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There is certainly more coming to eat away at your finances as infamous bankster Jamie Dimon laid out quite broadly and plainly this week.

gray and white bird on brown tree branch during sunset — Photo by Abhishek Singh on Unsplash

Jamie Dimon never saw a dying bank he didn’t want to eat. Yet, while I think that Dimon’s name should be pronounced less like the clear, crown jewel of choice and more like the horned fiends of Hades, he does often speak of things likely to bring down the banking world or the economy with more candor than any other bankers, including particularly his partners in crime at the Fed. And you can be sure he has his scavenger eye on those things.

Perhaps it is just because he has unparalleled confidence that he is untouchable like a serial killer who talks to police on the street about how sorry he feels that they have had no luck at all finding the serial killer. He’s just that confident his next big take from hauling in a failing bank at fire-sale prices is so certain, he needn’t worry that warning everyone of the coming failures will get in the way of his business. Thus, he can play the saint for warning us all, knowing the greedy will ignore his warnings anyway, and still wait in the wings for that Friday evening call from Fed Chair Jerome Powell that says, “We have another bank for you. Can we meet tomorrow morning to discuss terms and complete a weekend sale?”

Fitting right in with my theme for this weekend’s Deeper Dive for paying subscribers to be titled “The Apoceclypse,” The CEO of JPMorgan Chase warned the world this week that it faces “Risks that eclipse anything since World War II.” I, of course, couldn’t agree more, so I want to spend this article distilling the Dimon’s annual report down to the most essential risks:

…click on the above link to read the rest of the article…

“We Will Have A Hard Landing At Some Point. I Guarantee You That.”

March 10, 2024

“We Will Have A Hard Landing At Some Point. I Guarantee You That.”

Can you guess who the quote in the article title is from? I will give you a hint. It wasn’t me. I know that it sounds like it could have come from me, but it actually comes from a very big name on Wall Street. Ellen Zentner is Morgan Stanley’s chief U.S. economist, and she is the one that said it. During an interview with CNBC she warned that “the tightening impacts from monetary policy” will have enormous consequences for the U.S. economy in the months ahead…

“We will have a hard landing at some point. I guarantee you that. We’re all wondering: When does that come?” she said. “The point that Dimon makes is that there are these cumulative impacts that build over time, and we are in the camp that we haven’t yet seen all of the tightening impacts from monetary policy,” she added, referring to the impact of Fed rate hikes.

She makes a really great point.

The consequences of interest rate hikes are felt over time.

Higher interest rates have certainly started to cause a lot of problems, but if rates are not brought down soon the level of pain that we are experiencing will begin to go up dramatically.

Unfortunately, the Fed is not likely to reduce interest rates any time soon because inflation continues to run hotter than expected…

Inflation increased by the largest amount in almost a year, according to the Fed’s preferred measure – confirming expectations interest rates will not be cut until around June.

The so-called core personal consumption expenditures (PCE) index – which excludes volatile food and energy prices – increased 0.4 percent between December and January.

Marko Kolanovic, the chief market strategist for JPMorgan Chase, believes that the U.S. economy could be headed into “something like 1970s stagflation”…

…click on the above link to read the rest…

Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government

September 1, 2022

Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government

It appears somebody at the Federal Reserve has figured out that the central bank can’t tame inflation, so it’s setting up a scapegoat – Uncle Sam.

A paper co-authored by Leonardo Melosi of the Federal Reserve Bank of Chicago and John Hopkins University economist Francesco Bianchi and published by the Kansas City Federal Reserve argues that central bank monetary policy alone can’t control inflation.

The paper’s abstract asserts, “This increase in inflation could not have been averted by simply tightening monetary policy.”

In a nutshell, Melosi and Bianchi argue that the Fed can’t control inflation alone. US government fiscal policy contributes to inflationary pressure and makes it impossible for the Fed to do its job.

Trend inflation is fully controlled by the monetary authority only when public debt can be successfully stabilized by credible future fiscal plans. When the fiscal authority is not perceived as fully responsible for covering the existing fiscal imbalances, the private sector expects that inflation will rise to ensure sustainability of national debt. As a result, a large fiscal imbalance combined with a weakening fiscal credibility may lead trend inflation to drift away from the long-run target chosen by the monetary authority.”

There are a couple of startling admissions in this single paragraph.

First, the authors acknowledge that the federal government uses inflation as a tool to handle its debt. In other words, it acknowledges that we’re all paying an inflation tax.

Peter Schiff talked about this inflation tax in an interview on Rob Schmitt Tonight.

Inflation is a tax. It’s the way government finances deficit spending. Government spends money. It doesn’t collect enough taxes, so it has to run deficits. The Federal Reserve monetizes those deficits – prints money. They call it quantitative easing, but that’s inflation…

…click on the above link to read the rest of the article…

The Fed Is Winging It: A 75 Basis-Point Hike “Seemed Like the Right Thing”

June 16, 2022

The Fed Is Winging It: A 75 Basis-Point Hike “Seemed Like the Right Thing”

The Federal Reserve’s Federal Open Market Committee (FOMC) today announced an increase of 75 basis points to the target federal funds rate, raising the rate to 1.75% from 1%. June’s meeting today was the third meeting this year at which the FOMC has raised rates. Coming into the March meeting this year, however, the FOMC had not raised the target rate since March of 2020, even though price inflation began to accelerate during the second half of 2021.

Today’s 75-basis-point increase is the largest increase since late 1994 when the FOMC raised the target rate from 4.75% to 5.5%.

Notably, however, this increase comes mere weeks after the Fed Chair Powell slapped down the idea of a 75-basis point increase in June. As reported by Reuters on May 4, Powell had insisted “A 75 basis point increase is not something that the committee is actively considering.”

That didn’t last long.

The fact that the Fed was forced to hike the target rate by higher than it had suggested was even possible earlier in the year is a reminder that the Fed and its economists are simply in a reactionary mode when it comes to the US economy’s problem with mounting price inflation.

As even Powell admitted during today’s press conference, the Fed was surprised by how high price inflation has grown. The Fed then had to pivot in order to answer calls that the central bank “do something” about price inflation.

But when it comes to the Fed’s decisions about setting target rates, it is I increasingly obvious there is no model. The “plan,” to the extent one exists at all, amounts to “let’s see how bad inflation is, and then we’ll pick a target rate and hope that solves the problem.”

…click on the above link to read the rest of the article…

ECB Holds Emergency Meeting To Discuss Market Turmoil

June 15, 2022

ECB Holds Emergency Meeting To Discuss Market Turmoil

Last week, shortly after the ECB’s latest meeting disappointed markets and concluded without a discussion of Europe’s growing bond market fragmentation (which is to be expected since QE – the glue that held the Euro area’s bond market together – is ending) and which has since sent Italian bond yields soaring above 4%, we joked that “at this rate the ECB would make an emergency rate cut” just hours after announcing an end to QT and guiding to a July rate hike.

Once again, our “joke” was spot on because on Wednesday morning, just hours before the Fed’s first 75bps rate hike sine 1994, and with Italian bonds in freefall, European Central Bank “unexpectedly” announced it would hold an emergency, ad hoc meeting of its rate-setters starting 11am CET in which it would “discuss current market conditions.” It wasn’t immediately clear if a statement would be published after the confab.

The meeting, which comes less than a week after the rate-setting governing council’s last vote, raised investor expectations that the central bank is preparing to announce a policy instrument to stave-off another debt crisis in the region, which can only come in the form of more QE… which is ironic at a time when the ECB just announced it was phasing out all QE!

Italian government bonds rallied in price following news of the planned meeting, reversing some of the recent sell-off that analysts said brought the country’s borrowing costs towards the “danger zone”. Gilles Moec, chief economist at Axa, an insurer, said the “stakes are high” for the ECB “now that everyone is dusting off their debt sustainability spreadsheets for Italy, they probably need to go up an extra notch”.

…click on the above link to read the rest of the article…

The Mayhem Below the Surface of the Stock Market Seeps to the Surface: Now it’s the Giants that Topple

January 24, 2022

The Mayhem Below the Surface of the Stock Market Seeps to the Surface: Now it’s the Giants that Topple

The market finally gets it: The Fed is going to tighten to get a handle on its massive inflation problem.

Since February last year, the hottest most hyped stocks, many of them recent IPOs and SPACS, have been taken out the back and brutalized, either one by one or jointly. The stocks that have by now crashed 60%, 70%, 80%, or even 90% from their highs include luminaries such as Zoom, Redfin, Zillow, Compass, Virgin Galactic, Palantir, Moderna, BioNTech, Peloton, Carvana, Vroom, Chewy, the EV SPAC & IPO gaggle Lordstown Motors, Nikola, Lucid, and Rivian, plus dozens of others. Some of these superheroes are tracked by the ARK Innovation Fund, which has crashed by 55% from its high last February.

This mayhem has been raging beneath the surface of the market since February last year, and in March, I mused, The Most Hyped Corners of the Stock Market Come Unglued. They have since then come unglued a whole lot more. But the surface itself remained relatively calm and the S&P 500 Index set a new high on January 3 this year because the biggest stocks kept gaining or at least didn’t lose their footing.

But now even the giants too are going over the cliff. Combined by market cap, the seven giants, Apple [AAPL], Amazon [AMZN], Meta [FB], Alphabet [GOOG], Microsoft [MSFT], Nvidia [NVDA], and Tesla [TSLA] peaked on January 3, and in the 13 trading days since then have plunged 13.4%. $1.6 trillion in paper wealth vanished (stock data via YCharts):

This is obviously still no big deal, a 13.4% decline, after this huge gigantic run-up. During the March 2020 crash, these giants plunged 28%. But it’s the first time since then that this unappetizing event has occurred.

…click on the above link to read the rest of the article…

Peter Schiff: The Fed Can’t Do What It’s Saying It Will Do

January 11, 2022

Peter Schiff: The Fed Can’t Do What It’s Saying It Will Do

The Fed FOMC minutes came out last week, signaling tighter monetary policy. Peter Schiff talked about the minutes in his podcast, arguing that the Fed can’t do what it says it’s going to do. If it does, it will crash the markets and the economy. And it won’t lower inflation.

The Fed minutes were widely viewed as even more hawkish than the messaging coming out of the December meeting. Peter said the minutes even surprised him a bit. But he reminded us that when he’s talking about a “hawkish” Fed, he’s not really talking about hawks.

They’re extinct. They may as well be the dodo bird at the Federal Reserve. Everybody is a dove. We’re just talking about degrees of dovishness. And so, the Fed was less dovish than the markets had expected.”

The minutes indicated we could now see four interest rate hikes this year. Three hikes were widely anticipated after the meeting. That would push rates up to about 1% by the end of the year. In the big scheme of things, and against the backdrop of the current economic data, that’s not a lot.

You cannot describe those itsy-bitsy moves in any way ‘hawkish.’”

But comments regarding quantitative tightening – shrinking the balance sheet – really roiled the markets.

In other words, they’re going to go from being a massive buyer in US Treasuries and mortgage-backed securities to a seller of those securities. And that’s what really spooked the markets. Because that sent the bond markets tanking.”

Yields on the 10-year Treasury hit a 52-week high and briefly pushed above 1.8%.

If the Fed is going to shift from buying bonds to selling, clearly, that will put heavy pressure on the bond market. But Peter said there is one thing that the markets don’t seem to comprehend.

…click on the above link to read the rest of the article…

“Minsky Moments Almost Certainly Await”: Nomura Fears ‘Collateral’ Damage From The QE-to-QT Transition

January 10, 2022

“Minsky Moments Almost Certainly Await”: Nomura Fears ‘Collateral’ Damage From The QE-to-QT Transition

“Minsky Moments” almost certainly await, warns Nomura’s Charlie McElligott in his latest note as he reflects on a massive week ahead for markets.

With Powell testimony and bunches of Fed speakers, along with US economic releases headlined by the market’s most important datapoint in the CPI release Wednesday, in addition to PPI, Retail Sales and Consumer Sentiment over the course of the week, plus two Duration-heavy auctions ($36B of 10Y and $22B 30Y, on top of tomorrow’s $52B 3Y),… and finally, US corporate earnings season kickoff (highlighted by JPM, C and WFC this upcoming Friday), it is no wonder that investors are degrossing still…

While the long-end of the curve is reversing modestly – after some more ugliness overnight – STIRs continue to grind hawkishly higher with March now consolidating around a 90% chance of a rate-hike…

McElligott raises some worries of a rapid ‘reversal’ risk in bonds – via “market tantrum” forcing the Fed to yet-again “Bend the Knee” – as market positioning in bonds is extreme to say the least.

Looking at the QIS CTA Trend model to get a sense of the “bearish momentum” and asymmetry within Fixed-Income positioning, we currently see the net exposure across G10 Bonds is back to 10 year historical “extreme Short” at just 2.2%ile overall exposure since 2011; further, the aggregate $notional position across the agg G10 Bond positions is now greater that -2 SD rank (i.e. very “net Short”) dating all the way back to 2002.

Similarly, the Nomura MD notes that eventually, the more this selloff in legacy long / crowded hyper Growth Tech extends, there is ultimately a mounting risk of a sharp counter-trend rally in beaten-down Nasdaq, particularly considering the extremely magnitude of the Dealer “short Gamma” profile in QQQ ($Gamma -$476mm, 3.4%ile since 2013…

…click on the above link to read the rest of the article…

US Money Supply – The Pandemic Moonshot

June 15, 2020

US Money Supply – The Pandemic Moonshot

Printing Until the Cows Come Home…

It started out with Jay Powell planting a happy little money tree in 2019 to keep the repo market from suffering a terminal seizure. This essentially led to a restoration of the status quo ante “QT” (the mythical beast known as “quantitative tightening” that was briefly glimpsed in 2018/19). Thus the roach motel theory of QE was confirmed: once a central bank resorts to QE, a return to “standard monetary policy” becomes impossible. You can check in, but you can never leave.

Phase 1: Jay Powell plants a happy little money tree to rescue the repo market from itself (from: “The Joy of Printing”).

It is easy to see why. Any attempt to seriously reduce outstanding central bank credit will bring about the very situation QE was intended to prevent, i.e., falling asset prices and an economic bust. Seemingly no-one in officialdom ever stops to ask why that should be so. What happened to “self-sustaining recoveries” and “achieving escape velocity”? Could it be the economy is neither a perpetuum mobile nor a space ship?

Before we consider this question, here is what has happened since then: shortly after the double-plus-uncool novel SARS-2 corona-virus traversed several ponds and made landfall in the US, Mr. Powell and his fellow merry pranksters decided to water the money tree with super-gro. Or maybe it was hyper-gro:

The “QE” roach motel, illustrated by the history of the Fed’s balance sheet.

That is a rather noteworthy bout of inflation. Readers may have noticed that in the realms of finance and economics there has also been an inflation of verbiage describing never before seen extremes. By its very nature, one would normally not expect to hear the term “unprecedented” very often, but it has become disconcertingly commonplace in connection with monetary pumping, deficit spending and debt growth.

…click on the above link to read the rest of the article…

These Are The Banks Where The Fed’s $1.4 Trillion In Reserves Are Parked

September 22, 2019

These Are The Banks Where The Fed’s $1.4 Trillion In Reserves Are Parked

Over the past few days there has been much confusion over the repocalpyse that shook the overnight funding market, and just as much confusion over the definition of reserves which some banks were unwilling to part with, other banks were desperate for, and in the end both Powell and the former head of the NY Fed’s markets desk admitted that Quantitative Tightening had been taken too far, and the total amount of reserves in the system was too low and will be increased (welcome back QE).

Yet while the book has yet to be written on the causes for last week’s shocking move higher in repo rates, which sent general collateral as high as 10%, a record print in a time of $1.4 trillion in excess reserves, we can shed some clarity on the definition of “reserves.” While there is a universe of semantic gymnastics when it comes to explaining what reserves are, the most basic definition is quite simply “cash”, however not cash in circulation but rather cash (and deposits) held in the bank’s account with the Federal Reserve (which the US central bank’s name comes from).

This means that there should be a de facto identity between the total amount of cash in the US banking system and the amount of total (minimum required plus excess) reserves. Sure enough, if only looks at the Fed’s weekly H.8 statement, which lists the “Assets and Liabilities of Commercial Banks in the United States“, and adds across the various banking cash aggregates in the US, what one gets is precisely the total amount of reserves.

…click on the above link to read the rest of the article…

For The First Time In 6 Years, No Central Bank Is Hiking

July 27, 2019

For The First Time In 6 Years, No Central Bank Is Hiking

The global central bank experiment with renormalization is officially over.

After roughly half the world’s central banks hiked rates at least once in 2018, the major central banks have returned to easing mode, and as the chart below shows, for the first time since 2013, not a single central bank is hiking rates.

Commenting on the violent reversal away from tightening financial conditions which emerged following the Q4 2018 selloff, Goldman’s Jan Hatzius writes that “The FOMC looks set to cut the funds rate next week, the ECB today sent a strong signal that action in September is likely, and China has resumed easing policy after a spring pause. With global growth running at a below-trend rate of 2¾%—down from about 4% a year ago—a synchronized tilt towards easing looks like a natural response to a weaker outlook.”

Yet even Goldman can’t help but ask just why the Fed is rushing to commence the first easing cycle in years, pointing out that “the US economy is in decent shape, with a tight labor market, inflation close to target and— in our forecast— growth running a little above 2% both this year and next. We are modestly above consensus because we expect the negative inventory cycle to end and final demand to continue growing robustly on the back of easier financial conditions.”

This, according to the Goldman economist, should limit Fed easing to two 25bp insurance cuts, one next week and another in September, although the bank, which until very recently did not expect any rate cuts at all, fails to justify just why the Fed is doing what it is about to do, unless of course Powell is merely folding to Trump pressure.

…click on the above link to read the rest of the article…

Trump’s Fight With The Fed Over Interest Rates Is A Scripted Farce

July 17, 2019

Trump’s Fight With The Fed Over Interest Rates Is A Scripted Farce

There is a very bizarre narrative being circulated in the mainstream economic media and it goes a little something like this:

“The Federal Reserve has capitulated on liquidity tightening yet the US economy is “stronger than ever”, isn’t that weird?”

There are a couple things wrong with this statement. First, the Fed has not yet capitulated on its tightening policy. In fact, we have been hearing since last November from the mainstream media and some alternative media that the Fed was going to lower its Fed Funds Rate and end monthly balance sheet cuts at “any moment”, yet several months later it still has not happened. Just last month the Fed cut another $38 billion in assets from its balance sheet; a move that was barely discussed in the mainstream because it does not fit with the prevailing delusion that the Fed has “already capitulated”. When the Fed cuts rates back significantly and the asset dumps stop, then and only then can anyone say with any authority that the Fed has ended its tightening cycle.

Secondly, the US economy is not “stronger than ever”, it is at its weakest since just before the credit crash of 2008.

And here is where the disconnect begins in Fed policy versus public expectations and the behavior of the Trump Administration. Almost EVERYONE, including the Federal Reserve, Donald Trump and the media are talking about how the US economy is “booming”. So why all the fuss over the Fed’s interest rates? The truth is it’s just more theater for the masses.

…click on the above link to read the rest of the article…

March 28, 2019

The Federal Reserve’s Controlled Demolition Of The Economy Is Almost Complete

The Federal Reserve is an often misunderstood entity, not only in the mainstream, but also in alternative economic circles. There is this ever pervasive fantasy on both sides of the divide that the central bank actually “cares” about forever protecting the US economy, or at least propping up the US economy in an endless game of “kick the can”. While this might be true at times, it is not true ALL the time. Things change, agendas change, and sometimes the Fed’s goal is not to maintain the economy, but to destroy it.

The delusion that the Fed is seeking to kick the can is highly present today after the latest Fed meeting in which the central bank indicated there would be a pause in interest rate hikes in 2019. As I have noted in numerous articles over the past year, the mainstream media and the Fed have made interest rates the focus of every economic discussion, and I believe this was quite deliberate. In the meantime, the Fed balance sheet and its strange relationship to the stock market bubble is mostly ignored.

The word “capitulation” is getting thrown around quite haphazardly in reference to the Fed’s tightening policy. And yet, even now after all the pundits have declared the Fed “in retreat” or “trapped in a Catch-22”, the Fed continues to tighten, and is set to cut balance sheet assets straight through until the end of September. Perhaps my definition of capitulation is different from some people’s.

One would think that if the Fed was in retreat in terms of tightening, that they would actually STOP tightening. This has not happened. Also, one might also expect that if the Fed is going full “dovish” that they would have cut interest rates in March instead of holding them steady at their neutral rate of inflation.

…click on the above link to read the rest of the article…

Why The Fed Should Not Stop Raising Rates

March 25, 2019

Why The Fed Should Not Stop Raising Rates

A very smart and wealthy friend always reminds me that you have to invest in the market landscape that exists today—not the one you wish for. That said, I like to think of myself as a pragmatist who views the capital markets through the lens of financial history. That history would imply that the Fed should keep hiking rates and ignore the yield curve. In fact, if I were the chair of the Fed, I’d have an emergency 50bps hike today; just to show that I’m serious about putting the economy back on a sound footing for future growth.

To start with, capital markets exist to finance businesses—they should not exist to drive economic growth through a distributed wealth effect that narrowly benefits the wealthy who have capital market assets. The state of affairs that exists today, is an anomaly historically—it isn’t sustainable and shouldn’t be supported by the Fed at the expense of the rest of the economy. Capital market bubbles are disruptive and destructive of long-term GDP growth. Today’s bubble is unparalleled by almost any historical standard—only made possible by abnormally cheap credit along with an implicit Federal Reserve put.

Since the Fed sets the cost of capital, they need to change priorities from supporting financial bubbles to supporting the actual economy. The cost of capital should be at a level that allows businesses to profitably re-invest in growth endeavors. If capital is so cheap that returns on capital investment are minimal, businesses instead focus on driving returns through financial engineering. This isn’t only because they’re obsessed with their stock options—it is because they now have no viable investment opportunities in a world where there is endless competition funded with almost free and limitless capital.

…click on the above link to read the rest of the article…

Fed Can’t Get Out – Buy Gold Now – Jim Rickards

March 24, 2019

Fed Can’t Get Out – Buy Gold Now – Jim Rickards

Four time best-selling author Jim Rickards says the Fed “throwing in the towel” on rate hikes is signaling a big problem for the economy. Rickards says, “The Fed was tightening to get ready for the next recession. . . . You need to cut interest rates somewhere between 4% and 5% to get out of a recession. How do you cut interest rates 4% if you are only at 2.25%? The answer is you can’t. You have to get to 4% before you can cut 4%, and that’s what the Fed was trying to do. . . . How do you raise rates in weakness to get ready for the next recession without causing the next recession that you are preparing to cure? That was the conundrum. I never thought they would get it right . . . and, as of now, it looks like they didn’t get it right. Meaning, they tightened so much to get ready for the next recession they slowed the economy.”

Rickards says, “Bernanke painted them into a corner, and they can’t get out. There is no escape from the room. By the way, one of the reasons gold is preforming so well, the Fed has proved that they can’t get out of this. They got into it, but they can’t get out of it because every time they try, they sink the stock market. They sink the housing market. They raise the specter of recession. They slow economic growth. They don’t want that. So, they sort of pause and maybe tiptoe back into it, but they really can’t get out of it.”

On gold, Rickards says, “People always say there is not enough gold to support commerce and trade and the money supply. I always remind them that is nonsense.

…click on the above link to read the rest of the article…

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