We Are The Watchdogs
The most painfully obvious question for Jerome Powell at yesterday's press conference went unasked. Imagine that.
The thought crossed my mind yesterday that it’s entirely possible that my macro bearishness has been off-putting to some of you. Afterall, each of my last three posts have focused on some mix of the NVIDIA NVDA 0.00%↑ bubble, possibly fraudulent stablecoin transfer volume inflation on Solana ($SOL-USD), and the soon to be ending (we’re told) Buy The Fuckin’ Dip Bank Term Funding Program in March.
Result? Unsubs. Hey, I get it. Most people prefer to read what they want to digest not necessarily what they might need to digest. It’s easier to avoid the doom and gloom than face the reality that some of what I’m articulating might make some sense. Yesterday was one of the most eye opening days I can recall and I’ll get into why in just a moment. First, a small glance under the hood of the engine that is my brain…
I’m Actually Fun At Parties (I think)
I don’t like being bearish. Believe it or not, I’m actually a very optimistic person and I think we have a lot to be excited about long term. I just look at what I perceive to currently be issues in our age demographics, public debt, fiat system, and consumption-based economy… and I draw the conclusion that the next decade or so might be sorta rough for a lot of people.
I fully recognize that if I want to hit a million subscribers and make a lot of money from a newsletter, I would probably have to write about something else. Maybe more people are interested in Taylor Swift and Travis Kelce… I just don’t care because I don’t think focusing on that sort of thing really matters. What does matter to me is the belief that a lot of people are getting fleeced. And deep down I think most of us know that it’s happening, we just aren’t really sure how. I’m fully convinced that this is on purpose.
Watchdog vs Lapdog
There’s a belief by some on fintwit that a certain Wall Street Journal writer who I won’t name is little more than a mouthpiece for the Federal Reserve. I would actually go further and posit that there probably isn’t a single reporter covering finance in the mainstream financial publications who both possesses a critical viewpoint of central bank actions and also gets invited to cover Jerome Powell’s press conferences in person.
What we witnessed in that clown show of a display yesterday is proof positive that there is no serious journalism happening in this field from the traditional players. Consider that New York Community Bancorp NYCB 0.00%↑ - the bank that bought the toxic Signature Bank (RIP) “assets” last year when the regionals were blowing up - just posted a surprise earnings loss for Q4 when the market was expecting a positive EPS number. The bank is cutting its dividend. The market did not like it:
Here’s the weekly candle. So far just a 45% haircut in 2 sessions…
What makes this so interesting is the timing of everything. Credit Master Jerome was speaking in front of the watchful eyes of the mainstream press just yesterday afternoon; long after the earnings miss for NYCB was reported. Of course, rather than ask Powell about the situation at this bank, the baby birdies continue to eat from the palm of his hand. Too concerned about where rates may go in March to be bothered with any difficult questions like a possible bank failure literally happening in real time.
Even more astounding is the change in language from the Fed’s previous release to yesterday’s:
First line, second Paragraph.
The US banking system is sound and resilient.
Now, why would that line be crossed out? Maybe the better question is how is it even possible that a serious financial reporter - in a room with the chairman of the central bank at the podium already - neglected to ask why that statement was removed on the same day that a bank posted a surprise earnings loss?
It is incomprehensible to me unless you accept that these people are not actually in these positions to ask tough questions, speak truth to power, or generally hold regulators accountable for anything. They are there to massage, lob softballs, play nice, and deliver talking points to the filthy masses.
The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the senate, the congress, the state houses, the city halls. They’ve got the judges in their back pocket. And they own all the big media companies so they control just about all of the news and information you get to hear.
- George Carlin, 2007
Bold my emphasis in the Carlin quote above. It is all a confidence game and always has been.
They know, as sure as the treasurer of Enron knew, that they are engaged in, at best, a confidence game and, at worst, a Ponzi scheme.
—Thomas Kaplan on Central Banks
The worst part is the press is very clearly in on it. I still can’t wrap my mind around how the talking heads on bubble vision CNBC talk about Powell as if he’s the savior of the economy after having engineered what they all believe to be a soft landing while no less than 3 regional banks vanished last year due to duration mismatches that he played a part in creating:
The Chairman of the Federal Reserve told the world the central bank wasn’t “thinking about thinking about” raising interest rates in June 2020. At that time, he told the financial markets that rates would stay at zero through 2022. Then he raised rates at the fastest pace on record by year over year change percentage beginning the first quarter of 2022. Now all of the banks that bought treasuries on his June 2020 rate guidance are underwater and need bailouts.
Hey, no worries, anon… the money isn’t real anyway!
Of course, this is the underlying issue. It isn’t that the financial media is filled with a bunch of lapdogs and posers (which it is), it’s that none of this money actually exists and it’s all just an endless supply of “credit” juicing the price of assets that only a few people really own:
We have yet to reach a full reckoning of the consequences of the era of easy money, but it's abundantly clear that it ruined us. The damage was incremental at first, but the perverse incentives and distortions of easy money--zero-interest rate policy (ZIRP), credit available without limits to those who are more equal than others--accelerated the institutionalization of these toxic dynamics throughout the economy and society.
- Charles Hugh Smith, The Era of Easy Money Ruined Us
And Charles is right. ZIRP absolutely has ruined us. It has totally warped realities and perceptions and nobody wants to pay the check - which means all of us will. The only question is whether or not it will be a hard or a soft default.
Every time that the taxpayers are brought in to bailout financial institutions or malactors are allowed to get away with breaking all the rules and paying small fines, you really engender a whole population of people who think “well why should I have to pay back my student loans or my business debts? Why would I have to when the whole world is getting a bailout?”
- Danielle Park, Venable Park Investment Counsel
Soft default is more currency dilution. Hard default looks much different.
I really am fun at parties, I promise.
Disclaimer: I’m not an investment advisor.