Operating at the Intersection of Technology and the Capital Markets
Tag: debt
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
The New York Fed released its quarterly report on Household Debt and Credit this past week. Consumer strength is waning, not gaining. Loan delinquencies and foreclosures are up across auto loans and mortgage debt which is primarily where debt expansion has occurred in prior months. There are a number of charts between pages 3-40 that … Continue reading Consumer Strength Is Waning
Over the past several months we have written that the new economic normal means a target CPI in the 3-4% range and muted Real GDP in the 0-2% range. Interest rates can't go back to the Volcker days as Treasury would not be able to refinance its debt at double-digit rates. We could however see … Continue reading What Will The “New Normal” Look Like?
Inflation as measured by the CPI will persist above the Fed's target rate of 2% over the long-term. Why? Because as Milton Friedman said: "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in … Continue reading CPI Will Persist Above The Fed’s Target
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
It is tough to be a fixed income investor in this market. Yields are rising, but in real terms even high yield securities are in negative territory given the inflated CPI environment. Some fixed income portfolio managers are spinning that now is a great time to be a fixed income investor because high yield securities … Continue reading Tough To Be A Fixed Income Investor
Our view is that the Fed will reset its 2% inflation target approximately one year from now if it wants to salvage the last vestiges of its credibility. While April's CPI number may come down some due to the retreat in the price of oil, we could continue to see core inflation march higher for … Continue reading The Fed Will Reset Its 2% Inflation Target
10-year Treasury yields sit around 2.72% and will climb higher as the Fed: a.) lifts the Fed Funds Rate and, b.) trims its balance sheet (i.e. quantitative tightening "QT"). There is no scenario in which the Fed executes QT only to have Treasury yields move lower. It is simply a question of supply and demand. … Continue reading Treasury Yields Will Only Move In One Direction
PE firm Thoma Bravo is set to acquire Anaplan (tkr: PLAN) for $10.7 billion. That valuation implies an 18x Enterprise Value to Revenue (EV/Revenue) multiple on trailing revenue of $592 million. To us 18x revenue is a rich valuation in this environment where interest rates are climbing and recession is around the corner. Even if … Continue reading More Irrational Exuberance: Thoma Bravo to Acquire Anaplan for $10.7 Billion
Our bet is the Fed will exit 2022 at 2%. If you look at the Fed over time, it has historically maintained interest rates close to the 2-year Treasury (see below). https://soundcloud.com/ceorater
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