The percentage of domestic banks that have tightened credit standards for auto loans has ticked up into positive territory (1.9%), for the first time since Q4 2020. This figure was negative from Q1 2021 through Q2 2022. Net Percentage of Domestic Banks Tightening Standards for Auto Loans: Click HERE for detail.
It sure feels as though we are in a recession: Weak reports from retailers such as Amazon (AMZN) and Target (TGT, twice in Target's case).Soft retail numbers HERE.Low consumer confidence HERE.Atlanta Fed's new GDPNow estimate (as of June 15th), is zero percent Real GDP for Q2.Depleted personal savings (chart below).Even Johnny Come Latelys like Guggenheim's … Continue reading A Recession Won’t Cure Inflation Anytime Soon
In the pursuit of curbing price inflation Fed Chair Powell will be willing to break some glass... Speculative asset classes such as crypto, rare automobiles, fine art: YES. This has already happened to a degree, especially as it relates to crypto currencies and publicly-traded companies that have exposure to crypto such as Coinbase (COIN). There … Continue reading In Case Of Emergency Break Glass
We do not believe that investors fully appreciate how fragile the U.S. economy is. Our view is that the U.S. economy is in a recession and that this period will be followed by long-term muted growth given: 1.) the enormous U.S. Government debt load ($30.4 trillion), 2.) persistent price inflation, 3.) a consumption-driven economy rather … Continue reading The U.S. Economy Is Long-Term Fragile
The punchline is that a significant percentage of new money creation over the past year was allocated to non-productive use cases. "Helicopter" money to individuals and non-performing firms are two examples. When capital is deployed for non-productive use (acquiring cryptocurrencies for example), that capital invariably bids up prices causing asset price inflation. Conversely, recipients that … Continue reading Rewarding Non-Productive Activities with New Money Leads to Price Inflation
There is significant credit risk that is not priced into the markets. Looming credit defaults and downgrades - especially high grade to high yield downgrades ("fallen angles") - are bound to create uncertainty beyond the credit markets. There is significant default and downgrade risk associated with Commercial Real Estate ("CRE") credits. Nobody knows when major … Continue reading Credit Risk Is Substantial and Underestimated
Policy makers have held interest rates artificially low since the 2008 financial crisis. This unnatural act - preventing interest rates from finding a natural equilibrium - made it difficult for investors to find yield and equity market valuations ballooned as a result. The cheap debt train has pulled into the station. (See the debt issuance … Continue reading Cheap Debt: The Gift that Kept on Giving