Connect with us

Economics

Fed Chair Powell Owned At Least $1.5 Million In Municipal Bonds Like The Ones The Fed Bailed Out In 2020

Fed Chair Powell Owned At Least $1.5 Million In Municipal Bonds Like The Ones The Fed Bailed Out In 2020

In a revelation that should really…

Share this article:

Published

on

This article was originally published by Zero Hedge

Fed Chair Powell Owned At Least $1.5 Million In Municipal Bonds Like The Ones The Fed Bailed Out In 2020

In a revelation that should really surprise no one who has been paying attention for the last couple decades, it was reported late last week that Chairman Jerome Powell owned the same type of municipal bonds that the Fed stepped in to buy during the Covid crash in markets around March 2020. It was part of a series of disclosures that raised questions about Fed officials owning securities that directly benefitted from the Fed’s intervention in markets.

For example, the revelation follows our reporting just days ago that the Fed’s Robert Kaplan had made multiple million dollar stock trades in 2020. 

While none of the transactions appears to violate the Fed’s code of conduct, CNBC reported, municipal bonds are an asset class that are far more niche that stocks or ETFs. Officials “should be careful to avoid any dealings or other conduct that might convey even an appearance of conflict between their personal interests, the interests of the system, and the public interest,” the Fed’s code of conduct says.

That really clears things up. 

CNBC reported that “Powell held between $1.25 million and $2.5 million of municipal bonds in family trusts” which made up “just a small portion” of his total assets. These bonds were held last year when the Fed stepped into make more than $5 billion in muni purchases..

It was additionally disclosed this week that Boston Fed President Eric Rosengren held between $151,000 and $800,000 in REITs that owned mortgage backed securities and that he made as many as 37 trades in the 4 REITS while the Fed was buying nearly $700 billion in mortgage backed securities. 

CNBC also reported that Richmond Fed President Thomas Barkin held $1.35 million to $3 million in individual corporate bonds purchased before 2020, including bonds of companies like Pepsi and Home Depot.

Powell had no say over the central bank’s individual municipal bond purchases, a spokesperson told CNBC. Why would he? Just because he’s the Chairman doesn’t mean he has any say – right?

Rosengren’s spokesperson made a similarly un-reassuring statement, saying that Rosengren “made sure his personal saving and investment transactions complied with what was permissible under Fed ethics rules.”

Well; we feel put at ease.

Dennis Kelleher, CEO of a nonprofit called Better Markets, concluded: “To think that such trading is acceptable because it is supposedly allowed by Fed’s current policies only highlights that the Fed’s policies are woefully deficient.”

In their defense, Fed officials noted they didn’t trade during its “blackout period”, when Fed officials aren’t allowed to comment on monetary policy or trade.

“The whole year should be considered a blackout period,” Kelleher retorted.

Among the outraged responses to the realization of Robert Kaplan’s conflicts of interest last week was that of Sven Henrich who observed that “the Fed guys are personally actively trading the markets they influence more than anything else.”

“Go figure,” he said. “When are we officially declaring a Banana Republic?”

Tyler Durden
Sun, 09/19/2021 – 17:30







Author: Tyler Durden

Share this article:

Economics

‘Thielism’: Beyond The Dogmas Of Reaganism

‘Thielism’: Beyond The Dogmas Of Reaganism

Authored by The Thielist via The Thielist Dispatch (emphasis ours),

On October 31st, 2016, Peter…

Share this article:

‘Thielism’: Beyond The Dogmas Of Reaganism

Authored by The Thielist via The Thielist Dispatch (emphasis ours),

On October 31st, 2016, Peter Thiel delivered a speech at the National Press Club in the heart of Washington, just a few blocks away from the White House. In his prepared remarks, he articulated the case for Donald J. Trump, the Republican presidential nominee whose chances of winning the upcoming election against Hillary Clinton seemed all but nonexistent to the political establishment. But Thiel, always a contrarian, offered a radically different perspective. He argued that Trump voters weren’t crazy, and that the sentiments which fueled the candidate’s meteoric rise were the inevitable result of a country that had been run into the ground by decades of incompetence, misplaced priorities, and bubble thinking. The voters cast their ballots on November 8th, and the rest is history. Thiel was vindicated.

How is it that a Silicon Valley billionaire could have understood what scores of pollsters, consultants, and other industry insiders did not? Thiel’s political endeavors, after all, comprise only a fraction of his work. First and foremost, Peter Thiel is a venture capitalist and entrepreneur. And in the very same month that he gave a speech on Trump’s behalf at the RNC in Cleveland, Ohio, Thiel also bludgeoned Gawker Media out of existence and forced its founder into bankruptcy, exacting his revenge for outing him several years prior. But still, he somehow had a better read on the lives of everyday Americans than the pundit class, and in doing so made his peers look like arrogant buffoons.

In an interview with Walter Isaacson, Jeff Bezos said, “contrarians are usually wrong.” While Hillary Clinton’s infamous “basket of deplorables” slip encapsulated the Democratic nominee’s contempt for a vast portion of the American electorate, the Amazon founder’s swipe at Thiel speaks to the larger phenomenon that lead to Donald Trump’s rise.

This country’s ruling elites have known nothing but fattening wallets and expanding cultural influence for decades. But in addition to self-enrichment, they have gained unprecedented control over all of America’s treasured institutions, slowly but surely chipping away at ordinary people’s ability to have a meaningful say in how their Republic ought to be run. Having wrested power away from the general public and the government designed to serve their interests, the ruling class has internalized the mentality that they can do no wrong; anyone who challenges their infallibility should simply be ignored. So strong was this self-confidence in 2016 that, when one of their own dared to suggest that the elite consensus was completely untethered from reality, other members of the ruling class simply reassured one another that everything was still proceeding according to plan. When you replay the events of that fateful year from their point of view, it is hard to doubt that waking up on the morning of November 9th must have been uniquely terrifying.

Defining Thielism

Nearly five years after his bet on Donald Trump, Peter Thiel is making his biggest foray into the political arena yet. He has given twin contributions of ten million dollars to the United States Senate campaigns of J.D. Vance in Ohio and Blake Masters in Arizona, and he’s also thrown his support behind the likes of congressional candidates such as Joe Kent and Patrick Witt. No one can say for certain what these efforts will yield, but it is undeniable that Thiel seems determined to disrupt the American political landscape. If his endgame is merely to raise the profile of a strong crop of candidates and get them elected to federal office, the strategy seems to be working. The closely-vetted bunch is charismatic, competent, and strong on messaging, which poses a frustrating challenge to Republican and Democratic challengers alike. But Peter Thiel’s true ambitions are grander.

At the conclusion of his aforementioned National Press Club speech, Thiel spoke of then-candidate Trump ushering in “a new Republican Party, beyond the dogmas of Reaganism” and the birth of “a new American politics that overcomes denial.” The sentiment suggests that the project at hand is far more consequential than boosting a handful of impressive political outsiders. As the patron of an emerging movement within the Republican sphere, Peter Thiel is staging an effort to save the country. This is the dawn of Thielism as a political philosophy, which can be defined as follows:

A contrarian conservatism is one whose priorities and strategies diverge from the platform of the Republican establishment. While reigning in Big Tech, fixing the American university system, and addressing the decline of domestic manufacturing have all become points of conversation on the Right, Thielism emphasizes the need to address each of those problems substantively. Furthermore, it rejects the premise that we always have to subscribe to established methods when devising solutions to those problems. Protecting the American worker, for example, requires us to reassess the near-sacred status of free trade within Republican orthodoxy.

On a fundamental level, Thielism also rejects the doctrine of American exceptionalism. Why? Because it recognizes that America’s greatness cannot exist in rhetoric alone; it must be backed up with action, achievement, and honesty. What made us great in the past is worth celebrating, but simply assuming that some special national character will continue to buoy us into the future is ludicrous. We are still masters of our own destiny, but we can only reassert our national sovereignty if we become far more self-aware than we are today. This awareness requires us to take stock of our problems and begin solving them.

Charting the Course Forward

Every great movement has a founder, but the movement’s impact is inseparably linked to how much its adherents actually accomplish. If one espouses genius ideas but remains largely ignored, it’s not a movement at all. Fortunately, Thielism is reaching a critical mass on the legislative front, as candidates from Washington to Georgia position themselves to win seats in both houses of Congress next fall. But, as important as gaining an electoral foothold may be, it’s only one small part of the Thielist mission. The political dimension of the conservative movement must interface with the cultural dimension. And, most importantly, both politics and culture need to be responsive to the ever-present force of technology, which the Republican establishment has long ignored save for the purpose of generating funds for its campaigns. If leveraged correctly, technology of all varieties, not just digital, can become the space in which we finally reverse America’s decline.

But first, it’s critical to note that we can’t afford to get bogged down in the culture wars. Despite an avalanche of opposition to them, the facts of biology which have underpinned all of human existence and been fundamental to Western civilization remain true as ever. In engaging with debates over such obvious matters, we conservatives lock ourselves into a hopelessly defensive posture. It’s time to drop our shovels and refuse to dig ourselves in any deeper. The only way out of the hole we’re in now is to go up, and the only way up is to build.

This is not to say that we should outright ignore the state of our culture. To do so would be a grave mistake, as the work of preserving whatever fundamental truth and history we have left, reduced and diminished as they may be, remains an always important task. But, as many of us have come to understand already, the brand of conservatism to which we had subscribed up until this point has failed to conserve almost anything meaningful. The Thielist perspective on the matter is to filter out the distractions and devote energy to constructive, new endeavors that will serve our interests in tangible ways.

Towards this end, there are a practically infinite number of pathways which can be taken. Particularly promising are the areas of decentralized finance, human inhabitance of space, and developing new modes of transportation. The common denominator among these three examples is the usage of technology for our own purposes rather than letting it be wielded mercilessly against us. While the current ruling class controls all major institutions, a truly disruptive advancement within a domain beyond their influence will loosen their grip. Of course, artificial intelligence and robots do pose a challenge to the new conservative movement, as both have thus far hurt the American worker immeasurably in service to the globalist agenda. But those scores are not entirely settled, and there is still a chance to stave off the worst possible outcomes if we address both items with urgency.

Ultimately, Thielism seeks to return America to the state of definite optimism, which it has not experienced for some five decades now. Indefinite optimism—the “everything will be fine” mentality—has been the prevailing disposition of the ruling class since the dawn of the 1970s, and it was also the attitude of ordinary people until very recently. Today, most ordinary people aren’t optimistic. We are now in an era of indefinite pessimism, where things are just expected to get worse. And as much as we want to believe that the present storms will pass, a prolonged period of indefinite pessimism will eventually lead to collapse unless things change. A course correction is needed if we are to have any hope of keeping the Republic.

Getting the compass reoriented back towards the ideal, definite optimism, means we need to provide concrete proof that the future will be better than the past. It means overcoming the blackpill, once and for all. It means harnessing the power of technology, which is supposed to improve our quality of life, and actually reaping its benefits. It means reclaiming the American Dream and using the government which exists to protect it in an effective, efficient manner.

In beginning this project, I hope to play a small role in commentating on emerging developments within the conservative movement. It is abundantly clear that we need to take this country back, and doing so requires a worldview that looks beyond the tired solutions of the past to face the future, unafraid to acknowledge the many challenges before our nation today. With the same firm reliance on the protection of divine Providence as our forebears, let us go forward to create and build a better tomorrow for ourselves and for America.

Tyler Durden
Thu, 10/21/2021 – 22:10

Author: Tyler Durden

Share this article:

Continue Reading

Economics

The bond market is waking up

It looks like the bond market is beginning to wake up to the reality of higher inflation. Yields have moved significantly higher in recent days, and inflation…

Share this article:

It looks like the bond market is beginning to wake up to the reality of higher inflation. Yields have moved significantly higher in recent days, and inflation expectations are rising. That the stock market is taking this in stride—so far—suggests that higher interest rates are not necessarily bad for the economy. I think we are still in the early innings of the adjustment to higher interest rates. There’s a lot more to this story that will play out soon.

Chart #1
Chart #1 compares the nominal yield on 5-yr Treasuries (which is roughly equivalent to what the market expects that the Federal funds rate will average over the next 5 years) to the ex-energy rate of consumer price inflation (I remove energy because it is by far the most volatile component of the CPI). Despite recent jumps in yields, the chart strongly suggests that the level of yields is still way below what it “should be” given the current level of inflation. But yields are moving in the right direction.
I’ve been making the point of late that negative yields (i.e., nominal yields below the rate of inflation are unsustainable long-term because the existence of negative yields gives consumers and investors a strong incentive to “borrow and buy.” When real yields are negative it pays to short the dollar (i.e., borrow dollars) and go long anything that has roots in the nominal economy (e.g., houses, commodities, cars, equities). This incentive weakens the demand for money, which then leaves the economy with a lot of unwanted money—which provides the fuel for higher inflation. Eventually, rising yields and rising inflation expectations will prod the Fed to ignore the supposed weakness of the economy and begin the long process of normalizing interest rates. 
Chart #2

Chart #2 shows the level of real and nominal yields on 5-yr Treasuries and the difference between the two (green line), which is the market’s expectation for what the CPI will average over the next 5 years. Inflation expectations by this measure (now 3.0%) are the highest they have been since 1997, when TIPS were first introduced. Inflation expectations have now surged by 250 bps since March 2020. As the chart also shows, nominal yields are the ones that have risen the most. 

The economy won’t be at real risk of higher interest rates until real short-term interest rates are much higher than they are today (probably 3% or more) and the yield curve is much flatter than it is today (currently it is still steepening). 
Fasten your seat belts, because we just begun what could be a long and wild ride to higher interest rates.





Share this article:

Continue Reading

Economics

Stocks That Miss Expectations Are Being Hammered By The Most On Record

Stocks That Miss Expectations Are Being Hammered By The Most On Record

It was just a quarter ago (and then again, the quarter before that)…

Share this article:

Stocks That Miss Expectations Are Being Hammered By The Most On Record

It was just a quarter ago (and then again, the quarter before that) when we reported that in a market as priced to perfection as this one, where stock prices have massively outrun fair value based on corporate earnings (in some cases by years, but that’s where super generous earnings multiples come in), that investors have no patience for companies that miss, and the result was a furious hammering of all stocks that missed top or bottom-line expectations (and in many cases, companies that beat but did not beat by enough were also punished).

Well, fast forward to this quarter when the same phenomenon is at play: while earnings are expected to (still) come in hot, the market has a familiar warning to companies: miss and you will get punished.

While so far Q3 earnings has come is surprisingly strong – amid whispers that stagflation will hit margins – and 84% of reporting companies have posted earnings that topped expectations, just shy of the best showing ever, similar to last quarter the firms that surpassed profit forecasts got almost nothing to show for it in the market while misses got punished the most since Bloomberg started tracking the data in 2017.

As Bloomberg details looking at recent reports, Procter & Gamble beat on sales and earnings on Tuesday, only to have investors fixate on rising commodity and freight costs. Baker Hughes plunged 5.7% after reporting a third-quarter earnings stumble. And streaming giant Netflix Inc. fell 2.2% on Wednesday as traders looked past a profit and subscriber-growth beat.

On average, companies that beat on profit estimates outperformed the S&P 500 by less than 0.2%.

What about companies that did not beat? Here it was really ugly: shares of firms that missed profit forecasts underperformed the S&P 500 by 4.4% a day after the report, the worst post-earnings reaction since at least 2017, Bloomberg reported.

Combining with our previous observations on this striking phenomenon, this makes Q3 the fourth consecutive quarter in which earnings are not being rewarded and where beats are being severely punished by a market which has been priced to beyond perfection. And while U.S. companies overall have been able to deal with the pandemic-related headaches, analysts want to see whether they can continue to charge more for products without losing business should costs from labor to raw materials continue to go up.

“It is just going to take time to get all those container ships to port and to have enough trucks and truck drivers to take it the last mile to the store shelf or distribution facility,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “We hear corroborating evidence from corporate CEOs and, frankly, our own clients — that the current bottlenecks will persist into mid-2022.”

Tyler Durden
Thu, 10/21/2021 – 18:30

Author: Tyler Durden

Share this article:

Continue Reading

Trending