Wolf Richter with Adam Taggart on Thoughtful Money.
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Great pod. Love Adam and his interviews with guests. Nice job.
Great job Wolf!
The only sane voice in the world.
It feels like Wolf’s response to Adam is a more restrained version of his comments to many of the commenters regarding the recession and the FED..
The other thing I like in YT comments….the reassurance that Wolf will make a great Willem Dafoe impersonator
I can totally picture Wolf saying “You know, I’m something of a macro analyst myself”.
Very good interview well done.
Adam’s “half of Americans have less than $500 in savings” observation is a red herring. It has always been like that. This is Mrrrica.
“Adam’s “half of Americans have less than $500 in savings” observation is a red herring. It has always been like that. This is Mrrrica.”
No, that’s not Mrrrica. It’s clickbait bullshit that Adam cited and that keeps going viral. I was going to rip it apart but didn’t since he is the host and a nice and smart guy, and it’s his show, and he cites all kinds of stuff, and I know that going in, and I expect those kinds of things, so I restrain myself.
Lots of people don’t use savings accounts anymore. They may have one, but it’s mostly inactive. They have checking accounts, and they pay by electronic means, from debit/credit cards to automatic payments via ACH, and the cash stays in the checking account or goes into brokerage accounts, money market funds, CDs, stocks, bonds, 401ks, etc.
If you look at the detail of these studies, you see that.
The Federal Reserve has a similar regular survey out, and it also gets misrepresented in the clickbait headlines as: “X% of Americans don’t have $400 in their savings account to pay for an emergency.”
But once you actually read the report, you find out that the headline on CNBC, MarketWatch, Bloomberg, etc. is total bullshit, designed to be clickbait, and it works because that’s all people read, and bullshit goes viral.
I shredded these moronic headlines about the Fed’s pretty good analysis of how Americans pay for a $400 emergency and a 3-month job loss here, so READ THIS:
https://wolfstreet.com/2023/05/27/americans-ability-to-pay-for-emergency-expenses-or-three-month-job-loss-with-cash-or-cash-equivalent-by-selling-assets-by-borrowing-or-not-at-all/
Among other things, the Fed’s study found: Only 13% of Americans cannot pay for a $400 emergency at all. 54% have three months of expenses set aside in their account (but not a savings account). Some have to sell assets, such as stocks or money market funds, to pay for three-months expenses (and that’s a lot more than $400, LOL). So read this right now because I’m really really really tired of seeing this stupid bullshit on my site:
https://wolfstreet.com/2023/05/27/americans-ability-to-pay-for-emergency-expenses-or-three-month-job-loss-with-cash-or-cash-equivalent-by-selling-assets-by-borrowing-or-not-at-all/
Interest rates on most checking accounts be suckin’ an d dat don’ be no cap fam. You feel me?
Sure, that’s why most people don’t keep more cash than necessary in a checking account. There are many other options.
That is what I meant. It is a red herring. And yes, you were polite.
“This is Mrrrica” was a quippy way of saying that the USA is a nation of borrowers. Anyone with a mortgage or car loan is net negative cash. That doesn’t mean they don’t have plenty assets like home equity, pensions, 401Ks, etc.
While there are exceptions (which spoils the quip) it is only a small minority of people have three months of cash socked away in a savings account. The poor end of the curve can’t do it, the higher echelons don’t need to, and the middle borrows. And it has been that way for the last 30 years, maybe more.
RTGDFA I linked, for crying out loud. You’re spreading clickbait bullshit.
“…quippy way of saying that the USA is a nation of borrowers.”
Like I said, you’re just spreading clickbait bullshit. Incomes and the population have grown over the years much faster than consumer debts, and debt in relationship to consumers’ incomes is running at historic lows. This includes mortgage debts, auto loans, and credit card debt, and other revolving credit. See the chart below of total household debt to disposable income.
I’m just really tired of seeing this clickbait bullshit here in the comments, after all the articles I write to debunk this clickbait bullshit (do you people never read anything here?), including this:
https://wolfstreet.com/2024/08/06/household-debt-delinquencies-collections-and-bankruptcies-our-drunken-sailors-and-their-debts-in-q2/
Ken:
To your point, I have a squarely negative net worth.
I have a small/ languishing (at 1% interest) student loan and an affordable mortgage payment (the balance of which is the negative net worth part).
However we have disposed of the credit cards (not missing the “rewards”) and I have literally been asked “how do you pay for things?”
I have had folks try to refuse a debit card (my wife was subjected to an on the spot credit check at a rental car counter), but I let them know they can use whatever “hold” they need to make them comfortable.
I wonder how people answer these surveys: No, I don’t have $400 in my pocket at the moment for an emergency.
Yes, I have assets and income in excess of my liabilities and can access “saved” or other liquid funds for whatever expenses that crop up.
The difference is like how people sell insurance: “Could you cover your emergency medical treatment out of pocket today?”
No, but I can’t be denied life-saving emergency care in my country, so I can deal with it as soon as I am out of the coma.
And if I can’t pay? I will survive, along with a huge bill in collections, until I deal or it disappears.
Extend and pretend works on all scales!
Checkable deposits are near an ATH and it ain’t one-percenters. $500 is as good at it gets.
https://fred.stlouisfed.org/series/BOGZ1FL193020005Q
Here are household money market funds and CDs, on top of checkable deposits. That doesn’t include T-bills. The decline in CD balances occurred when interest rates were near 0% and people put their cash into stocks and left the remainder in their checking accounts, because it didn’t make much difference at the time. When interest rates rose, balances rose:
I read them when they came out and I am not spreading clickbait ffs — take the agreement with what you are saying.
I *literally said as good as it gets*. Meaning $500 is high. Not low. High. Americans were even *more* in debt in the past. You aren’t debunking anything; I have been trying to agree with your point since the first post.
Half of Americans don’t have $500 in their savings account now and they didn’t at the debt to disposable income peak in 2007-ish either.
I don’t think you have read what I said you are jumping to fury over click-bait which I am not espousing. A person could have posted the same misguided click-bait 30 years ago if twitter existed.
“Employment data is screwed up” I heard in this podcast several times.
I have to ask, why are illegals working illegally if there are tools such as “E-Verify” to prevent employers from hiring illegal aliens. This behavier by employers is illegal. They are not paying into the UI fund, workman’s comp fund, health care, etc and dumping all of these cost onto legally employed workers and their employers. They are also depressing wages for honest wage earners who are trying to support their families. Why are no politicians or media shills bringing up this issue which affects everyone who tries to “play by the rules” . We have turned into a totally lawless society sanctioned by the mainstream media and the corrupt government and politicians, as well as crooked corporations and businesses.
“Employers are not required to enroll in E-Verify. Employers who are not enrolled in E-Verify must physically inspect its newly hired employee’s documents.”
https://www.callaborlaw.com/entry/dhs-announces-permanent-remote-i-9-document-verification-for-e-verify-employers
I wonder what percentage of the people that hire the guys standing outside Home Depot every morning to work for the day “physically inspect its newly hired employee’s documents.” If I had to guess I would guess <1%…
I lived on a ranch in west Texas for many years. All my neighbors were hard core Republican voters who regularly hired illegals for their ranch work. There was a different term they used to describe them. Everyone knew they were illegal but there was no one else to do the work.
that’s what is known as a collective action problem. even if you oppose mass illegal immigration, if it happens, and your competitors hire illegal labor, and you don’t, you’re at a competitive disadvantage.
it requires a coordinated national response, not a few people refusing to hire them.
I was at Home Depot the other day and could not get anyone to help me load 300LB of topsoil into the back of my SUV in the 100 deg heat. I wound up doing it all myself. Having the dirt loaded by college hunks is the only reason I chose Home Depot to buy the topsoil. Home Depot is way short of help.
Franz G, do you live in a city? It had nothing to do with a competitive disadvantage. That implies there are legal workers available but you would have to pay them more. The places I am talking about are so far out in the boondocks, there is literally no one else to do the work.
Escierto:
“So far out in the boodocks” such as the myriad fracking fields in the Dakotas and other parts of Texas?
Turns out, financial incentives solve these issues! Entire towns sprung up where there was nothing before. Then they became fully populated with people.
The energy industry is boom/bust and some of these places are again, all but deserted.
The agricultural industry is seasonal (fast paced boom/bust), remote and competitive.
To Franz’ point: collective action to move toward employment compliance would be a seismic shift. Nobody wants to pay what anything is worth. This includes water, fruit, energy: you name it.
There’s always an incentive for bad behavior. When there’s more incentive to behave badly than with integrity (I see the scenario you mention everywhere: “Durn immigrants are ruining the country… BUT it’s all I can hire!”)
Wink wink… the sentence ends with “for $20/hr… for dangerous work… all while saving the money on unemployment insurance, SS, other taxes etc.”
I have worked side by side with illegals for most of my working career. The immigration “process” is broken. The workers are “needed” to protect ye ole profits (because nobody should make “that much” to do “that work”) but the “system” doesn’t allow for proper intake and naturalization of people who are willing to work.
Swampcreature, I think the new “illegals” are purposely being caught, detained, given a court date(way in the future) and released WITH a work permit.
Only a relatively small number from a few specific countries are getting work permits, such as Venezuelans.
Joebagodonuts
Old news. You need to be better than that
How are the illegal immigrants dumping costs onto legally employed workers and their employers when the illegal immigrants don’t qualify for the benefits you laid out?
If anything, they are depressing prices at the grocery store, contracting services for your home, and elsewhere.
they qualify for emergency medical care. ask any doctor who works in an er in a region with many illegal immigrants, and he’ll tell you that they use the er as a free doctor’s office.
their children are entitled to free public education, whether here legally or not.
it’s simply a lie that they don’t qualify for ranything.
Regarding our hypocrisy, I lived in a small town in East Texas where the parking lot to pick up day laborers was directly across the County Courthouse on one street, and the Police Station on the other. No problem.
The north side of Houston here….just about anybody with a hammer, shovel, saw, paint brush or lawnmower is illegal and doesn’t speak a word of English.
Car registration sticker theft is rampant here according to the sheriff that lives on my street. Lots of old pickups running around with recent stickers that obviously would not pass state inspection!
No one says a thing and life goes on.
Texas in 2025 won’t require safety inspections so that will bot be the issue any longer
There are black markets, underground markets, underground farm worker markets, offshore capital markets, money laundering markets, illegal drug markets, bribery markets. Everywhere, it’s called FREE ENTERPRISE…
It’s also called “human trafficking,” a woke term for “slavery.”
Compared to the other bozos Adam gets on his show, Wolf is a breath of Fresh air….
Glad he lowered himself to Adam’s level to hopefully gain more SANE followers.
Couldn’t agree more. Very few of Adam’s guests push back against some of his claims about the 10% who he thinks own 90% of assets. Thank you for explaining about home equity and retirement accounts.
(Maybe there should be a WolfStreet YT channel.)
Well, I didn’t just make up that stat: https://finance.yahoo.com/news/wealthiest-10-americans-own-93-033623827.html
1. The article you linked also said:
“Americans broadly have been participating in the stock market at a higher rate, with a record 58% of households owning stocks in 2023, according to the Fed’s Survey of Consumer Finances.”
So 58% of households hold the stocks (let’s say $50 trillion). Let’s take off the top 10% of households that hold 93% of the stocks. So the remaining 118 million households hold the remaining $3.5 trillion in stocks, but 55 million households hold no stocks, so 63 million hold the $3.5 trillion which averages out $55,000 per household in stocks for households that hold stocks.
2. Lots of households choose to not hold stocks because they’re too risky. They hold CDs, bonds, money market funds, etc. See my charts here about households’ CDs and money-market funds (about $7 trillion combined). This includes commenters here. I have no chart for households’ bond holdings, but they’re also substantial, including Treasuries, munis, and corporates. Lots of people here hold Treasuries, including T-bills and i-bonds.
3. Real estate is by far the biggest asset of Americans. 65% of households are homeowners. For most households, that’s the biggest component of their wealth. And they made massive gains on their leveraged asset in recent years.
5. And yes, Adam, you and I both mentioned several times the enormous wealth inequality and that this is a HUGE problem in the US. But that doesn’t mean that the middle class doesn’t have anything. It just means that the top has a lot more.
THat’s what I love about Adam’s pod is that there’s so many varieties of opinions on there. Adam has kind been pretty forthcoming about his opinions on the economy but in my opinion he’s a great interviewer.
One thing I disagreed with was the t-bill and chill. There’s always market dislocations out of hundreds and hundreds of publically traded companies to take advantage of. But if doing the work ain’t your thing to find them, then perhaps it is better to t-bill and chill.
“One thing I disagreed with was the t-bill and chill. There’s always market dislocations out of hundreds and hundreds of publicly traded companies to take advantage of.”
OK, so the question was about “prudent investors”; what you’re talking about is speculation and stock-picking, which is fine and a lot of fun, but that’s not the answer for “prudent investors.” There are over 1,000 stocks in my pantheon of Imploded Stocks that have lost more than 80% of their value since 2021. Many of them have lost all or nearly all of their value. There was a lot of speculation and stock-picking going on all the way down. Some traders made money on the brief bounces; others got wiped out. You cannot possibly recommend anything like that to “prudent investors.”
Wolf-
I agree with your general direction for a “prudent” investor to cool it on the risk-taking, but wouldn’t a slice dedicated to slightly longer treasuries ladder (e.g. 1-3 years), a relatively small percentage in a “value” stock fund and a small percent in gold or other commodity-related investments be even less speculative than all t-bills? I was taught that prudence usually involves some level of diversification.
An all t-bill portfolio risks a significant decline in investment income if/when the Fed moves back toward the idiotic ZIRP policies of yesteryear.
Asking for a friend! Thanks for this interview.
You’re right in the sense that there were many stocks that were just completely traded up on nonsense like Roku, Zoom, and the many Spacs out there. However, there are tons of quality names and decent companies that have traded to decent prices that have been great buying opportunities. So I still disagree.
It’s easy to look past your 1,000 exploded stocks. Buying Zoom at > 500/share, bad idea. Buying Amazon at a long term price/sales not seen in years in 2022 = good idea. Heck, even recently Ally was trading at a significant discount to its TBV. The names go on and on, NFLX when everyone thought “oh no, they’re going to bleed subscribers”, Target at 105, Expedia in the 90’s, Netflix, Google, Meta when everyone thought “dear Lord, Facebook is dead”. All have had significant buying opportunities. There’s always something for “prudent investors” to go find. Perhaps now that over your list of Imploded Stocks there’s value to be had? Perhaps not.
The lack of BS is sooo refreshing. Thank you Wolf. Have you applied to TM T-Bill and Chill?
I don’t think I coined it. But it would be hilarious if I coined it.
Sorry, Wolf — I’ve heard several others use it in the past (myself included).
I believe the 1st person I heard it from (perhaps in 2023) was George Gammon.
No problem, Adam. As (good) interviewer, you were needling me with stuff that has been circulating around out there. And I shot some of it down, which made for the dynamic interview it was. Other stuff I didn’t address, such as the nonsense that had been circulating about spiking credit card delinquencies (based on the complete misunderstanding of the NY Fed’s “Transition into Delinquency” metric … this BS had gone viral but few people read my debunk article). As you know, after the interview, I sent you three of my articles showing that credit card delinquencies are low, and have declined in recent months. But the people who actually believe this stuff about most Americans being tapped out and over-indebted and living from paycheck-to-paycheck and not even having $400, well they will never understand the strength of the US consumer and will always be baffled by the economy that refuses to collapse, and they’ll never understand the US economy.
Nice podcast!
Is there any real difference between m1 and m2 money supply?
Money flows much faster these days. Your $500 savings example is a great example of the current trends. Getting money out of a money market or stocks is much faster than it was years ago. Individuals treat savings accounts like checking accounts. Was not the bank failures last year because individuals quickly took their money out of the banks with a simple click?
I liked the explanation of the Fed Balance sheet keeping the long term rates down. We have to remember the Fed is still buying securities even though we are in QT.
Velocity is the term used for the speed of the flow of money, and M2 is not even used by the Federal Reserve any longer since around 2019. Most all savings accounts are limited to 3 withdrawals per quarter and are not intended to act as checking accounts.
SCBD:
“Most all savings… limited to 3 withdrawals per quarter.”
I have never heard of such a thing.
In my brief search I also discovered “Regulation D.” I am not sure if such a thing would be legal?
I get the fractional reserve system but this is also how everything is financialized! The day a conservative saver withdrawals his money, he probably won’t be able to! One withdrawl of “too much” money can draw scrutiny. Cash is being criminalized and crypto being popularized.
The world is so upside down, my head spins! Everything else just stands still.
There are no “limits’ on withdrawals from savings accounts — you can always get your money out. But if withdrawals exceed a certain number, there may be fees, such as 20 cents per withdrawal.
Many “free” accounts have certain triggers, such as a certain number of checks per month or withdrawals per month, or minimum balances, and when you hit that trigger, the account is no longer free, and the bank starts making money off you.
The limiting factors I have encountered are: increased scrutiny for large withdrawals (try getting $10k +… although not personally), and in our high met worth, small tourist town: branches without enough cash on hand!
Most branches in my area carry a smallish amount of cash. I remember when this was an issue years ago: we have a film festival (this weekend) and one year the banks literally ran dry (ATMs too!)
The next year they all stocked up in preparation. These days fewer people actually use cash.
“try getting $10k +… although not personally),”
It’s never a problem unless you try to withdraw that much in bills CASH. Unless you’re a drug dealer, you don’t need $10,000 in bills. That’s just stupid to bring that up.
Cash is dead for large legal payments.
MW: Any way you look at it, the stock market is dangerously overvalued
Yeah but this time is different and this is the new normal. This has been accepted as the truth in the housing market and stock as well.
Another sign this time is different, yield curve don’t mean jack and higher mortgage rate is not collapsing home price like many predicted. Hate this new normal but this is the matrix we got plugged into so despite my contempt, might as well get used to it I guess
Not for much longer.
Well it’s been long enough, 3 years of busted predictions I will have to say this is the proof in the pudding that this time is different perhaps…
Phoenix_Ikki
Things always happen when no one expects and never when everyone is waiting for them!
“Not for much longer”
I remember thinking that very sentiment in 1996, 1997, 1998, 1999, and early 2000. Eventually right, but painfully slow comeuppance…
Wolf, you have been talking for some time about the misrepresentation of unemployment and jobs numbers. The 6 to 10 million immigrants not in those figures. I have rtgdfa’s and wtgdfv’s but can’t wrap my head around what direction this actually skews what is being reported. Where are those numbers when figuring them in. Thanks!
I cannot wrap my head around it either.
We know that total employment is understated by the new immigrants who are working but have not been captured by the data. So in that sense, the labor market is stronger than what the data shows.
We know that the unemployment rate rose because it does capture at least some of the new immigrants who are looking for work but haven’t found work yet. But it likely doesn’t capture all the new immigrants looking for work.
Many of the new immigrants are working in contract jobs in construction, as drivers, etc. and they’re not in the nonfarm payroll data (establishment survey), which only captures payroll data.
Those new immigrants that don’t have work permits are not in the UI tax data either because they don’t qualify for UI and aren’t reported to the UI system by companies in their quarterly filing (that was the issue with the revision last week, which was based on UI data the excluded illegal immigrants).
There are a gazillion unknowns around this immigrant issue. Normally it’s not such a big deal because the numbers are much smaller. But now the numbers are suddenly huge, and they do matter. So this whole thing is super-aggravating and exasperating.
Wolf, 10-4 to ”So this whole thing is super-aggravating and exasperating.”
My early employment in SF bay area was always for cash, no checks. Most of it was day labor through the student jobs board.
One of the licensed GCs I worked for repeatedly set up my Worker’s Compensation Insurance with his insurance guy, but paid me cash with the understanding that he would initiate the coverage if there was an injury, but there wasn’t.
What was really aggravating was another licensed GC who took out all the taxes, UI and SS contributions, etc., and never paid a dime of them, which I only found out when my first official SS situation reports came decades later.
In any case, my pay 50+ years ago was so low that it never figured into my ”best years” on which first SS payment was based…
V V
September 1961 I arrived at MCRD San Diego with one set of clothes and no SS number. So was issued a CA number even being from the Midwest.
30 some years ago I checked my SS account and found no payments for 61. Later I found all had been lumped into 62 after graduating ITR. Still had the W2s back then.
So you aren’t the only one where this was done as even our government wasn’t honest.
Forecasting what’s going to happen with USA (and wider) does require also talking about the elections. There is an elephant in the room. This could be the most deciding factor.
MW: ‘FOMO’ returns to the options market as traders chase stocks higher
Stocks dropped tho
1M SPY : July closed above June high, but ES and NQ didn’t. If Aug 1M Dow close on Fri > July high, Adam and Eve, dressed in fig leaves, after eating an AAPL. will be on NVDA sugar high, possibly to 42K.
m1 and m2 are section of the brain. Impaired m1 and m2 cause brain fog, before Mag7 dementia.
Muzzle rates cut. The sticky CPI ex food and energy : dozens oil tankers are burning between….
Adam is a nice guy but he makes his money spreading doom.
Wolf is like a heavy dose of bleach all over the festering economic resentment that Adam’s viewers thrive on.
In the YouTube comments, they can’t stand Wolf’s accurate depictions of the economy.
Wolf, I don’t know how you tolerate it. You could present data and charts until you’re blue in the face, and Adam would still say “but..yknow aside from the facts, I mean the average person has $1.00 and is unemployed, and there’s a recession right? RIGHT?”
He was desperate for you to acknowledge a widespread shadow recession of pain and sorrow for his viewers.
I think the fact that Pow Pow managed to pull a soft or ultra cush or maybe a no landing with his finely crafted QT and interest rates policy is hard for people to wrap their brains around…heck present company included that and the fact that housing will just go up forever and exploded 50% in the last 3 years also broke a lot of people’s brain and at the end of the day it’s just a tough pill to shallow..well unless you’re benefitting from it, then it’s not a pill but maybe sweet sweet candy…
🤣❤️
It’s fun to spar with Adam. He needles me with all the stuff that I see every day and that I’m trying to debunk in my articles and in the comments. I hope it makes for a fun and interesting show.
But Adam can’t afford to have me on more than once a blue moon because this stuff doesn’t go viral. People want to see “Depression” in the headline, and then it gets the clicks and gets spread. That’s how YouTube, and the internet in general, works. And he’s going to piss off too many of his regular viewers every time he has me on the show.
Bankruptcy *really is* the best way to get the economy back to health. It has got to be the vested interests (political donors and wealthy congresspersons) who are doing everything in their power to prop up the system through ill conceived subsidies and fiscal spending. For bankrupt companies, the vast majority of the time it is the investors who get wiped out, while the plant, equipment, and employees remain. With lower leverage levels after bankruptcy, these companies can *easily* increase their profit margins, and yes, even lower prices.
Agree that BK is one way for SOME companies JD. That is one reason I have been OUT of the stock markets since 1980s when I realized that I had only made good returns when trading on basis of what is now called insider trading.
Other than that, stock markets are just a form of legalized gambling/fleecing of retail investors, with exceptions for very few long term investments in companies with good records and good plans going forward.
Such DO exist, or at least have existed.
Hey Wolf, thanks for detailed packed info. It must be very hard for general folk to understand and follow up the whole discussion.
Just one tiny detail about “Inverted yield curve”. Adam summarized it in way, that it is understandable that inversion is influenced by FED rolling off treasuries and replacing them. He missed the point, the FED is rolling off LONG TERM side, and started replacing them with SHORT TERM side, and Treasury.gov is willfully ignoring LONG TERM side. You explained the details, except SHORT side, or I missed it somewhere in 1.75speed.
The Fed holds just a small amount in T-bills: $195 billion out of the nearly $6 trillion in T-bills outstanding. The Fed’s T-bill holdings have not changed since it slowed the runoff of notes and bonds. Before it slowed the runoff in June, T-bills came off the balance sheet when the runoff of notes and bonds was below the cap. That hasn’t been the case since the cap was lowered.
Given their short maturities, some T-bills on the Fed’s balance sheet mature every week, and it replaces them. So the weekly amounts that mature are small compared to the nearly $6 trillion in T-bills outstanding that also constantly mature, and the Fed’s T-bills holdings are small compared to the $4.6 trillion in its total Treasury Securities.
You can check the auction results. Look for the SOMA purchases at the T-bill auctions. T-bill auctions are huge now to replace the mountain of maturing T-bills and to add new ones. For example, at the 3-month auction today, $76 billion in 3-month T-bills were sold, of which SOMA bought $5 billion to replace $5 billion that had matured.
There was huge demand at this auction: $236 billion in bids, including SOMA, including mine on auto-rollover). That demand for $236 billion dwarfed SOMA’s $5 billion.
In addition, T-bill yields largely track the expected trajectory of the Fed’s policy rates in their maturity window. They’re not really influenced by the SOMA purchases, unlike longer-term bonds that move all over the place, buffeted by market forces.
BTW, the 3-month bills today sold at an investment yield of 5.11%, pricing in a 25-basis point rate cut in September.
Thanks again for details, maybe you can write separate article on the ‘inverted yield curve’ current manipulative phenomenon.
Basically, Bills are influenced more by FED’s interest rates, while current low FED’s SOMA purchases have very little effect on yields, treasurry.gov supplies a lot of Bills, so even though there is high demand for Bills, there is plenty of supply, but treasurry.gov is less active in Bonds, and there is also big demand, but little supply, thus effect on yields. [FED is still active on bond’s side, while they replacing them, and certain institutions must do mandatory buys.]
You mentioned all the information in previous articles, (roll off of bonds and reinvestment, cap, interest rates, plans of FED to be less active in bonds in the future, etc.). Separate article will make sure the details won’t be lost here in comments and for your future reference on the current crazy situation.
Re the inverted yield curve:
I understand the mechanics about why it is the way it is (Fed holding short rates up, Treasury pushing long rates down). And I definitely agree with its futility in predicting a recession.
But Wolf, doesn’t a perpetually inverted curve just seem… unnatural? It doesn’t make sense that future money would be worth less than current money. The whole point of interest is the time value of money.
It would surprise me if it stayed perpetually inverted.
Excellent podcast kudos to both of you!
I used to watch Adam, but have recently been deleting many infotainment resources like that, because they don’t offer value for me.
At this point an astrology horoscope is as good as almost any economic analysis — but oddly enough, Wolfstreet sets a very high bar!
One thing I used to hear on shows similar to Adam’s — was the overwhelming belief by many analysts that Powell wouldn’t cut rates before the election. Looking back, and adjusting to our current reality, it’s still surprising that we are days away from a cut.
The curiosity in this, is the narrative that the economy is still strong and resilient and an army of analysts are laughing off a recession as well as labor concerns — therefore, why is it appropriate to cut rates — right before the election?
Still confused on that.
I explained that “why.”
I really enjoyed your explanation of Balance sheet stuff, which Adam apparently absorbed — but I didn’t finish the entire episode — and now, after not seeing a transcript function or breakout of timeline highlights, I guess I have to return there.
Looks like you stirred up tons of comments there and decent traffic count!
Number of comments says nothing about traffic. Some of the articles with the most comments (500+) got relatively little traffic. The biggest articles rarely get the most comments.
I’m English speaking, but Adam, um, keeps making a sound that is not a word and is, um, repeated, um, quite often. Um, maybe, um, it’s a preposition, um, or a, um, vowel, um, or an, um, adjective. Um, I am not, um, sure if I, um, have the spelling, um, right? Some help Wolf? Um, it makes, um, listening a bit, um, disjointed. Great talk though and not an, um, easy thing to do.
um is an “interjection,” and it’s used as an expression of doubt, hesitation, deliberation, interest, etc. It’s in the Random House Webster’s Unabridged Dictionary. If you don’t know, just look it up? That’s what dictionaries are for.
Thanks Wolf, for elucidating my comment from another post about “this time is different,” meaning that the data and markets and everything seem to be “measuring something different” than in the past.
Everyone wants to find the next crisis, in the last crisis. Still seeing the inane headlines about the “biggest downward revision,” and saw a Reuters about the “first AAA bond losses” since 2009.
This ain’t 2009, 2000, 1987 or 1929. The economic distortions since 1972 (a currency default) have been wild, magnifying and dangerous to the social and cultural stability.
These are the reasons people “feel like” they are in recession. My generation has never seen this inflation, “it’s always difficult to be young and starting out,” and I feel like the middle of sandwich: Boomers holding assets tightly and Millennials are getting quite ambitious (as a Xillenial, I just keep working).
The masses are more informed and educated than ever, even if the average American has a wrong take: the corruption, crony capitalism and geopolitical pressures (war, immigration, policy) are all categorically against the masses.
If you read these kinds of shocker clickbait headlines, and that’s all you read, you will be misinformed, that’s for sure.
As always, thanks Wolf. You knocked that interview out of the park. I haven’t found anyone else that dispels the BS like you. I’ve learned so much from you.