chaff in the tech sector it is pretty healthy. 

 

I'd be a lot more worried if markets were down 50% and unemployment was hitting double digits and Powell was turning a blind eye and continuing to press forward with interest rate increases. But that is a million miles away from what is happening here.