April 12, 2024 By Steve Blumenthal “The deficits today are even larger and occurring in boom times—not as the result of a recession—and they have been supported by quantitative easing, which was never done before the great financial crisis […] These markets seem to be pricing in at a 70% to 80% chance of a soft landing—modest growth along with declining inflation and interest rates. I believe the odds are a lot lower than that.” – Jamie Dimon, JPMorgan Chase, Chairman and CEO (Source: Annual Letter to Shareholders) I began last week’s post by highlighting the letter from ISDA to the ..read more

  April 5, 2024 By Steve Blumenthal “It isn’t so much that hard times are coming; The change observed is mostly soft times going.”  – Groucho Marx This is big. Lights on. Matters. First, the news, then the explanation. On March 5, ISDA submitted a letter to the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency to urge them to implement targeted reforms to the Supplementary Leverage Ratio (SLR), the enhanced SLR framework, and the risk-based surcharge for global bank holding companies tha ..read more

  March 29, 2024 By Steve Blumenthal “It’s a wonderful thing to be optimistic. It keeps you healthy and it keeps you resilient.”  – Daniel Kahneman   Daniel Kahneman passed away this week. Kahneman was an Israeli-American author, psychologist, and economist notable for his work on the psychology of judgment and decision-making. In 2002, he was awarded the Nobel Memorial Prize in Economic Sciences for his work in behavioral economics, including his development of prospect theory, which tests prevailing economic theory that assumes human rationality in decision-making and est ..read more

  March 20, 2024 By Steve Blumenthal “While Powell seemingly can’t wait to cut rates to take some edge off the current levels, at the end of the day, about half the committee wants 3 cuts this year and about half put its dots in for 2, about where we stood before the meeting in terms of market expectations. The real reveal was the ‘fairly soon’ expectations of tapering QT, though it could run longer and end up at the same place. If there is one thing Powell clearly did not do, [it] was push back on the current very easy financial conditions.”  – Peter Boockvar, The Boock Report 3 ..read more

  March 15, 2024 By Steve Blumenthal “Easy money, wrote Hazlitt, creates economic distortions… it tends to encourage highly speculative ventures that cannot continue except under the artificial conditions that have given birth to them. On the supply side, the artificial reduction of interest rates discourages normal thrift, saving, and investment. It reduces the accumulation of capital. It slows down that increase in productivity, that ‘economic growth’ that ‘progressives’ profess to be so eager to promote.” – Edward Chancellor, The Price of Time: The Real Story of Interest Thursday’s ..read more

  March 8, 2024 By Steve Blumenthal “Emotional Intelligence grows through perception. Look around at your present situation and observe it through the level of feeling.” – Deepak Chopra   I’ve been in Park City this week at the annual WallachBeth 2024 Winter Symposium, attending with numerous other investment professionals who are integral to the plumbing that makes our capital markets system run. This includes leaders in private equity and private credit, institutional fund managers, investment managers, the head of options from the NYSE, the head of ETF listings at Na ..read more

  March 1, 2024 By Steve Blumenthal “When we talk about the bond vigilantes calling the government to task, we’re talking about this. The government needs to fund itself, and the task is getting more challenging.” ­­– Steve Blumenthal, On My Radar Feb 23, 2024 I want to reiterate a point made last week—the elephant in the room: We have more debt, spending deficits, and entitlement obligations than we have money for. The math doesn’t add up. Jeffrey Gundlach summed up the problem nicely in the latest DoubleLine Round Table Prime discussion on macroeconomics, too. If we keep the current ..read more

  February 23, 2024 By Steve Blumenthal “The U.S. deficit has been going up, and it’s been going up because of higher interest rates. $17 trillion of treasury bonds come due in the next three to six months. The average interest rate on them is well below where interest rates are today. A lot of them are at 50 basis points. And if you have to reinvest them at 4% – you got an arithmetic problem.” ­­– Jeffrey Gundlach, DoubleLine Capital While Nvidia stole the show this week, Wednesday’s Treasury auction of 20-year Treasury bond notes was the worst on record, leading to a broad-based sel ..read more

  February 16, 2024 By Steve Blumenthal “Sustainable bull markets don’t start with a Shiller P/E of 33 and full employment.” ­­– Jeremy Grantham, GMO Several observations on the current technical picture of the US stock and bond markets: overvalued, overbought, and over believed…  The top five stocks in the S&P 500 Index—Microsoft, Apple, Alphabet, Amazon, and Nvidia—makeup 25% of the Index. Compare that to the top five stocks in 2000—Microsoft, GE, Cisco, Intel, and Exxon—which made up approximately 18% of the Index. If we go further back to the Nifty Fifty peak in 1972, the ..read more

  February 2, 2024 By Steve Blumenthal “Adventure is the invitation to common people to become uncommon.”  “There are only four things you can do on skis: Turn right, turn left, go straight, or sell them.” ­­– Warren Miller The last couple of weeks, we’ve been looking into the pressure cooker building in the commercial real estate market—more specifically, the risks in the commercial office space sector. Businesses need less space, so vacancy rates are up, building values are down, and $1.9 trillion in loans will come due over the next few years—and at higher interest rates. Othe ..read more