While the President tries to make a case that "Rates Are Too Damn High," a look at market realities says otherwise.
Setup: Fed's policy rates are 4.33% and inflation is 2.3%. Thus, rates are 'restrictive.' But that hasn't stopped insanity!
...There are signs everywhere that people are taking huge risks [like 'meme' stocks] with a this-is-so-much-fun attitude, including with cryptos where another mania is in full swing. And margin debt blew out by a record amount, to a record, and is Exhibit A of loosey-goosey financial conditions....
...spreads between high-risk junk bonds [BB] and Treasury securities are historically narrow [at 1.64%]...
Where are the problems? Mortgage payments is one of them. Note well: we said "payments", not "rates."
... residential real estate, where the resale market has frozen largely as a result of home prices having spiked by 50% and more in a two-year period through mid-2022...
The prices are the problem, not the rates. See, e.g., the assessment increase in Wauwatosa of ~50% in just 6 years.
As Wolf points out, there is a lot of money sloshing around. CRE is a disaster because Covid + Amazon, but risk-taking in junk bonds and bitcoin is very high (margin borrowing is, too.)
We're willing to bet that the ginormous national debt and the continuing deficit spend--something that Trump just loves to do--are the problems for T-bonds. Trump should spend energy on spanking Congress for a change.
4 comments:
What happened to Boots?
Probably on vacation. Or his wife said no more blogging until her morale is improved.
He is taking a hiatus.
So that’s what his wife has said. Gotcha.
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