One news item that caught our eye this week was that the Office of the Comptroller of the Currency (a division of Treasury) wants banks to extend credit to those who lack credit history. Banks plan to share some consumer data with each other in order to build enough history to justify extending credit. Smells fishy to us. Banks are profit driven and if they believed there was a profit opportunity they would have extended credit to this consumer cohort years ago. Our guess is that Treasury will subsidize a portion of loan losses – perhaps 100% – to entice banks to the table. Add this unnatural act to a long list of Government actions that have increased in number since April 2020. We believe these Government actions in the aggregate will lead to stagflation in the U.S.
The Share Repurchase Party Continues
Companies unsurprisingly continue to repurchase shares at record levels, undoubtedly with record debt levels. If you regularly read these pages you know how we feel about Technology companies and share buybacks.