35 Burst results for "Volcker"
A highlight from Markets Shrug Off Predictable Powell at Jackson Hole
"Welcome back to The Breakdown with me, N .L .W. It's a daily podcast on macro, Bitcoin and the big picture power shifts remaking our world. What's going on, guys? It is Friday, August 25th, and today we are doing a macro roundup. Before we get into that, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit .ly slash breakdown pod. Well, friends, today, the big thing, of course, is Jackson Hole and Powell's speech therein. And so I thought it would be good to put that in a wrapper of the stories that have been going on around and outside of the industry, things that have been impacting traditional markets to put that news of what Powell said in its proper context. And for that, I want to start with a story that those of you who have been listening to the AI Breakdown will be quite familiar with. That is, of course, Nvidia. Nvidia absolutely blew earnings out of the water after the market closed on Wednesday. Their Q2 net income came in at a staggering 6 .7 billion, which was a 422 % increase from the same quarter last year. Sales growth shot up by 171 % on an annualized basis to reach 13 .51 billion. Profit came in at 270 per share. Now, compared to analysts' estimates, those figures represented a 30 % beat on profits per share and a 22 % beat on sales. That is massive, especially considering how much hype and anticipation Nvidia had going into this. Now, overnight on Wednesday, shares rocketed up over 6 % and hit a high point of $517 per share. That pushed the stock up more than 220 % on the year. The company also announced the approval of a ridiculously large $25 billion in buybacks, representing a little over 2 % of the total market cap at current prices. Now, this is the second quarter in a row with blowout earnings for Nvidia. Q1 sales came in at 10 .3 billion, outperforming analysts' estimates by almost 30 % again. During their Q1 report, Nvidia had guided 11 billion in revenue for Q2, which was an estimate that exceeded analysts' forecasts by over 50%. And it turns out even that was far too conservative. Now, of course, Nvidia's success has been coupled to the rise of AI. The firm's H100 GPU is the top of the line in AI computing, and it's not particularly close. Individual units range in price between $25 ,000 and $30 ,000 with a volume discount, but that isn't even really the highest end product being demanded by the world's largest tech firms. That distinction goes to the HGX box, which is essentially eight H100s assembled into a single unit of raw AI computing power. Nvidia's CEO Jensen Huang said of the product line, We call it H100 as if it's a chip that comes off of a fab, but H100s go out really as HGX to the HGX unit's require a supply chain of 35 ,000 parts to put together and are sold at the lofty price tag of $299 ,999 per unit. And even at that price, Nvidia are struggling to keep up. Huang said, We're not shipping close to demand. Now, in a lot of ways, there really has not been anything like this phenomenon in recent memory. Nvidia has built their firm around the transition away from GPUs as just being used for graphics processing and video games to focus on more generalized use cases for that style of chip architecture. That transition started many years ago. For example, in 2012, researchers used Nvidia chips to achieve previously unheard of image recognition. Since then, the firm began working alongside AI researchers to optimize their chips for the tasks demanded by high -end AI models. They took on an explicit AI focus starting around 2017. That process of iteration has led to Nvidia being the singular leader in AI chips with a wide gap between them and their nearest competitor. During a recent interview, Huang said, This type of computing doesn't allow for you to just build a chip and customers use it. You've got to build the whole data center. And indeed, the customers seem perfectly willing to spend the high -end dollars for premium performance. One high -profile startup, for example Inflection AI, recently raised $1 .3 billion in funding to finance the purchase of 22 ,000 H100 chips. Mustafa Suleiman, the CEO at Inflection and previous co -founder at Google DeepMind, said that none of Nvidia's competitors could offer a comparable solution. Huang broke down the math of his company's product offering like this. He said, If you can reduce the time of training to half on a $5 billion data center, the savings is more than the cost of all the chips. We are the lowest cost solution in the world. This year, Meta has committed to spending $30 billion on data centers, with much of that capital likely to be spent with Nvidia as just one example. Now, Huang was not at all bashful on this week's earnings call, stating that a new computing era has begun. Many others agreed with him. Dan Ives from Wedbush called it a 1995 internet moment and said it was the guidance heard around the world. Indeed, so far this year, the market has been responding as if a paradigm -shifting technology change is underway. Nvidia is by far the best performer in the S &P 500, and alongside Nvidia, six other big tech firms have been benefiting from the AI enthusiasm as well. This includes Meta, Amazon, Apple, Alphabet, which is Google, Microsoft, and Tesla. Together, this group, which has now become known as the Magnificent Seven, have outperformed the S &P 500 over the past year. Historically speaking, this narrow range of market breadth is typically only seen in the wake of a massive market downturn, and even then only briefly. The only really comparable era of the last decade when market breadth had maintained such a lopsided slate for so long was in the second half of 2020. During that period, both Etsy and Tesla were added to returns respectively. The rest of the top performers that year were rounded out by L Brands, PayPal, and of course, Nvidia. As another comparison point, so far this year, the median S &P 500 company is up only 2 .34 % compared to the 16 % returns for the overall index. What's more, 228 companies in the index have seen their share price decline year to date. Now, the high -flying Nasdaq 100 index is a little bit more evenly spread. The index saw the best first half returns in its 52 -year history this year, notching up a 30 % gain. 32 firms are outperforming the index this year so far, while the bottom quarter declined in price. Now, these periods of narrow returns don't typically precede a major market correction. However, this situation is somewhat unique. It's rare that multiple companies across a leading sector are so reliant on a single company to supply a critical component. But that's a situation we find ourselves in right now. Now, part of why this matters, of course, is that, as you just heard numbers around, AI has effectively been keeping markets afloat this year. One of the most dramatic moments of this was during the battle around the US debt ceiling. This is a time that the market should have been, by all accounts, incredibly nervous, significantly wobbly. I mean, hell, we had our debt downgraded when all was said and done. But it couldn't beat out Nvidia and AI enthusiasm. Now, that wasn't exactly the case yesterday. A lot of the reporting on Thursday was about how concerns over what Jerome Powell would say at Jackson Hole on Friday were tamping down any particular bump from that Nvidia earnings beat. You'll remember that the annual Jackson Hole Symposium is a big central bankers event that focuses on the long term of monetary policy. It's a chance for the Fed to signal where things are going more than just in the next couple months. At least that's what it's historically been. Last year, it was notable because at the last minute, Powell decided to rip up his speech and give a terse eight minute diatribe that basically said that markets were getting way out ahead of themselves, effectively ending a late summer rally. Powell said at the time in no uncertain terms that the inflation fight was not over and stated explicitly that, quote, there will be pain. Now, coming into this, Adam Posen, president of the Peterson Institute for International Economics, said there's no way Powell's speech can be that tight and clear this time because the economic outlook is genuinely more uncertain. Central bank decision making in some sense is easier when you have policy wrong and you have a long way to go to where you should be. It's more difficult when you have to sort through being close to the right policy, but not sure you're there and that's where the Fed is now. And so a year later, the inflation fight is still underway and it was anticipated that Powell would use his appearance to reinforce the Fed's commitment to finishing the job. Up until now, the policy choices have frankly been somewhat obvious. Continue raising interest rates until inflation cools or something breaks. And even when something breaks, try to fix it without changing interest rate policy and see if that works. However, with inflation now moderating to its lowest level in almost two years, there is a lot more potential for disagreement among FOMC members. Powell was expected to give his views on whether rates should continue to go higher into the end of the year, as well as to sketch out how the Fed would determine when the time would come for rate cuts. Forecasts from Fed members have generally called for rates to be held higher for longer, but with pressure on the banking sector, it's unclear whether policymakers would be on board with sticking to that strategy. Now, as well as the rumors of dissent among FOMC members, the economic establishment is beginning to question whether the inflation fight is even worth taking all the way to its conclusion. Responding to a Wall Street Journal article published on Monday, Paul Krugman tweeted, I agree with Jason Furman's call for a 3 % inflation target. The rationale for 2 % has been overtaken by a couple decades of experience. So if you think 3 % is the right target, shouldn't we be declaring victory? Or to put it a different way, if 2 % was a mistake, how many people should lose their jobs for a mistake? Now, Yuga Kohler, senior staff engineer at Coinbase, captured much of the sentiment in the crypto space when they wrote, the difference between a 2 % and a 3 % inflation rate over the course of 75 years is literally 100%. Raising the target is a sleight of hand to inflate away national debt. Stephen Geiger, an economics commentator and Paul Volcker fan, said, or, and stick with me here, we keep it at 2 % and the Fed and federal government can just do their job. So what did we actually get? Well, in this case, it was much what we expected. Bloomberg's headline reads, Powell signals Fed will raise rates if needed, keep them high. The Wall Street Journal writes, Powell, Fed will proceed carefully on any rate rises. And as per Bloomberg, the key takeaways were that 1. Powell acknowledged that the economic backdrop is better than it was a year ago, but he said that the Fed stands ready and willing to raise interest rates further if they need to. 2. He continued to focus that everything going forward will be data driven, but he did not put the possibility of cuts on the agenda, saying based on this assessment, we will proceed carefully as we decide whether to tighten further or instead to hold the policy rate constant and await further data. Third, Bloomberg says the comments are consistent with expectations that the Fed will leave interest rates unchanged at the next meeting with the possibility of another rate hike later in the year. Fourth, Powell acknowledged that interest rates are now high enough to be restrictive, meaning that they are weighing down on growth and inflation. And finally, Powell said 2 % is and will remain our inflation target, throwing some damp water on that part of the conversation. Nick Timiros from the Wall Street Journal, widely viewed as the Fed whisperer, called it a risk management speech. He quoted Powell as saying, given how far we have come at upcoming meetings, we are in a position to proceed carefully. The Kobayisi letter pointed out some data from bond traders around what their predictions are. They write, odds of a 25 basis point rate hike in September more than doubled, 21 .5 % after Powell's speech. Odds of an additional rate hike this year just hit a two -month high of 52 .1%. Rate cuts are now not expected to begin until June 2024. Doug Bonaparte hit it out of the park again with another great headline. Breaking! Stocks fall as Fed Chair Powell signals he's willing to destroy the economy. But in point of fact, stocks are actually leveling out and even going up slightly, based I think on expectations being met. So all in all, a much less dramatic speech than last year, and frankly just a real continuation of what we've gotten from Powell for the last two years. Blockworks Jack Farley wrote, Powell chooses to close his speech with Paul Volcker's phrase, we'll keep at it for the second year in a row. And that is pretty much the story. Now the last interesting thing that I wanted to point out for this week just by way of closing is that the three -day BRICS summit came to a close on Thursday in South Africa with news that six new members would join the loose economic bloc. Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates have committed to join in January. This adds to Brazil, Russia, India, China, and South Africa — there's BRICS — bringing the ranks of membership up to 11. President Xi Jinping called the expansion historic and said it would be a new starting point for BRICS cooperation. Still, while the addition of new nations to the Economic Cooperation Group does add strength, the announcement falls far short of the hype that we had seen coming into it. There had been rampant speculation this year that the group would unveil a common trade currency backed by gold, which frankly rumors of a BRICS currency have been persistent for over a decade but have so far never materialized. So all in all, the world continues to be interesting but doesn't look all that different than it did heading into the week. AI is up, inflation is down, interest rates are flat, but maybe up. And so, as so often has been the case for the last few months, the best thing to do is go touch grass. Until next time, be safe and take care of each other.
A highlight from Behind Closed Vaults (The PREDATORY Nature Of Mega Banks)
"The best time to get a great deal on a Jeep SUV is now during the Summer of Jeep event. Visit jeep .com or your local Jeep brand dealer to find the perfect Jeep SUV for you. Hurry in and make this the Summer of Jeep. Right now during the Summer of Jeep, purchasing at 10 % below MSRP on the 2023 Jeep Compass Limited 4x4 or Renegade Latitude 4x4. Not compatible with lease offers or with any other consumer incentive offers. Contact dealer for details. Residency restrictions apply. Take retail delivery by 731 -23. Jeep is a registered trademark. Doesn't it seem to you that banking is becoming progressively worse and it's really happened in the last few years? Well, it's because it has. And this is just the beginning. Do you know how they say the larger banks are too big to fail? Well, unfortunately, for small town USA, the regional banks are too small to succeed. All of the money is systematically leaving smaller regional banks. It's going to larger ones, and it's all by design. This is the beginning of a seismic shift for the future of the banking sector, and it's time to take a dive into the mega bank monopoly. Let's get it! Welcome to BitBoy Crypto! My name is Ben. In this video, we're going to zoom in on the idea that our own government is encouraging the largest banks in America to engulf the smaller banks in a coordinated effort to centralize control. Understand that in today's financial climate, being a smaller bank is like bringing a slingshot to a shootout. We all know that money is power, and if my journey in crypto and politics has taught me anything, it's that America cares about one thing, having control. If you think things got bad in the last 20 years, just think about how much more control they'll have 20 years from now. And narrowing down who gets to control all the money is a great place to start. Now, before we get down into the nitty gritty, I want to keep it real with you. It's complicated as all this is about to get. I want to start off with a very basic concept so you can see firsthand how bad the situation already is. Let's take a quick look at this chart of the largest banks in the US. Does anything about this chart seem suspicious to you? Does anything seem wrong here? Look at the drastic difference between the big four and everyone else. Now, I can prove my point with just this chart. It's no secret who the big four banks are in the United States. JP Mortgage Ace, Bank of America, Citibank and Wells Fargo. And Wells Fargo has over a trillion dollars more than US Bank who's in fifth place. These four banks are the main players in the game, and it's most likely going to stay that way because these banks are the main benefactor and the dilemma our own government created. You should know that all of these banks are defined as GSIBs, or Globally Systematically Important Banks. Basically, they're held to a higher standard because of the risk they pose to the system if they were to fail. They get special treatment to avoid another terrible ending to a nonfiction movie. Alternatively, now that things have worsened for smaller regional banks, the Biden administration wants to change small bank standards so they have similar liquidity requirements to the larger ones. This tougher standard gives the smaller banks less wiggle room. When you pair this with high inflation and higher interest, what you'll eventually get is a seismic shift in the banking world because that standard is unattainable for more banks than you would think, and they're going to reach a point where the only way out is to consolidate. This concept is just the tip of the iceberg. Now, remember that first chart? Now, look at this one. This is a chart of deposits by bank size. How in the world are the small banks going to be competitive when they're getting outperformed this badly? It's like a high school team having to play, I don't know, the Georgia Bulldogs or maybe like another college team having to play the Georgia Bulldogs. They're that good. Believe me when I tell you though, banking is Darwinism at its finest. It's survival of the fittest. So, what do large fund investors think about this from an investment standpoint? We'll just ask Bill Negrin from Oakmark. Watch this. At Oakmark, our view has been that the largest banks have a strong competitive advantage versus smaller banks, and that the natural tendency is for the number of banks to shrink and the big to get bigger. They just have advantages when it comes to regulatory requirements, meeting regulatory requirements, mobilization, fraud control. If you're 10 times as big as somebody else, those costs aren't 10 times as large. Now, I want you to ask yourself, would investors on this scale waste their time investing in smaller banks? Of course not. Why would they? He said it himself. The number of banks is going to shrink, and the mega banks will keep adding zeros. To be fair, the US has more banks than all the other G7 countries combined. So, of course, there will be some consolidation, but when and where will it end? The problem is the standards of banking are what caused all the recent bank failures, and those same standards are preventing the smaller banks from getting larger. It's a double -edged sword. And there's no incentive for the government to find a middle ground. What do you think our government would rather do? Help the little man or continue co -signing to consolidation's decentralized control? I feel like you already know that answer. Now, I'm not exaggerating when I say that these banks are light years ahead of their competitors, and they really are too big to fail. Think of the enormity of advantage the big four has over the rest of the game. It's like playing Monopoly against the banker. They always roll doubles and don't play free parking. Instead, landing on Boardwalk and paying luxury tax out the wazoo. Now, why don't you play along with us and become a member of the BitSquad? Be sure to subscribe, smash that like button and ring the bell for notifications. Also, big thanks to Stake for sponsoring this video. They're our No. 1 sponsor. Check out bitboycrypto .com slash stake. Okay, let's look at the banking failures in recent history. You know, Silvergate, First Republic, Silicon Valley. And now look at that through the lens of how small businesses were forced to shut their doors because they couldn't compete with Walmart. It's the same thing. Look at it through the lens of cell phone companies. Yeah, there are smaller ones out there, but let's be honest. The majority go with either Verizon, T -Mobile or AT &T. It's not supposed to get boiled down to three like cell phones. It's for advantageous your everyday American to have multiple banking options because it forces the banks to be competitive with each other and actually have customer service. Stifling that competition leads to higher rates and less choices for customers, not to mention it sets the standard for anti -capitalism. It will also hinder innovation because smaller banks are more likely to offer innovative products and services to stand out in the crowd. With less banks to choose from, you won't be able to take your money and go down the street, shop for a better rate on a car loan. Unethical banking practices will only get worse because where are you going to go? Who are you going to go to? Do you think the bigger banks have any sense of sportsmanship for the smaller banks? Absolutely not. They don't want competition. This is a win for them. They want to crush them. It's all greed. Back before the sell -offs, the mega banks circled over Silicon Valley and First Republic like vultures. Did you know that JP Morgan's profits in Q2 this year jumped 67 %? Why? Because they bought out First Republic Bank, and in the process, they kept as many of their customers as they could, and not to mention interest rates are higher. One bank loss is another bank's gain. According to the Wall Street Journal, the 25 biggest US banks gained $120 billion in deposits in the days after Silicon Valley Bank collapsed. All the banks below that level lost $108 billion over the same time span. Some people like Jamie Dimon will tell you the worst is over. He's wrong. It's yet to come. Think about this. If the small banks have no choice but to keep consolidating the predatory practices the banks already pull on us, well, they're just going to multiply. Think about how much control your bank already has over you today. Hidden fees, higher rates and bidding over backwards just to get a small loan is one thing. But what about the headache you have to go through just to spend your own money? A bank shouldn't be able to tell you what you can or cannot spend your hard -earned money on. But they do this every single day. Don't even get me started. I can't even go to a normal bank. I really can't. They won't take me. And I'm not alone. Ask Drew about the time his bank didn't want him to take his own money out to buy a house. Ask AJ about the time his debit card got shut off with no warning. Ask Nick about the time they shut down his bank account for no reason at all. When he asked for an explanation, they told him they didn't have to tell him why. I can go on and on and on. Those are just people I know. And I'm sure you've got a personal nightmare story of your own. But the point I'm making here is it already feels like we have very little control in the institutions that were put there to protect our money. They don't respect us as humans. And it's all about the algorithms designed to facilitate the transfer of control. Unfortunately, the smaller banks are going to be forced to continue consolidating, giving all the money, all the power, all the control to the chosen elite. Obvious side note. Of course, they hate crypto. It's the only thing that gives the power back to the people. That's why they're pushing so hard to eliminate it. It scares them. You want to know what scares me more than anything? Regardless, if it's one bank, four banks or whatever with all the control, America's debt is at $32 .6 trillion and counting. Maybe not in my lifetime, but there has to come a moment where we stop kicking the can down the road, when you stop spreading risk around and centralized control. We enter a situation where there's a single point of failure, which would make this 10 times worse if it all comes crashing down. We don't even need a debt ceiling crisis to ruin the US credit system. We're already centralizing all the risk into four players. So how did it get this way? And why did these consolidations happen? Well, I'm sure you remember the 2008 banking crisis that ended in a bailout. Since the government and the FDIC don't want to take another den of that magnitude, they raised the standards for liquidity and put harsh restrictions on what banks can or cannot invest in. Some of you would know this as the Volcker Rule, which was part of the Dodd -Frank Wall Street Reform Bill. You can thank our old friend the banking broad Elizabeth Warren for that one. This rule is why banks can no longer invest in anything that is deemed too risky. Sure, it prevents them from getting wrecked, but it also prevents them from using money to make money. And, of course, who suffers the most? The average Joe. You and me. So what are the banks doing now that they can't take risks on? To answer this, I want you to think back to the days when interest rates were much lower. Remember when money was cheap? It was easy to go to the bank and get a loan if you wanted to go buy a house. Why do you think so many people under 30 don't own homes now? Because they can't. That flexibility is gone. Anyway, back when interest rates were low and money was cheap, there was a lot of extra liquidity moving around the banking system. Because of that, you would see a lot of big investors and venture capitalist money moving into riskier startups and starting new businesses, and, of course, they'll get the money to do that from easier to get banking loans. When the conditions were like this, you would see a lot of uninsured deposits at the bank. Remember, since the banks can't take risk, they had to take safer long -term investments with their money. For the most part, they went heavy into government bonds and mortgage -backed securities, the kind of investments that are long -term and low risk. This move they were forced into making is part of what took them down. When the banks bought those safer securities, they essentially made a bet that the interest rates wouldn't go higher. And unfortunately, we all know what happened last year. Of course, myself, himself, Jerome Powell and the gang spent the entirety of 2022 hiking interest rates to fight against inflation. They spent the entire year creating more problems to combat a problem they created. It was a perfect storm in the worst way for your everyday American. Between higher rates and a tight money supply, people had no choice but to withdraw money out of the banks. And when banks start to see money flying out by the boatload, they get to a point where they have to sell those safer securities they bought with their excess money. The problem was because the rates were higher, the bonds they were forced to sell were sold at a loss. Because Trump rolled back some of the Dodd -Frank rules, some banks didn't have to report unrealized losses. But when unrealized losses become real losses, it became a much different story between taking those losses, bad management and making terrible risk assessments. That's when the dominoes started to fall. That's when banks like First Republic and Silicon Valley had no choice but to sell stocks and borrow large quantities of money from other banks. This caused their investor and customer base to lose confidence and try to pull their money out as fast as possible, especially those uninsured deposits who have more than 250 grand because the rest is uninsured. This right here is a main reason why so many people are siding with the big four banks because even if the FDIC insurance rate of 250K is the same for small and large banks, it would take catastrophic circumstances for large banks to fail, not to mention the government wouldn't let it happen anyways. People know that big banks won't fail, and they're not about to put their life savings into a circumstance where they can only get a quarter million back if the bottom falls out. And trust me, the interest rates, well, they're not quite done hiking yet. This cycle will repeat itself as many times as it has to. By now, you're thinking, is there some sort of plan? What are the regulators going to do? Watch this. This clip here really sums it all up. The regionals are problematic because they keep losing their deposits and have to keep reducing their balance sheet. So for the regionals, I don't think earnings have bottomed. And I wouldn't even think about buying them until I thought that they had. You know, you could traffic a little bit in the larger banks, but the problem is that Michael Barr, who's vice chair of financial services, just said that he's going to raise capital requirements for the large banks by 20%, which would take our ways down by 100 to 200 basis points. There's an irony in this, by the way. All the problems that happened in the banks were in the mid cap banks. The large banks, because of all the regulatory changes, were fine. So what do the regulators do? They go fight the last war and they're raising capital requirements of the large banks. Why? I mean, there's absolutely no reason for it, but that's what they're doing. Do the regulators do anything at all to help out the smaller banks? Of course not. In fact, they intend to raise capital requirements by 20 % for the larger banks, a surefire way to ensure the failure of everyone that's beneath them. It's as if they want to consolidate the power. Imagine that. The man from the previous clip, well, that's Steve Eisman. He's famous on Wall Street. If you've ever seen the movie The Big Short, his character was played by Steve Carell. And, yes, he really did answer his phone in that meeting. Prime losses will stop at 5%. Zero. Excuse me. I have to take this. He must be from Bank of America. All jokes aside here, what he just said in that clip is directly in line with the narrative of the regional banks failing and the larger banks taking over. I agree with him on that. Of all people, this guy knows dumpster fire when he sees one. I agree with him. The smaller banks have no choice but to keep reducing their balance sheets, and that's why they haven't hit their bottom. My opinion differs from him though when he says that there's absolutely no reason for the regulator's large bank reaction to the problems with the smaller banks. I have to disagree. The reason is right in front of our faces. The regulators are raising capital requirements for the larger banks to encourage them to keep getting bigger, and that consequently makes it that much harder for smaller banks to grow. On the flip side, the Treasury Secretary herself, Janet Fellen Yellen, aka the Tweety Bird Monster, will tell you that they're not encouraging this type of activity. Another classic example of watch what they do, not what they say. Now, this clip is my favorite. Check it out. So what is your plan to keep large depositors from moving their funds out of community banks into the big banks? We have seen the mergers of banks over the past decade. I'm concerned you're about to accelerate that by encouraging anyone who has a large deposit in a community bank to say, we're not going to make you whole. But if you go to one of our preferred banks, we will make you whole at that point. That's certainly not something that we're encouraging. That is happening right now. That is happening because depositors are concerned about the bank failures that have happened and whether or not other banks could also fail. No, it's happening because you're fully insured no matter what the amount is. If you're in a big bank, you're not fully insured if you're in a community bank. Well, in all my years of watching Janet no tell and yell and lie to Americans about how she's protecting them, I've never once seen her stumble and fumble over words like she did in this clip. The best part is 30 seconds after getting put in the political equivalent of a stone -cold stunner, she says that her judgment is that the banking system is safe and sound and depositors should have confidence. Hysterical. Then when asked why some banks get special treatment and why others don't, she said that she didn't know and it's up for the FDIC to decide. The links people like Janet yell and go to protect depositors all while simultaneously hurting depositors is astounding. Reminds me of Gary Gensler. And in that lies a part of the problem. Getting a straight answer from a politician is like asking your mom for $5 and she tells you to ask your dad and he tells you to ask your mom and you never get the $5. Lack of accountability in our government has a lot to do with the fact that it's so easy for a three -letter agency to point the finger at another three -letter agency to pass the buck. With this, they all maintain a level of plausible deniability and get to go home and tell their families they're making a difference. What a joke. It's a joke. But wait, this is our money. This is our freedom. It's not a joke. And what's anybody going to do about it? Look, it's as simple as this. Politicians and regulators need to wake up and get it through their heads that small town America needs smaller banks. Where are we supposed to go to get loans of the banks that used to support small businesses? Have their hands tied. And Jamie Dimon has the key. We need that competition for competitive rates, and we need small banks to keep innovating to earn their market share. At this point, with the way things are going for the regional banks to survive, they'll be forced to tighten lending standards, make fewer loans, slowing down the economy for everybody. And now, with Biden's knee -jerk push to heighten capital requirements on small banks, politicians cannot sit there with a straight face and say they're not encouraging the consolidations. I'm also not saying this great consolidation will happen overnight, take years, maybe even decades, let the right people get elected and care enough to prevent it. Don't get me wrong. I'm not saying small banks shouldn't have regulations. Of course they do. Just the right kinds of regulations that involve common sense. Banks should be transparent. They should take stress tests. They still need enough wiggle room to be competitive as well as profitable. Sad part is it would take nothing short of a miracle for the public's faith to be restored in smaller banks. Obviously, everyone wants their money to be safe, so don't blame anyone personally for jumping ship to a bigger bank if they have to or if you're allowed to. But when this happens in droves and the government is backing it, you have to play the tape out and see how slippery this slope really is. So, at this point, other than voting in the polls and with our wallets, there's only so much we can do to hold on to the little bit of control we have left. And we have to make the most of it that we can. First of all, you have to be aware that the landscape is changing. With that, you need to do your part and self -educate yourself and become self -reliant. I don't say it lightly. And if you made it this far in this video, you obviously care about your financial future, but you need to keep going. If you're someone who's struggling or even someone who's just trying to level up, you need to plan out every minute of your day so you can make time to be studying at least three to four hours a day minimum. If you're someone that's got a lot of moving parts, there's no shame in hiring a financial advisor or someone that can help you be more active with your wealth management. Understand that at the end of the day, the big banks don't care about you or your self -interest. It's only about the bottom line for them. So that's why you need to learn as much as you can and take the time to figure out what works for you. With that, don't make the mistakes, the same mistakes the banks are making. Don't put all your eggs in one basket and expose yourself to the risk of having a single point of failure. You cannot stress how important it is for you to diversify. Split everything up so if one vertical fails, you're still well above water. Consider buying gold, buying stocks, holding cash, buying digital assets like Bitcoin, or even ammunition. If diplomacy fails, water and ammunition will become currency. It's clear I've been hanging out with Drew too much, but, hey, he's right. He's also kind of scary, but I like him. He's a good guy. At the end of the day, your financial future is up to you. So I wish you the best on your journey and your never -ending pursuit of financial education. That's all I got. Be blessed. BitBoy out.
"volcker" Discussed on Bloomberg Radio New York
"In your podcast feed. On the latest sound on podcasts, President Biden addresses the world from Poland after planting a flag in Ukraine, we talked to Kurt Volcker, former U.S. ambassador to NATO, former special representative for Ukraine negotiations. He is clearly staking United States prestige and credibility on Ukraine's success here in this conflict, which is very important. That being said, we need to see the follow through on this. So much of the speech sounded like we're already declaring victory that okay, we've succeeded here. But the war is far from over Russia still recruiting people and throwing them at the front line. We have not given Ukraine's the longest range munitions that they need. We've not given them any aircraft. There's a long way to go, but I hope that on the strength of the president's visit and his remarks that the administration now lifts the remaining restrictions that we have on our AD Ukraine. We don't have any indication of that. Is it going to take another year to be talking about F-16s in Ukraine? Certainly hope not because time is of the essence. I think there's a danger of complacency that because Ukraine is still standing one year on, that gee, we did everything right. When in fact, I think we should look back at the last year and say we made a lot of mistakes. We said that we weren't going to supply certain things. And then we changed our minds and did it, but did it late. We didn't have enough investment in our production capacity, which we could have done as well. Even things like training fighter pilots so that they could fly on that 16s. We're going to start that now, but we should have started that a year ago. Now, that being said, since we haven't started yet, we should start now, but we should be looking at how we can move these things much faster. Get more of this and other conversations on the latest Bloomberg sound on podcast. Subscribe on Apple Spotify and anywhere else you get your podcasts. Plus, listen anytime on the Bloomberg business app and Bloomberg dot com. Bloomberg television first in global business news The markets matter and they are moving. Yields actually lower globally from New York to San Francisco. Headlines involving Twitter. From London to Hong Kong. It has been a week of huge gyration. The world turns to Bloomberg for market moving headlines. It's all eyes are on what's going on in the tech space. The dollar really taking control here. Bloomberg television
Joe Biden Seems to Think He's "Curing Inflation"
"May see some market trepidation this week. I would expect it by the way I am not exactly what you would call a bull in this sort of economy, even though some people are like, oh, you know, it's great. Inflation is coming down. You know what? It's not. It's not coming down fast enough. We got the consumer personal expenditure index, which I don't even think is the right way to be looking at inflation. I really don't. There's some idiosyncrasies about it that would not make it my favorite metric if I were on the Federal Reserve board of governors to be looking at, but nonetheless, this is a thing that they watch, and it's at 5%, so they're like, oh, that's great. Well, let me just say, again, because it's not my favorite metric. If you were to actually look at this on an apples to apples basis and you went back to the early 1980s, when Paul Volcker had to raise rates so aggressively in order to contain inflation, what you would actually find is that we're much closer to roughly 14 percent. Inflation just like we were back then. And guess what else? We got all kinds of international problems. I mean, the balloon thing, this is a whole other level stuff, but nonetheless, back then, we had the Middle East crisis, and so as a result of that, you had escalating oil prices, which we have a little love today. We also have escalating food prices, leading us very much into a stagflationary style in environments. So be prepared Tuesday Tuesday night, we're going to hear from the president of the United States who's going to tell us, oh, everything's great. I mean, he actually is either stupid enough or delusional enough or deceptive enough to have sat there with a straight face on Friday and have said this about inflation. For any blame for inflation. Should you just the president? By taking blame inflation, no. Why not? Because it was already there when I got here, man. Remember what the economy was like when I got here? Jobs were hemorrhaging. Inflation was rising. We weren't manufacturing a damn thing here. We were in real economic difficulty. That's why I don't. Thank you. Okay, I just need to set the record straight on that. They're really irritates me. When people just so blatantly lie about things like the economy where we actually have metrics that we can go back and look at, including, of course, inflation. 1.4% inflation. That's what we had when Joe Biden came to office. But then he added his third stimulus check. I mean, we'd already had two from the federal government. I warned it was too many. Tuesday stimulus checks. Plus all that the Federal Reserve was doing, we certainly didn't need a third one, plus more money printing from the Federal Reserve. It was absolutely absurd.
The Exponential Trend Line on the Gold Price
"So here we are with our gold price curve. Again, we've looked at this so much. Don't think I need to go over the history of the last 50 years. You have the timeline there. You can check prior videos. If you're interested, but here we have the interest rates going up to 22% during the Volcker years kind of pricking the gold bubble in the United States and gold being priced here in dollars and floating freely for the first time since bretton Woods collapsed ten years prior. Gold actually peaked at about $850 an ounce for about two seconds and then in 1980 and then in December of 1980. Paul Volcker took interest rates to 22%. And then from here we had a falling interest rate period all during this period, the great moderation it was called some people called it the end of history at certain times. We had the Soviet Union ended the Berlin Wall fell. All sorts of great things for freedom, but this also happened during a falling interest rate environment, which is quite different from now. And then of course we have the global financial crisis and then gold popping back up in price. First and 2011. And again, in recent years, during COVID. So the current price as of a few days ago, December 31st, 2022, $1812 per Troy, ounce. And again, remember way back in August 1971, when many economists thought that gold would go to zero, gold was a deep pegging, the brenton Woods agreement was falling apart, the Nixon shock, the Smithsonian agreement ended. Even though they still statutorily have a value for gold on the books in the United States, there is nothing tying the dollar to gold. On the books of the United States, nor anywhere else in the world for that matter. And that all ended in the early 1970s. And then we had gold pretty much for the first time floating freely in the market. In the last 50 years.
"volcker" Discussed on Bloomberg Radio New York
"5 and a quarter for the entire year. No, the fed can't go out on a limb in this situation. And say that they are planning to cut rates because then the market will just front run them and we get looser financial conditions and inflation goes shooting up again. So there's going to be attention there all year, but the markets at this point are definitely not buying the fed's argument that it's going to be a year or more before they start cutting rates. Let's we're old enough to do historical perspective because we go way back to well before Paul Volcker. So just in historical terms, the inflation rate that we have right now, the fed funds rate, where do they stand? I mean, people say, yeah, it's high, it's high, but actually it's about where we were in the 1990s when rates were going when overall interest rates were continuing to fall. From the time that Volcker raised interest rates to almost 20% in the early 80s, rates have been on a continuous track down until we got to the great financial crisis and they hit zero. So we've come back up a little bit and it does raise an interesting question, John, that will be debated. You'll see this come up as the year goes on. Where do we end up when we get past this pandemic situation in the economy? Are we still in the new normal that Muhammad Ali and coined after the great financial crisis of low interest rates and low inflation? Do we have a new new normal where there's low interest rates and high inflation or do we have the old normal of higher rates and a little bit higher inflation? It's going to be interesting to see because that's going to really affect how you set up your portfolio going forward. And nobody really knows where we get to. Okay, this is the kind of thing that keeps Mike McKee in business. Michael, thank you very much as usual. Bloomberg global economics and policy editor Michael McKee. And just to hit on Bloomberg
We're in for a Tumultuous January...
"You're watching this market I suspect we're in for a tumultuous time, a difficult January already we're off to a rough start and what we're seeing there on Capitol Hill does not help. I mean, it's a little bit of a red herring and that they'll figure it out eventually and I don't think that the economy is going to collapse because of it. So you have to take these things in stride and know that while it doesn't look good for Republicans and it certainly doesn't make us look good on the world stage, it's not going to totally collapse these markets. What will collapse these markets are bad policies, which we've had many, and will continue to have more of. You heard me talking in just yesterday's program about gold in the potential for $3000 an ounce which one analyst over at a Danish bank is predicting, and while it's totally far fetched in many ways, the concept isn't in that you are starting to see a lot of nations around the country retreat away from dollar backed assets and obviously they can't go to crypto. So where are they going to go? They're going to go to those safe havens, things like gold which tend to perform better in an inflationary environment. Now gold hasn't performed that well, in part because you've got central banks around the world raising rates, the thinking is, oh, you raise rates, that's going to contain inflation until oops, you realize it's not containing inflation and it's not going to contain inflation if we really wanted to contain inflation. You know what we'd be doing with Paul Volcker did back in the early 1980s because apples to apples, we can talk more about it in tomorrow's program, but apples to apples, you're looking at a very similar situation, inflation wise of what we had in the early 80s, and it took a lot more than these small interest rate hikes that were getting right now to get that under control. So
"volcker" Discussed on Bloomberg Radio New York
"Came out and you could charge 1% on a money market fund, which is a lot to charge for something that says plain vanilla, some money market fund, but a money market fund was sure. To be a winner compared to the bank CDs that were limited by regulation to 5% interest, then Paul Volcker was driving the interest rates up to 8, ten, 12, even 14% on money market instruments, all you had to do was some money market fund manager is buy the standard stuff. Treasury bills, commercial paper, and the like, and you could put together a portfolio that's producing a very high income and the banks that had all the money were limited that at 5 and a half percent. So then when they float out of the banks into mutual funds and Vanguard made itself obvious choice by having slightly lower thieves and then lower fees and then lower fees as their assets built up. So they had low fees for identical product. And you don't have to be that smart to figure out, hey, wait a minute. These are identical products, and one is low cost, why not? So let's also talk about what was then thought of as a fairly radical concept, neutralizing the mutual funds, business, tell us a little bit about that idea where, instead of being profit driven, the profits would eventually flow back to the owners, the investors and the funds through lower fees. We've just said it beautifully. Well, you know, I the proposition. I've been educated with this book, so it's deep in my thought process. Well, you know, once you get two and two is four, it's easy to remember and put to work, but the secret here over and over and over again is ferocious drive to not fail. Which was Jack. Ferocious drive to be recognized as mister wonderful, which was a very important part of Jack bogle, all through his career, but it gets more and more and more important as he got deeper into Vanguard. Those two phenomena show up over and over and over again. Coming up, we continue our conversation with Charlie Ellis, author of inside Vanguard
"volcker" Discussed on Bloomberg Radio New York
"Council. On the latest edition of the tape podcast, a fed roundtable with Neil Grossman, Priya mizra and Danielle dimartino booth. Some of the frustration with the fed, I think, remains next year because we're going to look for the fed to eat and I think they're going to struggle to be with inflation still high next year. Speaking of frustration with the fed let me bring in Neil Grossman here. And first, let me say, you got to differentiate between how you feel about the fed what the fed should be doing in your take and what you expect if that actually to do. Very fed up by the way. And in a couple of things. First of all, as you know, I don't think they've been hawkish. They barely done anything in the way they should have, because I call it, as you know, infinitesimal incrementalism. They haven't even done one Volcker yet as far as I'm concerned. Paul Volcker raised rates 4% intermediate on a weekend. That would have been something. And I'm sorry for you, but they don't haven't done quantitative tightening either. Letting something slowly drip drip away. After they bought a 130 billion a month for ten years, is not tightening. So I mean, yes, there are effects, but to be honest with you, I would stop tightening now and announce this afternoon that I'm going to start selling bonds at a clip of 50 to a 100 billion a month. That would be effective per se. Now, what are they going to do or not? I'm not going to disagree too much. Other than I think the thing you need to watch or consider is the liquidity. I'm going to push back as hard as I possibly can about quantitative tightening not taking place. Now, there's something called the employee retention credit in the 9 months through November. It injected a 120 plus $1 billion into the economy, so there is still stimulus money running
Inflation Isn't Getting Any Better Under Biden
"Things haven't gotten bad enough yet But they are They're getting there now They are None of this is going to turn around They did a whole show on it yesterday The economic segment at the end of yesterday's show it's on my podcast if you missed it I laid out clearly how none of this is going to get any better This inflation crisis even Biden's really hesitant to call this a mission accomplished moment not inflation's ebbed a little bit because we've seen this before folks Just go back and look at what happened in the late 70s and 80s You remember that gym inflation would be 10% then they'd ease up a little bit to go down to 7 Oh we did it Back up to 10% They have a little bit They would ease up on the back up again to ten It wasn't until Paul Volcker came in and said I'm done with this inflation stuff And just destroyed it with interest rates Basically shut the economy down making money so expensive That he basically dried up the money supply and then Reagan juiced the production side of the economy to create more products which is the smarter way to do it by the way It wasn't until then we crushed it But they're going to crush the economy And they are going to crush the border while we're at it They're going to take advantage of the next two years
"volcker" Discussed on Bloomberg Radio New York
"Frailty thy name is woman, wrote William Shakespeare. Thereby proving not only that he was arguably sexist, but that he indisputably had no knowledge of Wall Street. For the most fickle female of poetic imagination, would seem a symbol of romantic constancy next to the recent behavior of the stock market. Indeed, to paraphrase that other male chauvinist, Sigmund Freud, what does Wall Street want? One thing it wanted we were told was Paul Volcker. It got him. That was Louis ruckus, of course, calling Shakespeare a sexist that I understand. And back in July of 1983, when the stock market was on its upward climb after chair Volcker's interest rates shock therapy. And the bull market in bonds was just really getting started. By then, the CPI was climbing only 2.5% a year. The top movie was Star Wars four return of the Jedi, and the police topped the charts with every breath you take. Things I can remember, actually. Welcome back now, David Bianco and Lori calvino. So given what we just talked about with what's going on in the markets, Larry, what's an investor to do? Where is there safe harbor from the storm? So look, I think it's a question of what your time horizon is. And if you're concerned about volatility in markets in the near term and want to add some more defense to the portfolio, I think the clear choice at this point is healthcare. If you look at other defensive sectors, Staples and utilities, you're basically at peak valuation relative to the broad market. We also think there are significant earnings risk for consumer Staples as the consumer weakens pricing power wanes for some of these companies and also Staples have massive exposure to the dollar to international issues. And they're very, very sensitive to a stronger dollar. So I think healthcare you have less of that sensitivity. And you have reasonable valuations. It's not a great story. But I think it's the best one you can tell on the defensive. So what about that? I think of defensive
"volcker" Discussed on Bloomberg Radio New York
"Frailty thy name is woman, wrote William Shakespeare Thereby proving not only that he was arguably sexist, but that he indisputably had no knowledge of Wall Street. For the most fickle female of poetic imagination, would seem a symbol of romantic constancy next to the recent behavior of the stock market. Indeed, to paraphrase that other male chauvinist, Sigmund Freud, what does Wall Street want? One thing it wanted we were told was Paul Volcker. It got him. That was Louis ruckus, of course, calling Shakespeare a sexist that I understand it back in July of 1983. When the stock market was on its upward climb after chair Volcker's interest rate shock therapy. And the bull market in bonds was just really getting started. By then, the CPI was climbing only 2.5% a year. The top movie was Star Wars four return of the Jedi, and the police topped the charts with every breath you take. Things I can remember, actually. Welcome back now. David Bianco and Lori have a Sino. So given what we just talked about with what's going on in the markets, Larry, what's an investor to do? Where is there safe harbor from the storm? So look, I think it's a question of what your time horizon is. And if you're concerned about volatility in markets in the near term and want to add some more defense to the portfolio, I think the clear choice at this point is healthcare. If you look at other defensive sectors, Staples and utilities, you're basically at peak valuation relative to the broad market. We also think there are significant earnings risk for consumer Staples as the consumer weakens pricing power wanes for some of these companies and also Staples have massive exposure to the dollar to international issues. And they're very, very sensitive to a stronger dollar. So I think healthcare you have less of that sensitivity. And you have reasonable valuations. It's not a great story, but I think it's the best one you can tell on the defensive. So what about that? I
"volcker" Discussed on Soulpods Podcast
"Fail again, we're going to bail them out again, essentially. I do not know. I'm not privy to that fact. I'm not totally sure if it's the same piece of lenses or legislation or not, but it all happened around the same time. I do. Can you tell me what it is? What it's called one more time. I'll look it up. This right here. But would I be searching to see if that if it said that we'll build them out again? Look up Dodd Frank. Don Frank. How you feeling Frank? Okay, the Dodd, Frank act summary. Here we go. Yeah, sure. Yeah, you keep going. And next up here, drop the veteran homeless rate by 50%. Wire. No other homeless, you didn't do anything for any other homeless anywhere else. Just veterans and even that is paltry. Considering having those numbers to the skyrocketed back up anyway. Yeah. Like Arthur more homeless veterans now than ever. I think so. I think so. And aren't 22 a day committing suicide? I think so. I think so, yeah. Yeah, this is not a thing. This is nothing burger already. Next up, oh, this is a good one. Reversed. Reversed. Bush era torture policies. No, he fucking dinged. Bush era torture policies and expanded Bush era torture policies. Don't you remember him saying we tortured some folks? You're a fucking idiot forever having the goal to type that out. Whoever the hell you are. I didn't take your name down. You're not important enough just based on this list of things. Okay. But seriously, you can not say something like that. You can not say that he reversed torture. No, he didn't. There was a public outcry about it, and they had to stop. And they haven't stopped. Remember, he kept saying he was going to close Guantanamo Bay? Yet, it's still open. Do this day. It sure is. So don't bring that shit here. Apparently, so everything that I'm reading about this, I guess it really, I guess it's spells out really concisely that if a. If a firm basically breaks any of these rules from this Dodd Frank from the Dodd Frank act, and they can prove that they did, they won't be eligible to receive a bailout from the government. However, if they can't prove that they were irresponsible with their funds and through. Essentially risking investing and other kind of dubious ways of making money that this firm goes bankrupt and that's going to cause and they can prove that they did so out of doing shady business, then they won't get a bailout. But if they can do it in a way like, let's say, buying up tons of properties, renovating them and then renting them as single home or predatory loans. Right. Which still exists, even though they're not supposed to because this law was supposed to stop shit like that from happening. Right, but you can't prove stuff when they're all in bed together. Right, right. That's how it works. The one thing it seems like this kind of does, which also just makes it more complicated, but it's just like, this looks like a face kind of thing to me. It's the Volcker Volcker rule. Basically makes it so like banks can't sponsor invest or own proprietary trading through hedge funds. Basically, so it just makes it so like you can't have a bank and run a hedge fund at the same time. Like you can't put money into a hedge fund. So you split up your partnership. So you fire a couple of people. They go over there and you have their business anyways. And so it doesn't matter. All of these are all surface who just like. Weren't going to look any deeper. This is all surface level bullshit that doesn't actually regulate a goddamn thing. No. From what I see what happens when your whole cabinet is picked by a Citibank email. Right. You are already beholden to these banks. That you're not regulating 14 years later and they just figure out how to play the game better. That's it. That's all that they did. They gave them a structure. How to play better. Until GameStop. Yeah. Until GameStop. Next up, $6 and 75 cents for your firm. That's what you saw would offer. Yeah. That's for sure. For sure. See, you got three hedge funds, two banks, and a private investing firm, $4 hard offer. Last one. We can't do better. The multi-billion dollar company, what are you talking about? Yeah, well, we're getting started. We're worth $7. So I want to give you more of our money. Next up here is another good one, I think. I began the process of normalizing relations with Cuba. And I did actually think that this was a good thing. It was long time. I guess that we started talking to Cuba again. And Trump shut that down automatically when he got in. This was one good thing that he definitely was doing for the international community. I thought, trying to bring Cuba back into the sphere. He was like, we could have gotten close to actually ending the embargo on them that's been going on for like 50, 60 years. Yeah. And actually really helping that country rise from the ashes of. What the world did to them. I even had somebody shoot back at me one day. About the embargo, like, oh, well, we're not blocking medicine or food. We're blocking parts for equipment for doctors. If you can't diagnose somebody, you can't prescribe them anything. So it doesn't fucking matter if we're walking the medicine or not. We're blocking the thing that you need to prescribe the medicine. Right. And I mean Fidel Castro wasn't a really a dad dude or anything like that, you know? Did talk to Cubans? I mean, so what's it called? I don't mean not a bad dude in the sense that after he came into power, he did some fucked up things. And I will say that. However, Cuba's government in the way that their country ran before he took over was really, really bad. Yeah, exactly. And he did take part as that revolutionary leader who did step forward and take back their country in that really real way. And because of his ideals, the west refused to work with him. So who the fuck else was he supposed to go to is a burgeoning country in a new leader? The way the way we look at him and it would be like if king George called George Washington like a murderer and a terrorist. Right. Totally. Totally. Of course not realizing the revolution that was actually happening. Right. And I think that I think that he's been villainized a lot, much like che Rivera has been boosted to this level of, oh my God, we got fucking his face on everything, right? When this dude just helped the United States take over his country. Basically all that it came down to, you know? We'd asked him, gave him all the guns and money that he needed. And now he's a socialist hero. But if
"volcker" Discussed on Bloomberg Radio New York
"For good economic news today, was that the U.S. unemployment rate fell to its lowest level in nearly four years, 5.7%. And for anyone who still hasn't got the message that inflation is the big problem, the index of wholesale prices took its second straight 7 tenths of a point monthly jump. The great Lewis Kaiser filming Wall Street week in 1978 from the sticky shower on, I think. That was a great moment of what mister rudkin did here and it speaks to 1978. And Lisa Brown, it's not of Bob Seger or the moment, but it was, and I'm sure Lou would agree. It was the dismal 70s. This is not the dismal 2020s. But this week, we got a number that was close with the 9.1% inflation shocking markets. And we can not avoid the rhyming aspect of that, even if this isn't the 1970s. And one of the things under the radar this week folks so important is compare contrast of Jerome Powell with Paul Volcker. I got some major heat from Wall Street pros. Maybe lose that tone and just start looking at where we are right now. Where we are as the lord Kelvin and David Bianco with RBC capital markets and DWS thrilled they could start us out here on the state of where Wall Street is right now. Laurie, I'm going to go to you because you are exquisite. It's something no one talks about anymore, not the Red Sox middle relief, but small cap stocks. And the answer is small cap stocks do nothing, and then about every 9 years, boom. Are we close to the small cap boom and why? Small caps are in a holding pattern right now versus large cap. I think they're waiting for their moment. Like what? 7 years? Well, they actually have had a terrible last year and a half. And actually, they've been bad for quite some time. But I think really around 2014 was kind of the last moment in the sun that we had there. But look, I think small caps are telling you that this is a market that wants to start bottom fishing, where people are starting to look for things that have been de risked. And when I talk to investors about areas of the market, then they risk small cap is the number one thing that looks like. But are they small cab because they're zombie companies or because they're managements do not merge into mid cap size? What's the pixie dust of widely underperformed? There's a few different there's a few different versions of it. There are the younger growth companies that are still up and coming. There's some that have been older and fallen on harder times. And then there are others that are simply a little too niche and haven't gotten scooped up yet. So there's a big variety in there. David, a lot of this hinges on inflation getting back to 2%, so many people believe. And this is the distinction people are drawing from the terrible 70s saying this is different and it is less entrenched than some people fear. What is the risk that that's not the case? Or is it a screamingly obvious argument that the fed will get things back to where they want it? The third world do everything it can do, but it may have a bitter medicine for the economy. So I do think it's instructive to look at the 1970s and try not to repeat those mistakes. It's early in the 2020s. From 1975 to 1979, real GDP growth was 5% plus. So real growth is not going to be that strong in the United States. It's really important that inflation does work its way back to the fed's target of close to 2%. That's going to require the fed doing its job, fiscal discipline, and most importantly, our renaissance once again, like in the early 1980s of the supply side. Reaganomics combined with monetary medicine has laid the seed for a very good 80s and 90s in thereafter. So we need to learn the lessons of the 70s and that repeat the mistakes. Meanwhile, as people do bottom fish and Laurie says there's evidence from the small caps. How much are bonds participating in this? How does the stability in longer duration bonds provided a template for that bottom fishing for that comfort that could even persist longer than people think? I think investors are better off for now. In short duration bonds, treasury bills, two, three year treasuries. The bond market is not priced for the fed getting to as high as 4%. And 9 is the equity market. That would be a risk. So I think investors should be careful with this bonds, look for inflation protected bonds, hold on to cash. And then look for real assets, whether it be stocks or real estate or utilities. I do like, I do like small caps and I do like banks for those who are willing to take the cyclical risk. I think small caps have been beaten up even more so than the large gaps. And what's interesting about small caps, they were held back over the past decade or two from globalization and other factors. They would benefit from it. So we got a problem here. I guess agree with each other. We agree. Okay, well here, I think. They agree. That's right. That's why we're put on the couch together. I do wonder, though. When you were all talking about the United States, we have to zoom out. It is not about the United States right now. It is strong. In the United States, in Europe, it's another story with gas. And we are looking to the ECB next week. We are looking to the Nord stream one pipeline, whether it will come back online. We are looking to emerging markets, Tom has been talking about it all week, and some of the crises percolating in pockets throughout the entire complex at what point can the United States fall subject to what's happening outside in the rest of the world, Lori. Well, look, I think we had a template for this back in 2018. We spent most of the year thinking the U.S. would be immune from the risk global recession that would emerge from the trade war. And then recession fears came home to roost in markets fell sharply. But we've already done that at this point in time. So I think we can go back to this idea of a relative game. Will Europe be worse off than the U.S. if the U.S. is better off? I think there's a limit to the amount of cash that institutional investors in particular are willing to sit on. A lot of that money is going to find its way into the U.S. and the small caps. David, I want to go to the heritage of DWS and of course the relationship with Deutsche Bank and the giant David folkers Landau who won February 24th or 25th told me watch the dollar. This will need to be amended. We are now living a dollar surge. And I'd say this week folks DXY, the blended large nation index was caught up with late in the week by the Bloomberg dollar index more EM. David, how do our listeners, how do they adapt to an incredibly large, strong dollar? It's a tough thing to adapt to. Don't forget the S&P 500, not banks, but the rest is a very global set of businesses and they're facing foreign exchange rates. And they're going to be facing tougher competition in the areas of auto and machinery and tools from Japan, incredibly weak yen. And Europe. And it's a slower global economy anyhow. David focus Landau from Deutsche Bank was one of the first to warn of a recession coming, and that DWS, the
"volcker" Discussed on Bloomberg Radio New York
"The integrity of elections is all put to question We have a lot of things that are making people feel uneasy And so to sort of get a handle on this I talked to a number of researchers including economists who think about behavior And they're saying that when people are afraid they tend to be afraid of everything and that being afraid of one thing if you have multiple sources of discomfort it actually sort of makes you feel even worse And so right now it's very real to say we do have rising prices So we do have inflation But at the same time people feel uncomfortable about government They feel uncomfortable about safety of guns and safety of schools and all of a sudden it means that you're pushed to the end where you sort of think everything's going to hell And so there's that malaise but then the other thing that is sort of echoes off of that late 70s early 80s moment Jim is like the spotlight on policymakers and obviously we had Volcker back then and he took the country to places that we haven't gone yet but I'm curious you know in the grand scheme of things we wrap up the story yesterday in the midst of the fed doing with the fed does And just wondering what you read on the fed is in all of this and that's the story of the week really I'm in the fed is there in the position of being at least if the 70s is any guy I mean that is the one body that can bring it into this I mean you can beat inflation The problem is that the beat inflation you often have to beat down the economy to the point that the people who will love you for it will eventually hate you for it It's simply because you know Paul Volcker beat inflation but to do it he had to get a federal funds fate rate that was what 2021 point He had to take mortgage rates up to almost 20% He had to basically take unemployment up to 10% He had to basically beat out inflationary expectations out of the economy simply because everybody was sort of completely beaten down Now that's probably works as a monetary policy It's very bad from a political standpoint And it's probably going to be the reason.
We Have Moved From Inflation to Stagflation
"U.S. retail sales declined in May as inflation stings consumers The producer price index is through the roof again As has the cost of manufacturing So we've now moved from inflation to stagflation as I explained the other day Where the economy is now stagnating Thinking about all these phony experts I'm telling you what's going on I'm seeing it you're feeling it you're living it We don't need statistics coming out of Washington I'm telling you what's happening Inflation drives up the cost of things drives down the value of your of your money it also creates shortages When Ronald Reagan was president and he was faced with this after winning the election against Jimmy Carter Volcker would increase the rates and Reagan knew he had to On the monetary side but then Reagan slashed taxes the greatest tax cuts in history Across the board That occurred in August Of 1981 So what Reagan was doing is he was trying to create production economic vitality A strong consumer market While the fed was trying to strengthen the value of the currency And ring inflation out of the system
"volcker" Discussed on Bloomberg Radio New York
"That period Do we need this time to sort of medicine that Paul Volcker ended up administration Because it was pretty tough It was brutal medicine And I think people need to appreciate that It was a very high price to pay for allowing inflation to accelerate for so long Volker hiked the overnight interest rate to 19% and inflation got to 15% It caused a recession but one of the things that's important to recognize is that there was this combination of tightening monetary policy while there's a lot of pro supply side policy whose reaganomics with Volcker's monetary discipline that really helped seed a terrific 1980s and longer expansion So Kate helped me here because you're responsible for making these sorts of decisions and normal if you've got a lot of inflation you don't want to have cash because it's dwindling even as you hold on to it On the other hand we've got a lot of uncertainty So what's your approach Yeah you know normally I would say holding cash in the bank and not investing it or putting it to work in the market in some way is a waste And especially in real terms you just think about that cash kind of burning away Of course holding cash in this environment where we've had a really really challenging period for both bonds and stocks in terms of returns Has actually proven to be a really good portfolio diversifier In fact we're holding a fairly high level of cash Both as an expression of our duration view So we've had a sort of shorter duration position in the fund We also de risked part of our equity portfolio While still holding some of the higher growth higher quality companies I think they can compound over the next couple of years I think you should have dry powder I really recommend people having some cash at this point We're going to get some interesting bites at the Apple Some other high quality companies as I was mentioning before may even get cheaper than this as we have a very volatile period over the next couple of months of policy adjustment and recession fears recession appears fading David in a time of inflation one thing people tend to go to is real assets Real estate note guys realize this Does that make sense right now It does And there's a nice availability of real assets in their investable more than they were back in the past It's easier to invest in commodities It's easier to invest in real estate It's easier to even buy inflation protected securities These things particularly the ease of which they're investable nowadays I bet you investors wish they had those options in the late 70s and early 80s So there are ways to help manage through this period of uncertainty and the risks of inflation being high Okay so this is unfair There's a curveball card I'll throw it your way Cash is not trash What about crypto I mean we've had this whole discussion There was something like $270 billion worth of value came out of crypto And out of stablecoins did that teach us anything in general I talked to Larry summers and he said mainly that greed drives the marketplace Yeah first of all I'm stealing Dave's cash is not trash And I might make a little tattoo of that on my shoulder But this is what I'll say By far and away not an expert or an authority in any crypto or digital assets I just would say that for people who are adding that into their portfolios as a diversifier I think we've seen an incredibly high correlation Between all of these assets and actually between a lot of them and more speculative parts of the technology sector And you got to really think about your portfolio construction This is a very early stages of this digital finance revolution if you will And you have to be I think pretty balanced in your portfolio if you're going to own some of those assets Such a good I don't know where it goes from here but I will say you have to be cautious Just quickly this is a great point cage is made We talk about trying to avoid correlations You can be hedged I'm not sure I heard a lot of people talk about the correlation between big tech on the one hand and crypto on the other But we certainly have seen it recently A lot of the same owners So uh yes they find themselves having been hurt and perhaps having to de risk The thing about one of the things to keep in mind the dollars has been getting stronger And if the fed pulls this off well the dollar will ring supreme again What about that case What about a strong dollar What does it do to your investment Yeah we take some concurrency views into consideration I gotta tell you though over the course of my career I don't have the best batting average on making cross currency that's what I will.
"volcker" Discussed on Bloomberg Radio New York
"Harvard earlier this week on Bloomberg He said he thinks it could be years we have a really high inflation If that's right if that proves me true what does that say for two investors Well actually you know as much stress as we have around higher inflationary rates particularly since most of us haven't had to deal with this for the majority of our lives There's actually really interesting investment theme around higher inflation It's really interesting to look at within industries which companies have price and power which companies are doing a really good job of managing their costs and managing to their margins And which are struggling I mean I also like this theme of looking at companies that have very high labor intensity to sales In other words do they have to continue to hire and especially at a time where we know the total cost of an employee continues to rise Or do they have business models that are scalable They can continue to grow without adding two additional labor I mean we have to live in this environment and invest in this environment And I think there's some pretty interesting opportunities Even though inflation does pinch our wallets Well okay give me an example What sorts of sectors at least are you talking about Okay an example might be like if you're just thinking in the consumer sectors for example some companies have done a really good job of writing longer term contracts of managing their input costs Sometimes they've made great investments in software and systems and technology so that they've been able to reduce their dependence on labor All of these things help to sort of mitigate the margin pressure that an inflationary environment might otherwise scare us and do right And so there are some decent fundamental stories even in the higher inflationary environment But you really got to get to know the company And there are some beneficiaries of the fed fighting inflation banks insurance companies they should benefit from higher interest rates We think utilities are a really good Bond substitute with inflation protection and probably delivering the energy that the future electrification and we like healthcare And healthcare has become the biggest part of consumer spending and continues to be the fastest growing part productivity medicines devices are needed there These productivity providers we think they're going to be able to play an important role in capture profits Well I'd love about your clip In 1975 is that even the provoker recognized the challenge ahead It surprised even him The big man to the upside inflation can be a very big problem when that Genie's out of the bottle Okay that leaves me exactly my question to you David which is you study that period Do we need this time to sort of medicine that Paul Volcker ended up administering that Because it was pretty tough It was brutal medicine and I think people need to appreciate that It was a very high price to pay for allowing inflation to accelerate for so long Volcker hiked the overnight interest rate to 19% and inflation got to 15% It caused a recession but one of the things that's important to recognize is that there was this combination of tightening monetary policy while there's a lot of pro supply side policy He was reaganomics with Volcker's monetary discipline that really helped seed a terrific 1980s and longer expansion So Kate helped me here because you're responsible for making these sorts of decisions and normally if you've got a lot of inflation you don't want to have cash because it's dwindling even as you hold on to it On the other hand we've got a lot of uncertainty So what's your approach Yeah you know normally I would say holding cash in the bank and not investing it or putting it to work in the market in some way is a waste And especially in real terms you just think about that cash kind of burning away Of course holding cash in this environment where we've had a really really challenging period for both bonds and stocks in terms of returns Has actually proven to be a really good portfolio diversifier In fact we're holding a fairly high level of cash Both as an expression of our duration view So we've had a sort of shorter duration position in the fund We also de risked part of our equity portfolio While still holding some of the higher growth higher quality companies And I think they can compound over the next couple of years I think you should have dry powder I really recommend people having some cash at this point We're going to get some interesting bites at the Apple Some other high quality companies as I was mentioning before may even get cheaper than this as we have a very volatile period over the next couple of months of policy adjustment and recession fears recession appears feeding David in a time of inflation one thing people tend to go to is real assets Real estate has realized that Does that make sense right now It does And there's availability of real assets in their investable more than they were back in the past It's easier to invest in commodities It's easier to invest in real estate It's easier to even buy inflation protected securities These things particularly the ease of which they're investable nowadays I bet you investors wish they had those options in the late 70s and early 80s So there are ways to help manage through this period of uncertainty and the risks of inflation being high Okay so this is unfair There's a curveball card I'll throw it your way Cash is not trash What about crypto I mean we've had this whole discussion There was something like $270 billion worth of value came out of crypto And out of stablecoins did that teach us anything in general I talked to Larry summers and he said mainly that greed drives the marketplace Yeah first of all I'm stealing Dave's cash is not trash And I might make a little tattoo of that on my shoulder but this is what I'll say By far and away not an expert or an authority in any on crypto or digital assets I just would say that for people who are adding that into their portfolios as a diversifier I think we've seen an incredibly hired correlation Between all of these assets and actually between a lot of them and more speculative parts of the technology sector And you got to really think about your portfolio construction This is a very early stages of this digital finance revolution if you will And you have to be I think pretty balanced in your portfolio if you're going to own some of those assets I don't know where it goes from here but I will say you have to be cautious Just quickly this is a great point cage is made We talk about trying to avoid correlations Sure You could be hedged I'm not sure I heard a lot of people talk about the correlation between big tech on the one hand and crypto on the other But we certainly have seen it recently A lot of the same owners So yes they find themselves having been hurt and perhaps having to de risk The thing about one of the things to keep in mind the dollars been getting stronger And if the fed pulls this off well the dollar will range supreme again What about that Kate What about a strong dollar What does it do to your investment Yeah we take some concurrency views into consideration I got to tell you though over the course of my career I don't have the best batting average on making cross currency that's what I.
"volcker" Discussed on Bloomberg Radio New York
"The bottle Okay that leaves me exactly my question to you David which is you study that period Do we need this time to sort of medicine that Paul Volcker ended up administering that Because it was pretty tough It was brutal medicine And I think people need to appreciate that It was a very high price to pay for allowing inflation to accelerate for so long Volcker hiked the overnight interest rate to 19% and inflation got to 15% It caused a recession but one of the things that's important to recognize is that there was this combination of tightening monetary policy while there's a lot of pro supply side policy whose reaganomics with Volcker's monetary discipline that really helped seed a terrific 1980s and longer expansion So Kate helped me here because you're responsible for making these sorts of decisions And normally if you've got a lot of inflation you don't want to have cash because it's dwindling Even as you hold on to it On the other hand we've got a lot of uncertainty So what's your approach Yeah you know normally I would say holding cash in the bank and not investing it or putting it to work in the market in some way is a waste And especially in real terms you just think about that cash kind of burning away Of course holding cash in this environment where we've had a really really challenging period for both bonds and stocks in terms of returns Has actually proven to be a really good portfolio diversifier In fact we're holding a fairly high level of cash Both as an expression of our duration view So we've had a sort of shorter duration position in the fund We also de risked part of our equity portfolio While still holding some of the higher growth higher quality companies I think they can compound over the next couple of years I think you should have dry powder I really recommend people having some cash at this point We're going to get some interesting bites at the Apple Some other high quality companies as I was mentioning before me even get cheaper than this as we have a very volatile period over the next couple of months of policy adjustment and recession fears recession of fierce fading David in a time of inflation one thing people tend to go to is real assets Real estate not guys realize this Does that make sense right now It does And there's a nice availability of real assets and they're investable more than they were back in the past It's easier to invest in commodities It's easier to invest in real estate It's easier to even buy inflation protected securities These things particularly the ease of which they're investable nowadays I bet you investors wish they had those options in the late 70s and early 80s So there are ways to help manage through this period of uncertainty and the risks of inflation being high Okay so this is unfair There's a curveball card I'll throw it your way Cash is not trash What about crypto I mean we've had this whole discussion There was something like $270 billion worth of value came out of crypto And out of stablecoins did that teach us anything in general I talked to Larry summers and he said mainly that greed drives the marketplace Yeah first of all I'm stealing Dave's cash is not trash And I might make a little tattoo of that on my shoulder But this is what I'll say By far and away not an expert or an authority in any crypto or digital assets I just would say that for people who are adding that into their portfolios as a diversifier I think we've seen an incredibly hired correlation Between all of these assets and actually between a lot of them and more speculative parts of the technology sector And you got to really think about your portfolio construction This is a very early stages of this digital finance revolution if you will And you have to be I think pretty balanced in your portfolio if you're going to own some of those assets That's such a good question I don't know where it goes from here but I will say you have to be cautious Just quickly this is a great point cage is made We talk about trying to avoid correlations You can be hedged I'm not sure I heard a lot of people talk about the correlation between big tech on the one hand and crypto on the other but we certainly have seen it recently A lot of the same owners So uh yes they find themselves having been hurt and perhaps having to de risk The thing about one of the things to keep in mind the dollars has been getting stronger And if the fed pulls this off well the dollar will range supreme again What about a strong dollar What does it do to your investment Yeah we take some concurrency views into consideration I got to tell you though over the course of my career I don't have the best batting average making cross currency that's what I will tell you though is you know it does affect how we think about our international interests I'm sure not.
"volcker" Discussed on Bloomberg Radio New York
"Go to double digit levels Well he certainly rattled markets when he invoked Paul Volcker's name and Paul Volcker's methods I am curious there's sort of a broader I guess theoretical question here as to what the fed is managing Are they managing inflation Are they trying to tame inflation itself or is it more about the expectations around it that they're focused on I think it's primarily the expectations around it because a lot of the shocks are coming on the supply side that are outside of their control Some of it does have to do with the demand for sure Money supply growth has been very very strong And so it's partially from fed's actions But partially from outside The main thing that they have to worry about is that un anchoring of expectations that we're starting to see a little bit of evidence of not enough yet And that's why the fit needs to move quickly Also I think politically it's much more difficult for the fed to start moving when the unemployment rate is 5 6% than when it's below 4% Well that leads to a kind of a key point The idea that we've never really had a soft landing in a rate hiking cycle when the fed has had to push the unemployment rate up Do you buy into that It's something that's very difficult to do as I said I'm not quite sure that if you just look at the previous cycles it's exactly like what we're seeing now because there's so many unusual circumstances But I do think that one of the challenges is that in the old days when Volcker was there people understood that the fed has to take the punch bowl away at some point because it can be overheating Over the last 20 25 years the fed's not going to take the punch all the way It's always been trying to provide support if there's sort of a negative shock And so we've now had a generation or two of both people in the markets as well as policy makers who have not seen the fed try to pull the punch bowl away It's always been seen as something to prompt provide support And that's why I think it's going to be much trickier politically for the fed to do the right thing I mean Volcker of course had it really tough There were a lot of people understood He needed to do the right thing Now they're not that many people around who experience that and understand what the right thing is to do All right Really appreciate getting your insights here on that doctor Randall krasner of course professor over at the University of Chicago and a former fed governor.
Dow Tumbles Nearly 1,000 Points as Fed Readies Sharp Rate Hike
"Turning now to what we're seeing here out of the markets and the fed. I mean, again, the Dow Jones Industrial Average now down nearly 700.6 196 at this moment for loss of 2% investors are waking up to this. We have to deal with inflation, right? You can not have a situation in which consumer prices are escalating to the tune of 8 and a half percent. Year over year. I mean, this is stuff that we haven't really seen since the Carter years. In fact, you'd have to go all the way back to Reagan first coming in as president and of course Volcker, they are at the Federal Reserve to see any kind of aggressive mood towards combating inflation. And that could be what we're looking at right now. And so the big question is, if the fed is doing that, what does it actually mean for the overall economy? Can the overall economy really withstand that? We haven't had to deal with anything like this, as I said since the early 80s. So this is really unchartered territory. We're also in uncharted territory just because, look, the job market is clearly healthy. You're still seeing wage increases, not enough, not enough, clearly, to combat the inflation that's going on. But all of this complicates the situation even
"volcker" Discussed on Bloomberg Radio New York
"I completely agree with Larry And I think you have to recognize it's a problem that was not created in two months It was a problem creator over the last two years And so it's going to take multiple years certainly to work it out I know I want to predict that we're going back to where we were in the late 70s but I was sitting in the Washington room of New York Times when Paul Volcker announced his new inflation policy and I watched all that happen And it took multiple multiple years and a terrible recession to get it out of the system So it is going to be painful And it's going to be painful for growth It's going to be painful for jobs And we do have an election coming next year which is going to be complicated So listen to The White House they admit there's inflation They still say maybe transitory And one of the things they point to is gas prices They said that's really artificially spiked it up That's leveling off Maybe we don't have as big a problem What about the difference between headline and so called core Look there's surely they're transitory elements in inflation No question about it But here's the thing David If you look at annual rates if you take this month's number and you annualize it it's 10% So a lot of that is no doubt transitory but to say that a lot of it is transitory is not to say that it's going to get anywhere near price stability on its own And there's another point which is we always talk about the things that are high and might be transitory House prices on every index rental prices on every index except the CPI are up 20% over the last year The vast majority of that is not yet in the CPI So it's probably coming Every business person I talk to says the same thing They say we're going to have much higher labor costs going forward to retain our people We're going to have higher input costs And it's kind of okay because we're going to be able to pass it on Well that's an environment where there are pressures in many places for rising prices not for falling prices You know one of the sectors that's been very benign over the last while is medical services But as you see all the nurses who are quitting there's going to be pressure there as you see all the backlogs of elective procedures from the last year or two They're going to be backlogs there So I think we're going to entrench inflation way above 2% perhaps in the 4% or even higher range unless something happens to break the current mood to break the current trend And I don't think it's going to be three rate increases or two rate increases next year I mean remember this crucially monetary policy today is far looser than it was a year ago Looser is measured by real interest rates looser is measured by financial conditions looser is measured by the size of the Federal Reserve's balance sheet So we've got looser monetary policy even as job vacancies are way up And even as inflation is.
"volcker" Discussed on The Peter Schiff Show Podcast
"Of the reasons that we had a rally in the dollar and the dollar index did sell off nicely today but the main reason that the dollar has been rallying was the anticipation of this hockey speeds. That we were supposed to get today and not only. Didn't we get a hawkish speech. We got an extremely dovish speech. So the dollar needs to really surrender all those. Ill-gotten gains normally. You get a by the rumor. Sell the fact right if you had a rally in the dollar bat was associated with the anticipation of this hawkish. Speech by powell. What would normally happen in the market is when you finally get the hawkish speech that investors anticipated in priced into the market. You get a reversal by the rumor. Sell the fact well. In this case the rumor was false because the fact was the opposite of what was rumored so this should have been an even bigger sell off in the dollar and even bigger rally in gold and gold stocks than the one we got today. And i'll talk about that a little bit later in the podcast for now. I wanna stick on the topic of this speech. And in addition to basically dismissing all of the price increases that we're seeing now experiencing as being transitory pal also spent a lot of time rewriting history in lecturing the public as to the mistakes made by prior federal reserve's in being to trigger happy when it came to fighting inflation that turned out to be transitory but at the time the fed officials feared that it wasn't transitory and so they moved preemptively and that ended up being the wrong thing and powell said that he doesn't want to risk making that mistake. First of all none of those prior mistakes. The way powell described it happen while the fed was at zero right. There isn't a prior period of time. Where the fed had interest rates at zero. So even if it turns out which it's not but even if it turned out that inflation is actually transitory. Even if that's the case that doesn't justify keeping interest rates at zero nothing justifies keeping interest rates at zero. Accept my explanation that the fed knows if they raise rates. The economy is gonna crash and so they're not raising them and if they raise them later it'll crash even harder so they're never going to raise them. That is the only viable explanation for the feds failure to act not the idea. That inflation is transitory. Because even if it was that doesn't justify keeping interest rates at zero percent now but more importantly pows history lesson is wrong. Kids rewriting history. There is no history of fed chairman's being too aggressive on fighting inflation history shows that the opposite is true. they're always too dovish. they're never too tight. The only time we really had tight money was under paul volcker and that's not the policy that pows criticizing in fact. He has praised the policies of paul volcker. He's just somehow criticizing everybody else without specifically naming names. The one period in history were pal. Did acknowledge that the fed got it wrong as far as they thought the inflation transitory and it turned out not to be was during the nineteen seventies. But the most ridiculous part about that. Admission is what powell blames. The higher inflation on pow said that the fed was correct in assuming inflation was transitory because the big increase in food and energy prices reverse. So you had this big spike up oil and food and then at some point oil. Prices and food started to come down so supposedly according to powell that vindicated the fed that they were right but then what happened was that core consumer prices kept going up anyway even though food and energy prices started..
"volcker" Discussed on Vox's The Weeds
"The fed appointing a guy who doesn't have a phd in economics to be chair Right but he became this kind of opinion. Appelbaum who go. i did a weeds with. He has this book about like the rise of economists as a as a class and the fed is like the means which they come in the eighties and nineties to have this sort of dominant role across the board economic policy. Right there like formerly speaking like the air traffic controller strike has nothing to do with monetary policy. But i think it's understood in the eighties. That like reagan's anti labor policies are like working hand in glove to both crush inflation and then allow for this rapid right and volker will say that explicitly. I was sort of surprised. At how a few sive. He is about breaking their traffic controller. Strike that he thought that was. Like reagan's finest moment and did an incalculable amount to help him and keeping wages from rising too much because after that all the unions were cow that they didn't want demand too much in the way of wages. Yeah there's there's serve analogy here between the fed's role in economics and the supreme court's role in the law that they they both sort of exists these government institutions but also as as the pinnacle of certain professions that elite schools whether it's the harvard or mit economics departments or the harvard or yale law. Send their best to these places I junior economists are clerks and then eventually as as the people on them and they exist both as a representatives of the people who who put their members on on the democratic nominees act differently from from republicans had nominees democratic justices act differently from republican justices but with a a shared kind of economists brain or lawyer brain set of professional norms and practices that these institutions work to to inculcate separately from from the mainstream political process. And the other point of analogy. Is there's a lot of writing in constitutional law about how you you. Reconcile the patently surf anti-democratic features of the supreme court with american democratic tradition. And there's less hendrickson about that. With with the fed among economists in part because economists are terrified of what a really democratically controlled fed with do. But there's a similar kind of question there that part of what fokker did was pursue policies directly opposed to the interests and often stated preferences of the man who appointed him and did so without much in the way of of public accountability outside of a few congressional testimonies and there are benefits to that. Like i think central bank independence probably overrated by economists but has benefits and and can allow countries to get out from genuine crises that local leaders have generated. But it should make us uneasy a little bit. Should we take a break and talk about whether all of this was really necessary. Absolutely support.
"volcker" Discussed on Vox's The Weeds
"The previous democratic president but volker basically affects ronald reagan winning election. There's a lot of recent historical work suggesting that that the volcker shock helped lead to the financial ization of of the economy overall once interest rates are really high and it becomes clear that you can make a lot of money in good. Investments as opposed to in productive investments in factories and stuff more and more of the economy starts to pour into bat as opposed alternatives. He helps cause a crisis. In latin america. Wear a lot of dots for governments are dominated in dollars and so suddenly. The interest rates on those debts skyrocket because volkers actions. The whole memoir has told in a sort of low as Tone of like. I'm the guy who to clean up other people's messes And so he's like. Oh those those mexicans wouldn't like stop borrowing money. I had to get down there and help them. Figure out a bailout. Package and the result was the mexico a lot of latin american countries. Get these bailouts from the imf including strict rules about not spending too much on social programs and so poverty rises there some negative health impacts. These are all things that i think in the academy. The term neoliberalism gets used for a lot But even if if you don't like that term or one of referred to like there has been a rightward shift in in american politics in life. And i think like if you're one understand why poker's important it's because he's like one of the authors of that shift in this even though i mean i'm still having some trouble wrapping my head around the fact that the president hugh reaps the political benefit of this lake steel manned fed is the president who like actually attempted to order the fed not to raise rates over the course of a year for political reasons. Especially when you combine that with the kind of the free marketeer assumption. That has become an article of faith among like people who generally think that american capitalism is fundamentally. Good that you know. You can't have the government trying to tell the market what to do that is going to inevitably lead to the kind of like managing issues that we saw in the decade leading into the volcker shock. So can we talk a little bit about the kind of like the political institution of the fed and all this and like how is is this just a change of its role in perception in. You know a bunch of economists deciding that a strong independent fed is the way to go and therefore that they must protect that independence or their actual lake institutional changes in what the can do so More to serve possible institutional changes the big change to the fed in this period legally was in nineteen seventy eight. They passed the humphrey. Hawkins act which was originally going to be much more expensive. But in the form that took it mandated that the fed pursue full employment and price stability and so many central banks around the world are just tasked with reducing inflation ensuring price stability. The fed has a dual and so if anything congress was pushing to be more attentive to the needs of workers in less willing to raise unemployment at the time that the volcker took over. I don't think there were substantial changes. In their their powers over that period there were some some crises that kind of tested. It's it's Explicit powers shortly after a voelker left office there was the the savings and loan crisis because his interest rate hikes meant that these mortgage companies that had all these these mortgages from earlier periods. Where interest rates were really. Low ran into financial dilemma. And start to fail on mass and and the fed did things to rescue them. That were i think i'd press. It ended at that time and then we're small potatoes compared to what happened Two decades later but yeah it was much more about attitude and the culture of the institution. And how you should view it as separate from the white house on that that he was not trying to be arthur burns in the white house. Giving the president advice on tax cuts are wage and price controls and the like he was trying to be the leader of an independent institution. You don't i mean. I think it's actually important that there wasn't a formal institutional change here and done said if anything. The congressional action pointed in the opposite direction. But like an important thing that happened here. I mean this is the interplay between vulgar and the right word time in american politics. Is that the fed volcker and likeminded of communists essentially outmaneuver labor unions out the nineteen seventy s and nineteen eighty s. Right you know. After jimmy carter wins and seventy six democrats big congressional majorities. There's a push to sort of a revised partly in important ways that passes the house with a large majority but is defeated in the senate in part. Thanks to a lack of enthusiasm from the white house. there's this push for humphrey hawkins and a strong employment mandate it gets watered down but it passed anyway and then part volker does venture is just ignored right like he does not act as if congress has just pushed him to be more supportive of employment he does exactly the opposite But then when reagan is president like is instituting structural economic reform tax cuts reduces in welfare spending a more hostile posture toward private sector labor unions and public sector ones. And you know this is not an official part of the monetary policy mix but just as in the sixties. I think fed officials approved of civil rights in the war on poverty and they wanted to make it successful. They liked the supply side agenda and they wanted to make it successful. It was like awkward. That reagan was saying in eighty four. Don't raise interest rates because that went against the like story. They were trying to put out but like they didn't raise interest rates. You know what i mean like. They generated the boom. that would vindicate these policies. And that's something that you see now recurring through historian right. When bill clinton takes over in nineteen ninety-three there is a kind of threat. Slash deal from alan greenspan. Which is if you do a big fiscal austerity package. I will keep interest rates low. But if you do a sort of biden s build back better. I'm going to say. Oh the deficits getting to hi. This is dangerous and inflationary and that really changes the course of political events in nineteen ninety three ninety four it consolidates the like super neoliberal nineties globalization era The european central bank during the great recession. You don't eat. Keep saying to european governments like you guys have all these policies in place said like we think bath right like europe has very interventionist labor. Market regulation has just lots of policies. That most economists think are bad policies and the easy be kept saying to them. Like you need to change this stuff. You need to do structural reform and they keep saying that low interest rates would be bailing out these irresponsible governments right and so we goes from the initial idea which is like the central bank. Can't be overly indulgent of inflation. It needed to the idea that the central bank is really like the babysitter for all of economic policy. Right and that like the. You're there in some sense to punish bad populism and reward like sound center right. Technocratic policy is and that's a big thing that we started to move away from. Like i really think under trump actually because trump does so much bad populism including fashioned yelling at.
Fed adopts new inflation strategy, widely seen as leading to easier policy
"We would be remiss if we did not mention a big speech coming tomorrow from Fed Chair J. Paul the Title Monetary Policy Framework Review. Is I think we can all agree Adad Dry. What it's going to mean in real life though says economists Tim Dewey at the University of Oregon. In dry at all, my expectation is the Fed's going to basically loosen up how they've been thinking about their a two percent inflation target. Specifically, the Fed will actually try to overshoot the two percent target a little bit to make up for periods of undershooting the two percent target, and that's a big deal because central bankers today are still really really leery of inflation flashing back as they do to the nineteen seventies and Paul Volcker and a prime rate of twenty one and a half percent. But. What is this speech going to mean for you and me where you're gonNA notice a difference as maybe over the longer run like in this recovery, the federal probably won't raise interest rates as early as it did in the previous recovery. So maybe as a result of that, the recovery is a little bit faster and that would mean Jonah that rumour quickly that wages that grew more quickly and then maybe inflation was a little bit higher. And as often happens with the Fed Powell merely talking about higher inflation could just nudge the economy all by itself even the expectation that policy will be easier for longer could actually induce some of us to take economic activity now because it improves your confidence about the future. Tim Dewey at the university, of Oregon, there with the set of J. Pals big speech tomorrow on inflation. It's all virtual. By the way the Fed conference tomorrow, you can watch pal speech sued use. Should you so choose go to the Kansas City Fed's youtube site YouTube dot com slash Kansas City Fed.
Federal banking agencies ease Volcker Rule restrictions
"The federal reserve and for the bank regulatory agencies finalize the rule easing restrictions that keep banks from investing in areas such as hedge fund the regulations are known as the Volcker rule passed by Congress in twenty ten it was part of an overhaul of banking regulation aimed at curbing excesses that led to the two thousand eight financial crisis he generally prohibited banks from engaging in proprietary trading and from acquiring ownership interests in hedge funds and private equity funds president trump campaigned in twenty sixteen on rolling back what he saw as over regulation of the banks arguing it weighed on the economy by preventing them from making loans to qualified borrowers the fed's announcement gave an immediate boost to bank
Federal banking agencies ease Volcker Rule restrictions
"The federal reserve and four other regulatory agencies say they've finalized a rule that will ease restrictions curtailing the ability of banks to make investments in such areas as hedge funds the reason the so called Volcker
The Fed has capped bank dividends and suspended buybacks after stress tests
"For the first time in the ten years of stress, testing banks are required to resubmit their capital plans later this year to reflect the current environment by chair Randall. Quarrels notes in a statement that there is quote material uncertainty about the trajectory for the economic recovery in its impact on banking organizations, and not all governors agreed to let the banks continue payouts even if If, they're limited fed governor Lael brainard said in a separate statement that she does not support giving the green light for large banks to deplete capital which raises the risk they will need to tighten credit or rebuilt capital during the recovery coverage, informing this decision by the Fed was a covert sensitivity overlay for their traditional stress tests where the test of the bank's viability under three hypothetical recessions in subsequent recoveries, v-shaped, u-shaped and w shaped. The Fed notes that there are scenarios are not predictions of the likely path of the economy in aggregate, though the Fed said loan losses for the thirty four banks tested amounted to five hundred and sixty billion to seven hundred billion dollars aggregate capital. Ratios declined from twelve. Twelve percent in the fourth quarter of two thousand nineteen to between nine point five to seven point seven percent in the hypothetical downside, they did not break out the results of the cove analysis on individual banks, but in the after hours investors have been drawing their own conclusions with mixed results depending on the bank mixed performance depending on the Bank Melissa all right Leslie, thank you Leslie picture with the results of the stress has a lot to think about. There are a lot to think about in terms of how it affects the bank trade, but there's also this to think about. Take a listen to what David Ellison of the Hennessy funds said on the closing bell just a few moments ago. There really inserting themselves, and and basically acting like they want to act in a sense that these companies are effectively nationalized. and. We're seeing the effect of that today. in what they're saying, so they're worried about the the appear to be more worried about the economy than the market is. Again heard Powell last week. Say that he was worried now. It seems like we're hearing that again. And this is going to be an ongoing thing. The banks are going to be battling this for the next couple years. So they are effectively nationalized according to this bank investor, guide me. What does this all mean for the bank trade? Yeah. It's interesting. I mean I. Don't know if I'd go that far that the bank should be but I I respected the the opinion on that. Know what it means for the bank trade I don't think the value proposition of the reason you were getting wanted to belong J. P. Morgan was because of the dividend or their stock. Buy Back. I mean I. Don't think that's why you're long the stock, but I understand the headline. This is somewhat shocking, although probably not all that. Surprising quite frankly, I think a lot of people probably saw this coming I think the bigger headline was the reason I thought. The market rally in the first place was a relaxation of the Volcker rule to a certain extent. I think that's why banks had the big run. Now you have to wonder if the timing was somewhat coincidental. I still would submit the following. Pretty steadfast on this you're looking for opportunities to by name like J. P. Morgan for that now second potential run up to one fifteen, and we've done the math for you. I mean one fifteen for J. P. Morgan is putting a one point eight multiple on sixty two dollars tangible book, and it makes a lot of sense. Go back and look where we traded up to a couple of weeks ago and that to me is where the market wants to go I. Don't think it's I. Don't think this is the reason to be bearish the broader market although you know I am. But I do think the headline is probably going to some people carrying. You've been a longtime investor in the bank specifically, certainly not for the dividends, certainly not for the share buybacks. Knew that they were gonNA suspend by back at least for this quarter. So how do you factor this into your investment thesis? So. I mean I guess it makes sense I that they say. Let's see how the year unfolds before we decide whether or not you're going to be allowed to to pay your dividend, or at what level you'll be allowed to pay your dividend, so that sort of makes sense to me i. think what is going to be more important I think is how bad are the provision for loan losses going to be in this quarter? And how bad are they going to be given that we are having difficulty reopening? How sustainable those losses to be going through the throughout the year, so I had thought that the first quarter and the second I'm sorry, the quarter ending in. June, and this next one I'm sorry. March marching, June would be the worst quarters of the year. Maybe there's another bad quarter here. It is interesting to me though that the Volcker rule did come out on the same day that I mean that's sort of like back to go go times. To? The stress tests. But I think the story hasn't really dramatically changed today we'll be. It'll be interesting when we see on Monday. Who is going to change their dividend? Would seem like Wells Fargo is maybe a likely candidate. For BANKAMERICA's city and JP Morgan. The big money centers I don't think they're moving much I. saw city up a little JP Morgan down a little and Bankamerica down. Little I don't think a whole lot has changed to me. It still comes down to how bad will the loss be? Yeah, Goldman after hours one of the biggest loser, if down two and a half percent, a wells Fargo's down one and. And a half percent.
Federal banking agencies ease Volcker Rule restrictions
"The federal reserve and for other banking regulatory agencies have finalized a rule easing restrictions that keep banks from investing in areas such as hedge funds the regulations are known as the Volcker rule passed by Congress in twenty ten it was part of an overhaul of banking regulation aimed at curbing excesses that led to the two thousand eight financial crisis he generally prohibited banks from engaging in proprietary trading and from acquiring ownership interests in hedge funds and private equity funds president trump campaigned in twenty sixteen on rolling back what he saw as over regulation of the banks arguing it weighed on the economy by preventing them from making loans to qualified borrowers the fed's announcement gave an immediate boost to bank stocks Ben Thomas Washington
What You Need to Know About the Coronavirus
"News covered nineteen what you need to know about coronavirus I'm Lucas Univar now we're going to look at the ways authorities around the world are responding to this pandemic the trump administration's handling of the crisis has been heavily criticized the president has given confusing advice contradicting his own experts and misleading the public about timelines for testing and vaccinations morning edition's Rachel Martin spoke to three of NPR's international correspondents about how other countries are handling the coronavirus Sylvia Julie is in Rome Anthony kun is in Seoul and and Lee Fang is in Beijing Emily I'm gonna start with you because you were covering the crisis in Wuhan from the beginning can you just give us a sense now about what was the trajectory of the Chinese response to this well for the first month after that initial cases of the current affairs sure there wasn't a response there is local cover up in a delay and during that time of about five million people left the virus epicenter in like the spread it to the rest of China but then the country mobilized it did so very quickly imposed very stringent self isolation and quarantine measures and by self isolation I mean people sort of waiting densely populated areas they canceled all public events they shut down factories and offices and by quarantine measures and that the they still sealed off cities and villages completely Anthony how does what and we just say said compared to what's been happening in in South Korea while South Korea got hit right after China and because of south Korea's experience with previous epidemics they decided that rapid mass testing for the virus was going to be the key to their strategy and so they've been testing around fifteen thousand people a day S. three thousand six hundred people per million of population compared to five people per million in the US results also focus on transparency putting out daily statistics and press briefings Sylvia in Italy I mean now Italy is has replaced South Korea as the number two in the world after China when it comes to the the scope of of this pandemic what has been the Italian response drastic curbs on freedom of movement and there's been overwhelming compliance only food shops pharmacies and you stands are open people can go out but if stopped by police they must show kind of affidavit that states the purpose either work grocery shopping health or emergency police are carrying out random checks they face either three months in jail or a fine of two hundred thirty dollars the purposes social distancing keep people apart Italy's following China's lead the Wuhan model so Emily the Wuhan model hasn't worked I mean transmission has decreased there has not yeah and experts pretty much unanimously agreed that's because of social distancing it will destroy your economy as it temporarily has in China but it quickly slows the virus's spread another thing China did was it built these makeshift centers where they sent six people and sending instead of sending them home and researchers in both the US and China have now said this week that that was critical to slowing down the outbreak but this could be a measure that western democracies may be unwilling to take as for quarantine measures though sealing off the ledges and cities that's the jury's still out on the efficacy of of that because quarantines meet harder for medical medical resources to reach heart the hardest hit areas and that's probably why fatality rates in the epicenter in China are nearly four times higher than the rest of the country so Sylvia how have the measures worked in Italy what's the situation right now is there any slowing well nationwide it's too early to say it hasn't hit the peak yet the quarantine that was put in place a few weeks ago in the contagion epicenter in Lombardy eleven pounds fifty thousand people local authorities say it's working the contagion rate has dropped and that's why the quarantine was extended to all of Italy to try to prevent a spread to the south which has much weaker health systems than those of the north which were among the best in Europe but they are severely strained by this crisis now I'm Anthony South Korea chose not to take measures like we've seen in Italy or in China with these dramatic quarantines are lockdowns and yet it seems like the have still been able to to keep the crisis at bay right yeah well okay so numbers have been declining for two weeks in a row and sexualities of been at less than one percent compared to about four percent for China and six percent for Italy and you know doing this without having to log huge regions down is also a kind of effectiveness kind of accuracy was or something specifically about South Korea that made it possible for them to avoid large scale large scale quarantines well it's you know testing capacity is not just about cats it's about investment in basic healthcare infrastructure lab technicians chemicals machines logistics and if any one of those areas has a bottleneck it's going to mess things up and people are going to lose lives and it's just you know at the end of the day it's investment in in a healthcare system hospital beds you know national health insurance and this shows up in survivability for all diseases including covert nineteen and lastly Emily and Sylvia I'd love for you to talk some about how the different political systems in China and Italy have affected the coronavirus responsibly you alluded to this earlier but really how much of China's success in mitigating the spread has to do with the fact that this is this is a country frankly with a long history of human rights abuses it is an authoritarian state we've seen transparency is critical for a fast response that wasn't present in China but because China is a very centralized government one might say authoritarian it was able to mobilize quarantine measures and self social distancing very very quickly the problem is quarantines may have cost more lives than we know but we'll never know the secondary costs of people who are not able to get timely medical care and suffered from it because they were sealed into their villages or cities right and still be obviously Italy is a democracy what is been just the people's response to these kinds of drastic measures the crisis has totally turned the world upside down Italians notorious for cutting into line not very beaten to rules are become the most compliant people I've ever seen in my life and French correspondents based here sent a petition to French president Emmanuel MacColl telling him France underestimates the gravity of the epidemic and failed to prepare French public opinion they say look at Italy it's our duty to tell you there's no time to lose NPR's Sylvia patrolling Anthony kun and Emily Feng talking with rich mark fears about the impact of coronavirus have sparked a financial crisis in the markets Austin Goolsby who chaired president Barack Obama's council of economic advisers says that as the virus spreads American markets might be hit even harder than China's and here's our Shapiro asked him why if you look at the economy of the United States or of the rich countries in Europe they're much more dominated by these face to face services that are exactly the things they get pulled down whether their leisure and entertainment and sports or going to the gym or all sorts of services so if everyone stops doing that that's a bigger hit on the U. S. economy even that it was in China we went when they shut down he also said that virus economics are different from regular economics explain what you mean by that yeah by that I mean the closest thing in our in our collective memories to this moment was a financial crisis right into my house I natural crisis economics and business cycle economics is a little different than the virus in that the main thing that is paralyzing the economy is this year and withdrawal and so in a way the best thing you can do for the economy has nothing to do with the economy with virus economics and that is things like paid leave for people that are sick is actually not stimulus it's paying people not to come to work but anything that slows the rate of spread of the virus is the best kind of stimulus so if we have to get on top of this as a public health matter I think before you can effectively deal with this as an economic except if we do so the rate of the virus in this epidemic continues for weeks or months is there anyway to turn around the financial slide yes and no no in that look if there's going to be a substantial slowdown our goal is and should be allowing us the opportunity to bounce back it as this thing passes over us and that means you can't let everybody go bankrupt or starve or have these persistent lasting problems from what we hope to be a temporary shock and so do you see the crunch that we're experiencing now as an irrational panic or an appropriate response to the cancellation of big economic engines like pro sports like Broadway lever like school like the economic activity that goes on in major cities every day yeah a bit of both as we in fear the withdrawal and have social distancing to try to slow the virus there is going to be a substantial slowdown of economic activity right but I can never get out of my head from the two thousand eight crisis Paul Volcker's words over and over at that time that during a crisis the only asset you have is your credibility and as the U. S. government has not made credible statements that contributes to fear that makes it go down and we've we've got to do better we need the president to
Remembering Paul Volcker
"Here's the thing about Paul Volcker the former chairman of the Federal Reserve arguably one of the most influential of Fed shares. Who died it yesterday at the age of ninety two? Yeah it's kind of an amazing story that's author and New York Times editorial board member beaming Applebaum on this show about a month or two ago. He used to cover the Fed for the Times. When Paul Volcker I started at the Federal Reserve he worked basically as a human calculator in an office deep inside the Federal Reserve? There Have Bank of New York in the early nineteen fifties and he told his wife one night that he didn't think he had a future at the Fed that as an economist he was always going to be consigned to being essentially. Actually you know A worker bee at this institution that was run by financial market types businessmen. Those even a Iowa Hog farmer there and he didn't think that he had much chance of getting ahead. Suffice it to say Paul Volcker got way ahead at the Federal Reserve. Jimmy Carter picked him to run the Central Bank in nineteen seventy nine with inflation and this is important headed toward almost fifteen percent. I ask Carter about that about the economic and political fallout from picking Volker when I interviewed the former president in two thousand ten so I went looking as I Picked up this book. I went looking for the name. Paul Volcker who You pointed to the Fed in nineteen seventy nine. You don't come across crosses name until page three hundred and forty something and it's really funny because it is dismissed in a sentence. Paul Volcker came in We decided we could work with him. And then the the next day bang you name to defend that was really the one of the most hotly debated things. I did because a lot of my political advisor. Said don't appoint Paul Volcker because he's going to tighten up on everything and you will have no control at all over the Fed anymore. You won't even have communication with him when Paul Volcker came. I was seeing the prospect of enormous inflation rates. And so I agreed with Paul Volcker in conversation that I would not interfere in what he did. I was prepared for him. To tighten up tremendously and drive interest rates and so forth up in order to control rampant in. It's funny actually because a little bit later in the book you basically say in this passage that you dictated at the time Volcker says he's going to have to tighten interest rates. And it's GonNa hurt me politically. I mean. You knew it was coming. I knew it was coming but I was prepared to take it. I thought that I could be reelected in spite of that as it turns out. Of course things didn't work out for President Carter about which I asked Paul Volcker in two thousand twelve if I read the see the recounting of that job interview correctly in this book. You basically said I want independence and I gotta do what I gotTa do. It was obvious why he wanted to see me. But I MR president and if you're thinking of appointing me Germany Federal Reserve. You have to know that I believe in somewhat entitled Monetary Policy and we have been following and my predecessor followed. Yeah you know I the next question I asked the president actually was Did you mind when he raised interest. He's like that and he said Oh no I I thought it was going to be good for the next presidential term. I thought that term was going to be mine. Not Raking No. He asked him why said I cost him the election. There's some people said and he had kind of Ri- smiled and he said well I think there were a few other factors as well after he left the Fed in nineteen eighty seven. Paul Volcker worked on on Wall Street for a while. Got Drafted back into government service every now and then most. Recently as the chairman of President Obama's economic recovery advisory board and as the namesake for the Volcker Carulli. The part of the Dodd Frank Financial Reform Bill that limited some of the kinds of trades. The Big Wall Street banks could make. But really when you think Paul Volcker. It's those years in the late nineteen seventies early nineteen eighties when the Fed pushed short-term interest rates up to a record twenty percent to get inflation back under control twenty percent went today the Fed's current short-term target rate is between one and a half percent and one and three quarters percent and it hasn't over five in more than a decade which makes double digit interest rates hard for most Americans below a certain age to even fathom so marketplace's Amy Scott takes us back in the early nineteen eighties and Owen managed a bank branch Boston to remember telling customers. They'd have to pay twenty one percent interest for a car loan today. The average is just over for four percent. They would get mad at the bank and many times they would just basically say I can't afford that. Oh and went on to become an economist at the Fed and now teaches at Hamilton College. She says those high interest rates had a purpose volcker was trying to slow down demand by making borrowing more expensive give. It made it difficult for people to buy houses by cars Credit card interest rates. Were extremely high. The economy did slowdown slowdown falling into two recessions. In one thousand nine hundred eighty two unemployment topped ten percent in protest homebuilders mailed. Chunks of two by fours is to Volker and members of Congress. Fred Napolitano is former president of the National Association of homebuilders. Just make a point to say this is what we do is is what we build you know with. The interest rate is hurting us. That pain eventually paid off. Robert King is a professor of economics at Boston University. Ultimately once people began to believe that inflation was gonNA come down it came down and interest rates tumbled and the economy recovered and and it's viewed as a major triumph at triumph. Nobody wants to have to repeat. I'm Amy Scott for marketplace. Paul Volcker did yesterday at at the age of ninety
Former Fed Chief Paul Volcker, inflation slayer, dies at 92
"He was known as the fed chair who tamed inflation now Paul Volcker has died at his home in New York here's ABC Jim Ryan Paul Volcker served as chairman of the federal reserve under presidents Carter and Reagan but decades later head of president Obama's economic recovery advisory board to combat inflation folders that raise the federal funds rate and tighten the money supply and while it did cut inflation can also created the conditions for a recession he founded the Volcker alliance a nonpartisan nonprofit organization when he was eighty six to promote public service he died yesterday at ninety
Netflix, Golden Globes, Large Caps vs. Index Funds
"We're GONNA look at large cap. Stocks Relative to index funds. We're going to pour one out for Paul Volcker but we're going to start with the entertainment industry the Golden Globe. Nominations came out this morning for film and television the most nominations in film I went to Netflix with seventeen. Nominations followed by Sony and Disney with second and third respectively. Most nominations in television netflix with seventeen. HBO Second Hula Third. And I will just add parenthetically broadcast television completely. Shut out of the nominations for television. Where do you WanNa go with this because I we were talking a little bit this morning about this? Obviously this is A nice feather in the capital Net flicks and I think part of the reason is not just because it's nice to get this kind of recognition but also because is for anyone who's wondering about the money they're spending on content. Ted Surround US can point to this and say no. I feel like from a quality standpoint. We're doing pretty pretty well. Yeah I mean I I. I don't. I'm not surprised by this. I mean it really feels like this is just Reiterates what we've been watching. Play out over the last several years. Just just we're seeing the old legacy providers really take a hit on the content inside and I think a lot of that has to do with just the fact they've been hamstrung by Hold School advertising models and limitations on the type of content that they can produce and we saw netflix trump in their early on the power of the disruption That the Internet is provided in a lot of other companies have started to follow suit I I don't really. I'm not one that really focuses or cares much about what award awards shows say or what critics say when it comes to content But with that said I mean these types of awards just even these types of nominations regardless of whether they win or not these types of nominations certainly helped get this type of stuff on viewers radars. And I think that is probably one of the biggest benefits of all is that it is more more or less free publicity. I mean I say free. Obviously they're paying a lot of money to produce this stuff but it is. It is publicity that helps get a lot of this stuff on viewers radars as we enter after this phase of just more content than we ever have time to watch. It's nice to know what is what is Bubbling to the surface there as as the must see TV and in films and whatnot. And I think you know honestly it feels like we've talked about this golden age for for television television. It really feels like films have had a tough go of it in and I think part of the proof there is just. This constant need to reboot everything in in. These reboots are just so uncompetitive from so many different angles It's nice to see your net flexes and Disney's Hbo's taken these Creative Moon. MM shots so to speak and seeing some of them pay off absolutely and I think you're you're completely right particularly when it comes to the fact that you know we know that smaller networks whether it's FX AMC. Some of these other niche. But I guess from just from a content creation standpoint in a way they are niche because they're not producing a lot of original stuff but part of their pitch to show runners. Is We can give you a lot more oxygen in terms of promotion. Because the fact of the matter there is net flicks. They're going to promote their bigger hits and bigger budget items more but just the sheer number of original things. It's the Netflix is producing in a calendar. Year is in the hundreds and so as they continue to invest in things like stand up comedy. There's only so much promotion motion. They're going to give a new comedy special. No matter WHO's doing it they're going to say. Yeah Jason. Yeah you've got a new hour stand up special. That's we're GONNA give you about three days worth of promotion. It'll be on social social media and maybe a billboard a two and that's going to be it yeah and so it is this This really does afford them as you said this bonus opportunity to promote. Oh yeah the Irishman Yeah. It's a long film but apparently it's a great film Because it's getting all these award nomination I'm so torn on the Irish. I want to watch it so I know I'm not. I'm not going to have the patience to finish it and it's like you know it's going to be just an amalgamation of a lot of movies we've already seen with these guys he is and you're going to kind of know how it ends anyway. So do I need to bother really and then you get Scorsese at. They're just begging you not to watch it on your phone but it's four hours man. Yeah there's GonNa be some time spent watching this thing on my phone netflix is a very interesting situation right now. Because is it has such a headstart on all of these other streaming services that are coming to market in HBO included. I mean when you look at some of these numbers regarding Gordon content spend it's actually astounding thing I mean. NETFLIX IS GONNA spend fifteen billion dollars on content this year. You compare that with something like Disney Disney plus right. They're going to spend about a billion here in this first year. Now that'll continue to go up. His time goes on They're just getting started. But then you look at something like comcast peacock which is going to be the end. NBC Service. They're talking about spending two billion dollars of the first two years to grow that service and really always always recognized that service for more than anything is probably just the fact that it's going to have the office wants. The office leaves Netflix. Six But my point is is that a lot of these other services. Don't spend nearly as much on content that can be an advantage or a disadvantage depending on what your perspective is. I mean Netflix. Netflix is trying to build a service. That scratches niche for everybody and so they have this wide cross section of content that they're building at a cost a lot of money to do that. And if that's GONNA be their strategy they're are GONNA need to keep on doing that. That requires a lot of capital. And they're going to figure out ways to raise it. HBO Peacock Amazon Disney plus to a lesser extent. I mean they are focused a little bit more specific world and what they know where the content spend might not be as heavy but their catalogue is going to be more limited and that's that's by design So then it is just a matter of how these all come together in and how we as consumers are are going to pick and choose which services we ultimately want price. It's GonNa take take part of it but I mean people are GonNa pay up for what they want to see in in so you know again. I feel like Netflix. Having such a great head start. It's terrific from the consumer side but now from the investor side. You have to start asking yourself. How much more can they raise prices versus something like a Disney plus where it looks like? They have a lot of room to raise prices but they're also just getting started. You mentioned the number of sequels that we've seen I sort of the the reboots that we've seen and I agree with you from a creative standpoint. It's hard to get excited about that from a business standpoint when you look at the box office numbers for this year here and the fact that right now. The Lion King remake is number two at the box office and for anyone questioning Disney's he's movie strategy you. Can you can stop because Disney is on pace to do about ten billion dollars at the box office. Is this year. The biggest year they had was twenty sixteen. Just over seven and a half billion and I'm not even including the Fox properties include those that gets you closer to twelve billion but it's it's really phenomenal. What they've built in and good luck to whoever gets to succeed Bob Barker? Yeah Yeah. I mean they've got their work cut out for them but I tell it is amazing that even when Disney puts out something that you might not initially think you care all that much about then at some point or another you end up seeing it for one reason or another and you discover wow man. I really enjoyed that and I mean the most recent example for me was over Thanksgiving break lake. Were down at the river for the holiday and we keep that house. disconnected from the
Former Federal Reserve Chairman Paul Volcker has died
"As fed chair in the early eighties Fokker elevated interest rates to historic highs causing a recession and was vilified by the public he later served as an economic adviser to president Obama and in two thousand nine during the Great Recession talked about the ongoing financial crisis the big economic problems behind the financial system so they're gonna take longer to work out Volcker pressed for restrictions on banks ability to trade in financial markets into invest in private equity and hedge funds those regulations became known as the Volcker rule I'm I camp in