Will Slaughter
@BamaBonds
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Southern fried fixed income. The cynic formerly known as MilwaukeeBonds.
Birmingham, Alabama USA
Joined November 2013
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The rebranding of linear algebra as "artificial intelligence" may be the most successful marketing campaign of all time.
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It is both hilarious and somehow inevitable that Donald Trump has, entirely by accident, solved his financial problems, overfunded his campaign, personally enriched himself, and made a total ingenious end run around campaign finance laws, by turning himself into a meme stock.
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I feel like there are a startling number of people who work in real estate who don’t realize that their industry has been running a giant levered long bond fund for the past 40 years.
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What makes this latest Trumpian stroke of improbable luck especially hilarious is that it never would have happened but for the strenuous efforts of “protectors of democracy” to deplatform him and erase his voice from the public square.
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Anyway, watching $DJT fly higher this morning is a reminder that Donald Trump truly is the Godzilla of American politics. Trying to use nukes against him is futile, as the radiation only makes him stronger.
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It seems like Michael Burry, like John Paulson and the other Big Short heroes, is indeed nothing more than a one hit wonder.
The financial press has spent a decade+ trying to portray Powerball winners as economic savants.
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As $XOM quietly celebrates a fresh all-time high today, it's worth remembering this magnificently stupid tweet from one of the worst investors in the world. Cumulative total returns since posting this nonsense on July 15, 2020?
$XOM: +233%
$ARKK: -40%
Oil demand probably hit a secular peak last year and, thanks to
#EVs
, now is in secular “decline”. Though ARK has no formal forecast, I believe that
#Oilprices
are on their way back to $12, the level reached after the 1973 oil cartel crisis, or lower, now that EVs are taking off.
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Why the Fed is going to need to cut rates. A thread-
The SIVB crisis marks a phase change in the US financial system that renders the current highly inverted yield curve intolerable. Merely providing liquidity won't help banks much when the problem is upside down balance sheets.
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Trump (again without thinking) has stolen the genius of Hunter Biden’s art scam or SBF’s FTX grift and implemented it on a vastly larger, and yet completely legal, scale. It is yet another brave new frontier in money laundering, conflicts of interest, and influence peddling.
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Now, donors big & small, any of his near 100 million voters, foreign governments- whoever- can effectively make direct, untraceable donations to Trump personally, to use however he sees fit. And (when $DJT eventually goes to zero), these gifts will effectively be tax deductible.
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Ballooning inventories, desperation price cuts, rental fleet sales, panel gaps, poor quality control- and now trying to paper the whole thing over with advertising.
Tesla starting to look more like 1980s Detroit every day.
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Given that this it is now possible to get close to 7% over 10 to 30 years in fairly low risk bonds, the minimum hurdle rate for investment in any risky or equity, partnership, or real estate investment should probably be at least 12%.
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But the fundamental problem is the absurdity of being able to put unlimited money directly at the Fed (via MM funds) at 5 or 6% while still expecting deposits to stay at banks at 0-1%. This was a highly unstable equilibrium to begin with, SIVB merely touched off the avalanche.
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At this point, Musk’s management of this platform can only be understood as a conscious effort to goad the 1st lien creditors into a foreclosure action.
X has removed both headlines and subheads when displaying external links—it just features a key image from the destination.
This will impact news on here significantly: it strips out crucial info/context for users scrolling past news articles.
This just keeps getting worse
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It’s clear that Jeffrey Epstein ran, for decades, a honey trap/kompromat scheme designed to ensnare & blackmail the world’s wealthiest & most influential people- apparently with the complicity of US intelligence services.
It’s time for the truth, no matter who it embarrasses.
Bill Gates had an affair with a Russian bridge player around 2010. Then Jeffrey Epstein found out.
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That ship has sailed. The SIVB crisis gives customers a powerful incentive to shift deposits out of banks into money market funds. The economic incentive (5% rates vs 0%) was already there, it was only laziness/ convenience which kept cash in banks. Fear is now making money move.
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The bottom line is that inverted yield curves are poison for financial institutions, and it is now obvious that the Fed has administered too much poison to the system. It's time to walk the rate hikes back and think of other ways to work on inflation.
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Sequoia will never live down the fact they got snowed by one of the most obvious and preposterous con men in the history of business, did no work or due diligence on a major capital commitment, and put a cringeworthy fawning profile of a criminal on their website.
Today’s swift and unanimous verdict confirms what we already knew: that SBF misled and deceived so many, from customers and employees to business partners and investors, including myself and Sequoia.
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This is, of course, largely a problem of the Fed's own making. Its reckless, stupid, & unnecessary QE program of 2021 (combined with ultra dovish forward guidance) actively encouraged banks to load up on low coupon, long duration, and/or negatively convex securities.
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Man, if only you could travel back in time to short the European financials index (SX7E) at the start of the year to take advantage of the Credit Suisse crisis you could have *checks notes* - lost 9% YTD in dollar terms on your hedge?
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The $SIVB failure is all about asset liability mismatch. It is not a credit risk/ bad asset story at all.
It is in many ways more shocking than the 2008 crackups because it’s such an elemental failure of the bread-and-butter risk management banks & regulators are supposed to do.
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Looks like someone has an epic misunderstanding of securities laws- though not at all surprising for a crypto moron.
You learn on day 1 of Series 7 prep that SEC registration implies no government approval whatsoever of a firm’s business model or the legality of its activities.
Coinbase is a public reporting company.
Some of the named assets were trading on the platform when the SEC approved the S-1.
This is epic gaslighting.
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Sacrificing the summer interns… always the sign of a healthy company!
First byline for
@KaraCarlson2
at Bloomberg, and it's a doozy:
Tesla rescinded interns' offers just weeks before they were supposed to start
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Since the end of 2011, Boeing has rewarded shareholders with $55 billion in capital return via share buybacks & dividends. During that time $BA stock has cumulatively underperformed Airbus by -243%, the S&P500 by-130%, and US industrial stocks by -56%.
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Last Friday, nobody expected the 16th largest depository institution in the US to be seized by the FDIC this Friday.
2nd largest bank failure in U.S. history, essentially out of the clear blue sky.
Of course this is a big deal.
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The most infuriating thing in the government response is that it is uninsured depositors- who knowingly ignored deposit limits & risk management in exchange for executive perks, sweetheart mortgages, & other favors- who are getting their bad behavior rewarded.
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The scam was never affirmative action. It was instead the role accorded to 4 year colleges as finishing schools and prestige laundries designed to varnish the same old entrenched privilege with the shiny glosses of “merit” and “justice.”
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This appallingly stupid article, appearing just weeks before Tesla effectively killed its charging business- is a perfect illustration of the low quality journalists (ideologues & cheerleaders mostly) Bloomberg has hired for its climate change beat.
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We will continue to see a huge flight of deposits from the banking system which are going to end up at the Fed's reverse repo facility. Why keep money in risky banks at 0% when you can effectively lend to the Fed at 5%? SIVB provides the catalyst that makes water flow downhill.
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Only a Japanese player could have this level of confidence in low nominal interest rates for the next 20 years.
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The Fed's open ended liquidity support for banks like First Republic isn't going to help that much, as deposit flight still means they are suddenly replacing 0% funding with 5% funding against a ~2% coupon investment portfolio.
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Anecdotally, there is zero evidence in my community that the real estate market is slowing down at all. We bought a house in Dec 2021 (just as rate hikes were starting to get priced) and I’d guess we could probably sell the new house for 20% more today, 16 months & 500 bps later
Buddy in NJ put his house up for sale a few days ago. Wanted to list at $1.35 million. Realtor told him $1.5m. Reluctantly agreed. House sold in 36 hours for $1.86 million.
Hearing other such stories elsewhere.
What the heck is going on? Panic buying?
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Raising rates at the fastest pace in 40 years was only going to go smoothly as long as long as bank funding costs could rise slowly as the asset side of their balance sheets gradually repriced. This required deposit rates to stay near zero even as rates rose everywhere else.
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As things stand now, it appears the Fed would be better off being much aggressive on balance sheet reduction while not raising short rates so much, thereby keeping curves steep while still slowing activity with higher long end rates.
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I don’t mean to alarm anyone, but so far in 1000+ years of English history, odd-numbered Charlies have a 100% track record of getting their heads chopped off.
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If you’ve ever complained about Hunter Biden picking up a check for his dad, you should probably be insisting on Clarence Thomas’ immediate retirement from SCOTUS right about now.
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The pitch clock is a great innovation long overdue in baseball. The “purists” can cry in the beer watching paint dry.
Entire half inning with pitch clock vs. one pitch without pitch clock
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Sooner or later, Americans are going to figure out why electricity, car prices, and car insurance are rising at such precipitous rates. It’s what happens when you replace proven, reliable & efficient technologies with janky & expensive alternatives in the name of cult loyalty.
🇺🇲 US electricity prices are now up 24% over the past three years.
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After all, if you are bank, why not do exactly the same trade as your regulator is putting on its own balance sheet?
But then the Fed rope-a-doped the banking system with the most precipitous rise in short term interest rates in 40+ years. Psych!
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As Boeing was cannibalizing itself in order to shower shareholders & management with the short-term sugar high of $55B in divvies & buybacks, Airbus returned a comparatively paltry $10B or so shareholders. The reward for Airbus shareholders?- total returns twice that of Boeing.
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To stop deposit flight, the Fed needs to dramatically reduce the gradient between riskless money market yields (the reverse repo facility) and bank deposit rates. If that gradient is reduced solely by a sudden shift higher in deposit rates, it's going to destabilize bank capital.
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At bank type (>10x) leverage, that negative funding spread is going to erode bank capital quickly EVEN IF banks are not forced to sell underwater securities at a loss. And by nuking SIVB hybrids, regulators have just made the cost of replacing that capital much more expensive.
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Certainly true in my experience (born in 1973). Events of 08-09 happened shortly after finishing business school, buying a house, and having our first child. Led directly to getting laid off in 2012, a year of unemployment, and a subsequent decade of relative economic insecurity.
No one wants to hear this but it’s empirically true:
The ppl most hurt by 2008 were NOT Millenials. It was a very specific cohort of Gen X born 1967-1973
Saw a great RCM study on 401k balances of this cohort and they never recovered
This is important (1/2)
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How toxic is sentiment on coal?
$BTU out there trading at 1.5x EV/EBITDA, a P/E of of 3, holding a net cash position of $1.5B with plans to buy back 1/3 of its market cap over the next 12 months.
Seem kind of cheap.
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Great companies, as Boeing used to be, are driven by a sense of mission and purpose quite apart from the bottom line. The failure of leadership at Boeing has been comprehensive, and the house cleaning needs to start all the way at the top, from the BOD on down.
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All of which is to suggest that he government (both Fed and Treasury) need to be a bit more creative in how they are fighting inflation. A much stronger fiscal effort is necessary, while the Fed needs to figure out how to keep the curve steep while tightening policy.
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Area octogenarian surprised that a 100-year flood occurs every 100 years or so.
My state has just suffered its worst natural disaster since 1927. The climate crisis is here. For the sake of our common humanity, we must act boldly.
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Republicans losing a hotly contested statewide race by *10 points* in a state as closely divided as Wisconsin is an important indication of what a loser the abortion issue is for the GOP.
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Evidence continues to mount both in favor of a lab leak and a concerted effort by the small community of virus researchers- led by by people like
@K_G_Andersen
- to actively suppress investigation of this possibility.
My view is that it's almost 100% likely COVID originated from the Wuhan lab - as it has been for some time.
We've witnessed essentially a cover up from large parts of the international medical community.
The question is now not what was covered up, but why it was covered up?
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The lessons banks will take away from 2023 are as follows:
1) Never believe Fed “forward guidance” ever again.
2) Keep that duration gap near zero.
3) Mortgage lending just isn’t worth the trouble.
4) “Relationship banking” counts for nothing when the chips are down.
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It’s taken a decade, but perhaps the world has finally woken up to the fact that the rideshare business (and its red-headed stepchild food delivery) is just a terrible, structurally unprofitable money pit.
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There is no corporate credit, no matter how good it is today, that can justify buying 30 or 40Y paper at single digit credit spreads (bps). Remember, it's only been 25 years or so since $AAPL was on the verge of bankruptcy. A lot can happen in 3 decades.
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One unexpected benefit of the knife-fight now playing out among various interest groups over affirmative action is that it is exploding, in a hopefully permanent way, the very idea of a “meritocracy” intermediated by elite college admissions.
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The dead cat bounce is Bitcoin is annoying, but perhaps a sign that the risk apocalypse feared by many in 2023 ain’t gonna happen.
Because if this really were the “Big One” as financial earthquakes go, that junk is going back to zero where it belongs.
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If a 5% funds rate hasn’t sunk risk assets, I highly doubt 50bps on 10Y JGBs is going to do it
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After the most relentless 3 year gaslighting psyop in human history, the truth at last:
“Doctors say they're finding it increasingly difficult to distinguish Covid from allergies or the common cold”
Maybe we’ll be smarter next time.
via
@nbcnews
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If
@CFAinstitute
actually took its ethical canons seriously (instead of merely using them as a cudgel to get people to pay dues), it should be revoking a lot of charters from people with the letters CFA after their name who have been shilling for one crypto scam or another.
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if you think Jay Powell getting tricked by pranksters posing as Volodymyr Zelenskyy is embarrassing, wait until you find out about how he fell for Owner Equivalent Rent posing as inflation.
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If Milei can implement his program of massive fiscal & monetary austerity (even short of dollarization), the result will likely be painful deflation, sovereign default & recession bordering on depression. Argentina probably needs this, but it will end Milei’s career at 1 term.
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Argentina heads for another exchange crisis, maxi-devaluation & debt default before the 2023 PASO in August.
A fitting end for the lies & incompetence of Team Fernandez/CFK & the magical thinking their supporters, 4 years after the 2019 PASO snuffed out reform hopes in Argy.
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Haven’t these people heard of T-Bills?
*ROKU: 26% OF TOTAL CASH, CASH EQUIVALENTS HELD WITH SVB
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Stopping bank runs is good public policy. Many who are disappointed that VCs got away without paying a pound of flesh should encourage Fed/ Treasury to get even by simply enforcing money laundering, tax evasion & securities laws, thereby ending VC enabled crypto scammery forever.
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Imagine being one hit wonder Michael Burry, thinking your broken clock systemic meltdown call is finally going to pay off again after 14 years- only to watch Spoos close green on the day.
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Great companies compound wealth by investing in new products and themselves. Dying, second rate companies loot themselves to enrich managers and shareholders who no longer give a damn. Perhaps Boeing should start fixing its problems by stopping its own self-looting.
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Wow. JP Morgan paying $290 million to prevent Jamie Dimon & other executives from testifying about why JPM enabled, for decades, a trafficking, blackmail, & kompromat ring run by a college dropout con man.
Not the sort of thing you do when your hands are actually clean.
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With ex-food/energy/shelter “super core” inflation down to 3.7% YoY and 2.4% annualized on a 6 month run rate, I really don’t know why the Fed continues to talk about inflation. No need to wait for the entirely predictable OER collapse in 2 months to declare victory.
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The Fed has managed to swerve from pretending it doesn’t have an inflation problem to pretending it does have one.
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It’s nice to see both parties tell their respective lunatic fringes to take a hike and form a centrist coalition to get something done that the rest of America is wants.
One wishes we could see this more often.
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Raytheon out there bragging it’s going to issue debt at 6.25-6.75% to buy back stock yielding 3.0%.
I know execs want to get their bonuses but c’mon man…
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PSA: Before you send out that tweet about how fixed income mark-to-market is going to destroy pensions & life insurers just like Silicon Valley Bank, please take a moment to think about the nature of pension & insurance liabilities.
And then delete your tweet.
Thank you.
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Argentina has finally figured out that the only way to fix itself is to unplug the country and turn it back on.
Here’s hoping for a successful reboot.
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Hopefully, both shareholders and boards of directors will draw the appropriate conclusions regarding short termism driven by management equity compensation, decapitalization of once great industrial franchises, and the limitations of financial engineering.
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@politacenter
@3YearLetterman
Get rid of the bull and replace it with “I never lettered in” and you have tweeted a true statement.
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After hearing all their laudatory thoughts on deposit insurance and socializing losses in the banking system, I can't wait to hear what all the New Dealers in Silicon Valley think about taxing carried interest as ordinary income.
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Anyone else find it curious how we’ve spent $2 trillion+ on super advanced airplanes like the F-35 & god knows what else, and yet the US Air Force apparently can’t do anything about a stupid balloon?
#Pathetic
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Bearing in mind that the BLS measures of rent & shelter are so backward looking as to be useless, worth noting that CPI ex-food, energy, and shelter was just 0.1% in Sep and 2.0% YoY.
The US economy may have 99 problems, but inflation isn’t one.
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Taking crypto seriously in any professional or institutional investment context is prima facie evidence of incompetence, ignorance, and/or bad faith. Any fiduciary or advisor who abetted this scam should be made to pay the price.
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The whole delightful dust up over the Harvard Extension School should make it clear- if the phrase “Harvard graduate Jared Kushner” already did not- that what the Ivy League is selling is not an education but rather an anointing.
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We’ve reached the point where using monetary policy to fight inflation is getting checkmated by financial stability risks. If more needs to be done against inflation, it’s going to require a strong fiscal effort.
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Couldn’t decide between “Delete your account” and “Tell me you don’t know anything about bonds without telling me you don’t know anything about bonds.”
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TL;DR of my earlier thread- it's an interesting inversion of the 08/09 script that cash is now fleeing from banks to money market funds. This is mainly due the existence of the Fed reverse repo facility, and will continue until the Fed either shuts it down or cuts interest rates.
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The thing that is most remarkable about this clip is the incredible colonial arrogance of the BBC interviewer, who despite being an anonymous nobody, believes he had the right to interrupt, bully, and lecture an actual head of state.
There are few things I enjoy quite as much as watching indoctrinated Western virtue signallers get epically destroyed by people from developing countries who are willing to be honest.
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As it stands now the bank hybrid/ AT1 market is dead. Huge flood of common equity issuance coming from the banks?
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Well,
@elonmusk
has finally done it. He’s apparently limited people to reading 300 tweets a day or something like that, though in practice it seem like you get a “rate limit exceeded” message after reading 10 tweets or so. The platform is now unusable.
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Great advice here. The difference between wild success and years of obscure toil in the money management business is being in the right asset class, in the right seat, at the right time.
Bubbles are incredibly rewarding until they're not
My advice to younger folk starting to manage money is to find a highly volatile asset in a clear and present uptrend and take an inordinately large risk size
Become a hero but risk oblivion...
The alternative is to start a
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Suffice it to say, there are a lot of assets out there with values that cannot be supported at a 12%+ discount rate.
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It really has been a long time since 9/11 hasn't it?
BREAKING: Columbia Occupiers have declared Hamilton Hall is now "Hind's Hall"
"INTRODUCING HIND'S HALL. GLORY TO ALL OUR MARTYRS."
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There’s no better way to fuel belief in conspiracy theories than by obstinately attempting to hide, and then lie about, a massive, repulsive actual conspiracy laying in plain sight.
Only brutal, radical transparency will clear the stench from this disaster.
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$LYFT successfully executes the first pump and dump guidance cycle to take place entirely within a single after hours trading session.
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I am going to guess this fantasy never gets built. Neither Chicago nor Illinois has the $2.3B in public funding this plan calls for. It's a nice fairy tale to tell, so that when the deal eventually fails and
@Bears
move to the suburbs, the owners can say "At least we tried."
The Chicago Bears just officially introduced plans for a new $2 billion lakefront stadium.
MORE »
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The rigid professor brains at the Fed are about to make a mirror image of the mistakes they made in 2020 & 2021- I don't know why it so difficult for these people to change their minds in response to facts on the ground, rather than blindly sticking to a preset course of action.
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Argentina has sensibly decided to reject both Peronist socialism and the glib technocratic orthodoxy of the IMF & the Washington consensus. The brutal but necessary readjustment coming will make Milei unpopular- but if he can make the changes irreversible he we will be a hero.
Meet Argentina’s new President Javier Milei. First thing you need to know: He absolutely can’t stand leftists. 😂
Congrats to Argentina!! 🇦🇷
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And now, essentially any bank in the US with an outsize securities portfolio is under suspicion.
Experience teaches that it is better for policymakers to overreact, & overreact early, in a situation like this.
Caution, or a concern with moral hazard, will lead to catastrophe.
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Hard not to notice that green energy investment fads- offshore wind, rooftop solar, biomass, merchant renewables etc.- are concurrently blowing up everywhere. A violent intrusion of reality for ecogrifters in the greater fool magic bean business.
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Fox having to fork over nearly $1B to settle the Dominion case is a win for both free speech & journalistic standards. News organizations can’t just make up wild allegations up- which they know to be untrue- and then cynically spread them to pander to their audience.
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Everyone thought the Fed would keep hiking until something breaks. Well, stuff is breaking.
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Bond yields getting high enough that “there is no alternative” takes on a whole different meaning. (As in sub 4% FCF yield on the SPX doesn’t look so hot when the IG corporate bond index yields 6.10%)
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It’s quite hilarious to me that some people still don’t realize that $PLTR , once a data science glamor stock, is merely Accenture without the scale, customer diversification, or profits.
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