lol, oh man. I just love reading QTR! I get so f*ck'ng depressed and castrated reading up on the latest news. "It's not me, it's the rest of the word. Lord!" as I try to grasp the last thatch of sanity leaving my inebriated soul. It just makes my green Vulcan blood boil. Yet, a few quick minutes reading QTR mind-melding articles has the same effect of drinking green Romulan ale. I feel happy! Thank you QTR!!!
I must say reading "Backing the U.S. dollar with waffles manufactured under the Eggo brand name" is the funniest thing I have read in a long time. I'm glad I didn't have a sip of coffee before reading that. Enjoy your skiing in Aspen this weekend!
around 2018 or so, i was talking to a passenger (i was an uber driver) and he was a VC, i asked him, do you think the bay area (silicon valley) would ever experience bad times (something along those lines) he answered "no, you see silicon valley, is like, in it's own bubble, whatever happens in the country won't really touch us here" in a few years, a tiny microbe (covid) came in and made millions of people flee the state, now, one of the first casualties seems to be SIVB bank... from that question, i knew people were to prideful in silicon valley, and many Americans (sadly) still don't understand what is coming, people get crazy when it comes to their finances, and their livelihood. Sad times are ahead
its not specifically SIVB bank, 100% of banks are fractional reserve banking, you just need someone to put a flame to the large tinder.
A ton of these banks have HTM portfolios that are deeply underwater, even if they think they're safe because they bought long term treasuries, because they have a high duration they've probably taken 20-30% loss at least on their treasuries, which is probably greater than their equity.
Not to mention think of all the collateral that's been pledged that's treasury based. As rates went up collateral value went down, along with the asset that was purchased. Only the debt remains.
Yes, you are right. People in Silicon Valley were too proud of themselves, and that played a cruel trick on them. Hopefully, after this crisis, we will realize what problems we need to fix in our economic system.
My father was on a panel with Myron Scholes at Stanford talking about computer system shutdowns and developing orderly trade halts after Black Monday in 1987. They were discussing real estate in California and Scholes said with no apparent irony that the worst CA could ever expect is a flattening of prices in that market. It simply wasn't realistic that real estate would devalue there, to which my dad replied that this didn't make any sense. Of course real estate everywhere was subject to the same market pressures as any other asset. By the end of the panel he had lost a huge amount of respect for Myron's apparently sage advice on markets. Four years later my dad thought of selling his house in Los Feliz; he had been offered $600k cash for it from an eager acquaintance in 1987, but was now told it could realistically get $450k in 1991.
Stupid, earnest experts exist in all intellectual circles. They never see reality until it hits them in the face. Even then, they often explain away the punch as being due to extraneous forces.
I keep on hearing that there have always been bad times from most Boomers I talk to. Just wait it out. Well, what I see is going on currently in the US and from others I listen to things are different. Cultural revolution different. But I must just have a tinfoil hat.
I’m sorry, but I have been watching “Bankers” screw up so many things for so long I have no faith whatsoever, in their capability of making any type of reasonable business decision. They are the worst business people.
I don’t care what size bank, the bankers I have dealt with are,to be kind, clueless.
Thanks QTR for giving your audience the truth.
The “FED”. What a joke? They should not have bailed out these “too big to fail companies” in 2008. Look where we are now. This is going to get interesting.
There is much blame to be spread around and it runs to the Fed and Treasury. Modern Monetary Theory has undergirded our monetary policy for a couple of decades and its proponents never saw a treasury infusion of cash they didn't like. It would be funny to hear jackassery like Paul Krugman's op eds about how MMT is just too right wing for his excellency's liking, except that we all have to live with the effects of economists steeped in his narcissistic vision. Apparently playing God with spending and taxation is just so many "tools in the Fed toolbox". Now we have the genius Janet Yellin shovelling money out of a hole and into the economy trying to find the bottom of the inflation pit. If only we could transfer this crew back in time to Soviet era command economies, maybe rational, non-ego driven professionals could guide us back to sanity.
You talk about bankers and their ability to make important business decisions, on this I completely agree with you. I wonder where the risk management was? Where was compliance? Why didn't the bank's management and, in fact, the major shareholders intervene?
Thanks for the morning laugh. "I knew it, I'm surrounded by assholes." Like Chris Cole says about vol, "It's like a closed pipe system with increasing pressure. You don't know which pipe will be the first to blow, but you know it is going to happen."
You all know the drill: if the panic gets bad enough the Fed will step in. But, unlike days past, their options are going to be severely limited by the fact that inflation is nowhere near under control.
IMHO........i doubt very much whether the Fed will let the Market panic get out of control.........yes....on Thurs the markets went down a bit.....but big deal..... in the last 10 to 15 yrs the markets have gone up so ...frickin high............that a few points down ......means nothing at all........so is there a panic yet.........IMHO.......i say no...............will the Fed let the banks go bust.........IMHO..........hell no.........so tell me if you will.........in your honest opinion do you really think that the President of the US and his loyal Fed...Jay Powell........really want to see the banks go bust and another Great Depression on their watch..............if they do and if thats what happens i will eat my hat........lol........of course that would be without salt........my doctor says i can't eat salt.........lol....................
Maybe a Great Depression is exactly what the Fed wants. More control, more economic terror, more poverty, and more obedience......Poor people, and that is where we are heading, obey.
Good article, Chris. I think the real shit hits the fan when, instead of waking up the day after banks like SIVB have fallen 60%+ and the next morning on Twitter people are saying it's now a "trade" for the "degenerates"; instead of that kind of Las Vegas logic, people are crying to the Administration for "justice." When that day comes, we will see sentiment truly shift. Until then, apes are still in the market.
They'll never accept my idea: mint lovely platinum coins at a set price and purity and weight at $1,000 face value and have a lovely "platinum" window effectively backing the U.S. dollar on a 'Platinum Standard.' - Along with flying cars, I will never live to see the day.
JL - Houston, TX. (a state with the beginnings of sound money.
"Curing" inflation by raising interest rates is like curing hypertension by flatlining the patient. It works, but the side effects are hell. If they wanted to rein in inflation (they don't) they would work to bring the cost of diesel down under $4 per gallon. How can we do that? By making lakes of pristine clean diesel from mountains of coal.
The proven process is over a century old. Yet, a couple guys won the Nobel Prize in Chemistry a decade or so ago by creating a process that mimics nature, making the process much more productive and efficient. Ten years is long enough to get a bright idea out of the lab and onto the plant floor.
Of course, the criminally insane Malthusian Marxists squatting in power will howl at the moon at the idea of cheap, plentiful diesel. So what? Thank God and the Founding Fathers for federalism! West Virginia needs to urgently ramp up coal-to-diesel production. If the Feds try to bottle it up in the Mountain State, then truck drivers can just adjust their routes to pass through the state so they can fill up for 25% less.
There is no avoiding a lot of agony to cure inflation brought on by the pumping trillions of dollars into the system in a completely artificial fashion. Handing out free money tokens tends to make everyone's cash less valuable. The pain from the Federal response to Covid has to be felt by everybody. There is either a very long period of unpleasant interest rates and low economic output, or the bank rate needs to jump substantially and everybody tastes it right now a la 1979/80.
But Quantitative Easing and money pumping has been going on for fifteen years now, yet inflation has been a big problem for only two years. That's because most of the money pumped "into" the economy went straight into stocks and bonds - and essentially out of the economy. It certainly didn't end up on Main Street.
Using high interest rates to attempt to cure the economy is equivalent to using leeches in "medicine". This sudden jolt of massive increases in interest rates is destroying banks, which, for better or worse, had grown accustomed to low interest rates. And they were given every indication by the Fed that low interest rates would continue.
Stolen elections have consequences - we are now stuck with silly children stumbling about in their father's shoes. They've knocked the gas on on the stove in the kitchen and toppled over a candle in the living room. The results are as expected as they are tragic.
lol, oh man. I just love reading QTR! I get so f*ck'ng depressed and castrated reading up on the latest news. "It's not me, it's the rest of the word. Lord!" as I try to grasp the last thatch of sanity leaving my inebriated soul. It just makes my green Vulcan blood boil. Yet, a few quick minutes reading QTR mind-melding articles has the same effect of drinking green Romulan ale. I feel happy! Thank you QTR!!!
I must say reading "Backing the U.S. dollar with waffles manufactured under the Eggo brand name" is the funniest thing I have read in a long time. I'm glad I didn't have a sip of coffee before reading that. Enjoy your skiing in Aspen this weekend!
I keep expecting them to put a Hunter Biden art piece on deposit at the FED valued at one trillion Biden Bucks.
Yes. That line got me too. Hilarious!
around 2018 or so, i was talking to a passenger (i was an uber driver) and he was a VC, i asked him, do you think the bay area (silicon valley) would ever experience bad times (something along those lines) he answered "no, you see silicon valley, is like, in it's own bubble, whatever happens in the country won't really touch us here" in a few years, a tiny microbe (covid) came in and made millions of people flee the state, now, one of the first casualties seems to be SIVB bank... from that question, i knew people were to prideful in silicon valley, and many Americans (sadly) still don't understand what is coming, people get crazy when it comes to their finances, and their livelihood. Sad times are ahead
its not specifically SIVB bank, 100% of banks are fractional reserve banking, you just need someone to put a flame to the large tinder.
A ton of these banks have HTM portfolios that are deeply underwater, even if they think they're safe because they bought long term treasuries, because they have a high duration they've probably taken 20-30% loss at least on their treasuries, which is probably greater than their equity.
Not to mention think of all the collateral that's been pledged that's treasury based. As rates went up collateral value went down, along with the asset that was purchased. Only the debt remains.
Everyone is going to take a bath.
Yes, you are right. People in Silicon Valley were too proud of themselves, and that played a cruel trick on them. Hopefully, after this crisis, we will realize what problems we need to fix in our economic system.
My father was on a panel with Myron Scholes at Stanford talking about computer system shutdowns and developing orderly trade halts after Black Monday in 1987. They were discussing real estate in California and Scholes said with no apparent irony that the worst CA could ever expect is a flattening of prices in that market. It simply wasn't realistic that real estate would devalue there, to which my dad replied that this didn't make any sense. Of course real estate everywhere was subject to the same market pressures as any other asset. By the end of the panel he had lost a huge amount of respect for Myron's apparently sage advice on markets. Four years later my dad thought of selling his house in Los Feliz; he had been offered $600k cash for it from an eager acquaintance in 1987, but was now told it could realistically get $450k in 1991.
Stupid, earnest experts exist in all intellectual circles. They never see reality until it hits them in the face. Even then, they often explain away the punch as being due to extraneous forces.
I keep on hearing that there have always been bad times from most Boomers I talk to. Just wait it out. Well, what I see is going on currently in the US and from others I listen to things are different. Cultural revolution different. But I must just have a tinfoil hat.
I’m sorry, but I have been watching “Bankers” screw up so many things for so long I have no faith whatsoever, in their capability of making any type of reasonable business decision. They are the worst business people.
I don’t care what size bank, the bankers I have dealt with are,to be kind, clueless.
Thanks QTR for giving your audience the truth.
The “FED”. What a joke? They should not have bailed out these “too big to fail companies” in 2008. Look where we are now. This is going to get interesting.
There is much blame to be spread around and it runs to the Fed and Treasury. Modern Monetary Theory has undergirded our monetary policy for a couple of decades and its proponents never saw a treasury infusion of cash they didn't like. It would be funny to hear jackassery like Paul Krugman's op eds about how MMT is just too right wing for his excellency's liking, except that we all have to live with the effects of economists steeped in his narcissistic vision. Apparently playing God with spending and taxation is just so many "tools in the Fed toolbox". Now we have the genius Janet Yellin shovelling money out of a hole and into the economy trying to find the bottom of the inflation pit. If only we could transfer this crew back in time to Soviet era command economies, maybe rational, non-ego driven professionals could guide us back to sanity.
Yup , they were long the yield curve trade. the wrong way
You talk about bankers and their ability to make important business decisions, on this I completely agree with you. I wonder where the risk management was? Where was compliance? Why didn't the bank's management and, in fact, the major shareholders intervene?
Well looks like the roller coaster ride is getting to the interesting point in the amusement park.
Thanks for the morning laugh. "I knew it, I'm surrounded by assholes." Like Chris Cole says about vol, "It's like a closed pipe system with increasing pressure. You don't know which pipe will be the first to blow, but you know it is going to happen."
You all know the drill: if the panic gets bad enough the Fed will step in. But, unlike days past, their options are going to be severely limited by the fact that inflation is nowhere near under control.
IMHO........i doubt very much whether the Fed will let the Market panic get out of control.........yes....on Thurs the markets went down a bit.....but big deal..... in the last 10 to 15 yrs the markets have gone up so ...frickin high............that a few points down ......means nothing at all........so is there a panic yet.........IMHO.......i say no...............will the Fed let the banks go bust.........IMHO..........hell no.........so tell me if you will.........in your honest opinion do you really think that the President of the US and his loyal Fed...Jay Powell........really want to see the banks go bust and another Great Depression on their watch..............if they do and if thats what happens i will eat my hat........lol........of course that would be without salt........my doctor says i can't eat salt.........lol....................
Maybe a Great Depression is exactly what the Fed wants. More control, more economic terror, more poverty, and more obedience......Poor people, and that is where we are heading, obey.
Good article, Chris. I think the real shit hits the fan when, instead of waking up the day after banks like SIVB have fallen 60%+ and the next morning on Twitter people are saying it's now a "trade" for the "degenerates"; instead of that kind of Las Vegas logic, people are crying to the Administration for "justice." When that day comes, we will see sentiment truly shift. Until then, apes are still in the market.
Chris M
What a Ride! :)
I love this blog. No matter how dire the news, it still makes me laugh.
One of your best!
Thank you!
Brother we need a QTR podcast ASAP!!! I don't care if SVB is a one off or a harbinger of doom... but things seem to be getting spicy
They'll never accept my idea: mint lovely platinum coins at a set price and purity and weight at $1,000 face value and have a lovely "platinum" window effectively backing the U.S. dollar on a 'Platinum Standard.' - Along with flying cars, I will never live to see the day.
JL - Houston, TX. (a state with the beginnings of sound money.
"Curing" inflation by raising interest rates is like curing hypertension by flatlining the patient. It works, but the side effects are hell. If they wanted to rein in inflation (they don't) they would work to bring the cost of diesel down under $4 per gallon. How can we do that? By making lakes of pristine clean diesel from mountains of coal.
The proven process is over a century old. Yet, a couple guys won the Nobel Prize in Chemistry a decade or so ago by creating a process that mimics nature, making the process much more productive and efficient. Ten years is long enough to get a bright idea out of the lab and onto the plant floor.
Of course, the criminally insane Malthusian Marxists squatting in power will howl at the moon at the idea of cheap, plentiful diesel. So what? Thank God and the Founding Fathers for federalism! West Virginia needs to urgently ramp up coal-to-diesel production. If the Feds try to bottle it up in the Mountain State, then truck drivers can just adjust their routes to pass through the state so they can fill up for 25% less.
There is no avoiding a lot of agony to cure inflation brought on by the pumping trillions of dollars into the system in a completely artificial fashion. Handing out free money tokens tends to make everyone's cash less valuable. The pain from the Federal response to Covid has to be felt by everybody. There is either a very long period of unpleasant interest rates and low economic output, or the bank rate needs to jump substantially and everybody tastes it right now a la 1979/80.
But Quantitative Easing and money pumping has been going on for fifteen years now, yet inflation has been a big problem for only two years. That's because most of the money pumped "into" the economy went straight into stocks and bonds - and essentially out of the economy. It certainly didn't end up on Main Street.
Using high interest rates to attempt to cure the economy is equivalent to using leeches in "medicine". This sudden jolt of massive increases in interest rates is destroying banks, which, for better or worse, had grown accustomed to low interest rates. And they were given every indication by the Fed that low interest rates would continue.
Stolen elections have consequences - we are now stuck with silly children stumbling about in their father's shoes. They've knocked the gas on on the stove in the kitchen and toppled over a candle in the living room. The results are as expected as they are tragic.
Our Bullshit Economy!!! Let’s go
You wrote a great article and it's very much appreciated and from every perspective.