The Economy

I like Kara. ... she should be talking about technology, though, and only technology.

That op-ed largely got it right. It's actually one of the rare things you'll read that demonstrates some actual level of understanding.

 

She's great when she is telling you what kinds of silly things are happening inside of Facebook HQ.

 

BTW, in 3 minutes (as I type this) there is an ECB rate decision.

Christine Lagarde TOLD everyone 50 basis points was coming. ... They are superhero inflation fighters.

They are behind the Federal Reserve. ... but just on what they already have done off of their NEGATIVE INTEREST RATE policy. ... Credit Suisse went kerplunk.

Should be fun (i.e. -- sad) watching her tap dance at the press conference.

 

Well, shit. ... they followed through with a 50 basis point hike. I am actually surprised.

Good for them (they are afraid for their credibility). ... bad for the European banks.

EDIT: They did signal that future rate hikes are more uncertain now.

 

This is breaking, so don't have a link. ... but it's reminiscent of JP Morgan in 1907. ... A group of companies including JP Morgan and Morgan Stanley is in talks to deposit $20 billion combined into First Republic Bank to sure it up.

EDIT: Here is a link. https://www.cnbc.com/2023/03/16/gro...y.html?__source=sharebar|twitter&par=sharebar

 

If anything he wrote was wrong, surely you could actually respond to what he actually wrote.

Bad investment strategy, eh? Banks that are underwater own long-dated TREASURY bonds. ... considered the safest, most liquid invesments on earth.

I wonder what caused the huge losses they are sitting on on a marked to market basis. I mean, it wouldn't have anything to do with a price-fixing authority that created monetary inflation for a very long period of time to suppress yields and drive up the prices of those bonds artificially. ... and then abruptly ended the party (with no warning. ... inflation was "transitory" right up until they pulled the rug out) burying hundreds of banks that had bought those historically, safe, liquid investments.

If that is bad investment strategy, there is no way on earth for a bank to actually earn any money in that environment. ... safe yield was literally being stolen from them as a matter of "policy," and unlike the rest of the world, they couldn't be pushed up the risk spectrum (which is going to be the next shoe to drop and it's a HUGE deal when we find out what crazy behavior has been going on) because banks are highly regulated. ... so they essentially made the only decision they could, to extend duration a little to try to have positive net interest margins (what banks are in business for!).

Tell you what. ... if you want to tell me that it was "bad investment strategy," explain to me exactly what the environment has been (in your understanding) since the Fed started QE. ... and tell me what the proper "investment strategy" for the hundreds of banks sitting on losses on a marked to market basis was?

Should banks have been rolling over short-term paper and operating at big losses for the last decade plus? On whose dime?

Should they have told the Fed to fuck off on its incentives to lend trillions of dollars, and take the money back in massive deposits? Because the only alternative to that was to just shut their doors.

But maybe I am wrong, and you will tell me how a bank could actually earn anything without the duration risk that is now biting them in the ass and assuming as it had been the case for so long that there was a "Fed put" shielding them.

I'll hang up and listen.