“It’s always gonna be this” way, said Zaheer Ebtikar, founder of crypto fund Split Capital. “People can’t help it. [Crypto] is literally the most FOMO [fear of missing out] industry ever.” Ever? Ebtikar wasn’t around for tulipmania.
All in Economics
Banking Stress, What Banking Stress?
A few minutes later Simon Rabinovitch with The Economist, threw this curveball at Powell. “Quick follow up to the question about banking stresses. You talked about how the banking system is resilient. Of course, part of the resilience of the past year stems from the Bank Term Funding Program that you launched in March.
GDP Up, So Are Bankruptcy Filings
For more than a decade interest rates were falling and zombie companies roamed the economy with the benefit of low interest payments. Free money from the government during COVID also provided a shot in the arm for the financially infirm.
The ESG Hustle
Carson Block is the founder of Muddy Waters LLC. His firm is shorting solar firm Sunrun, Inc. (for the second time) as a part of a short theme he calls the “ESG hustle.” When he released his first report on Sunrun, in July 2022, he included in the title that ESG stands for “Everybody Screws the Government.”
Arsonist Fireman Perfect for Job at Fed
The Arnold Fire Department announced early Thursday that they suspended 21-year-old firefighter Andrew Bischof his arrest on arson charges in connection to four suspicious fires in the New Kensington and Arnold areas over the weekend.
Janet Yellen Needs to Brush Up on Her ABCT
“I am feeling very good about that prediction,” Treasury Secretary Janet Yellen told Bloomberg when asked whether the U.S. would avoid a recession while still containing inflation. Yet, commercial bankruptcies increased nearly 17% in August compared to July, reports Fortune.com, marking the 13th consecutive month that total bankruptcies, including families and individuals, have logged year-over-year increases, according to the American Bankruptcy Institute.
Taxpayers Wonder Where the Yellow Went
“I’m actually quite proud of the fact that we did YRC [Yellow’s previous name],” Mnuchin said in 2020. “It saved lots and lots and lots of jobs. I’ve received calls from the company, from truckers, from other people who appreciate this.”
Bank Failure in the Heartland
The deposit insurer estimates the Deposit Insurance Fund will lose $54.2 million by having Dream First Bank, National Association, of Syracuse, Kansas assume all the deposits and enter into a commercial shared-loss agreement with the FDIC on the loans it purchased of the former Heartland Tri-State Bank.
Medicare in a Pickle, But Pickleball Will Not Put it Under
it’s plausible that pickleball medical costs are driving 5-10 percent of the unexpected medical cost trend this year.”
Powerball Play Down: Players Too Bored or Too Broke
“There were $152 million in nationwide sales for Saturday’s $829 million jackpot—a 25% decline from the $197 million in sales for another $825 million Powerball drawing on Oct. 29, 2022, according to Lottoreport.com, which tracks sales.”
Hotelier Checking Out
Higher rates have already taken a toll on real estate investors and now hoteliers. Bloomberg reports “Ashford Hospitality Trust Inc. expects to return 19 hotels to lenders in cities including Las Vegas and Atlanta.” Hotels brands expected to be returned include Residence Inn, SpringHill Suites, and Marriott.
Ahoy! Loans Overboard!
“This is the first inning. They [banks] are selling the assets that are their highest-quality assets and that are short-duration and floating rate.” Some quick math on the $2 billion sale looks to be a 3% hit to PacWest on their best loans.
Can Fractionalized Banking Survive 21st Century Technology?
What she knows is as the world has gone from paper to digits “bank runs clearly are speeding up. And the impact of that is it's revealing that the traditional banking system-- it's always been fundamentally unstable. But it's even more unstable than folks had realized. And banks in general, as a result of the fact that the liabilities can be withdrawn a lot faster, are going to need to hold more cash.”
Some Bank Depositors Get the Smoke, others the Mirrors.
The FDIC can decide what deposits live and which ones die. For now, the deposit insurer has told SVB’s Cayman depositors they can file unsecured claims in the bankruptcy by July 10. The receiver (FDIC) has up to 180 days to determine whether to allow the claims, according to a notice sent by one of SVB’s customers to its investors.
Real Estate Still Lurks
Banks can’t raise equity at this point given low valuations and tepid investor demand, so they must reduce their loan books and “find places to pull back on existing loans and future loan commitments.”
The Fed fights COVID Largesse
While we’ve all moved on from COVID, the government’s COVID largesse has a long tail. Kaplan’s been talking to mayors from around the country and they tell him “American Rescue Act (ARPA) money must be spent by states and municipalities between now and the end of 2024 or it’s lost.
Entreprenuership Breaks Out at Taylor Swift Concert
It would take a Swifty to know Swifties and their individual demand curves.
Bank Buyers Wait For FDIC Subsidy
A rose-colored glasses wearing Jamie Dimon said on May 11th as paraphrased by CNBC, “Regional banks are “quite strong” and will have good financial results, but managers are worried because of the bank runs that have taken down three firms, he said.”
Depositors are not listening to Mr. Dimon and neither are regional bank shareholders.
Privatize Gains, Socialize Losses
That last boldfaced item is “$50 loan from the FDIC.” The deposit insurer doesn’t have that kind of money. The FDIC borrowed it from the Fed (which doesn’t have it either but can conjure it up out of thin air) to lend to JP Morgan Chase. JPM then paid off the $30 billion it and the other 10 big banks placed on deposit as First Republic was circling the drain.
The Agony Out There
As Snider points out, “There is so much hubris attached to [CLOs] because they are basically made to be quantified by mathematical models.” So, the Fed can lower rates but that won’t save real estate. Real estate will continue to crash and THAT will bring down rates.