When The Wealth Effect Dries Up

 

The Atlanta Federal Reserve recently revised the G.D.P. expectation for the first quarter of 2025 into the negative.  A large part of the economy is being supported by an increasingly smaller and smaller part of the population.  Those with some real wealth continue to spend no matter what the cost.  Those who would like to be presumed as wealthy continue to borrow in order to spend.  A very large part of the population has officially tapped out.  Their borrowing capacity is maxed out.  Their earnings have stagnated against the cost of goods and they purchase only that which is absolutely necessary.

Stocks are said to be "priced to perfection".  The only way to go from here is down.  Housing has "jumped the shark" in many markets and inventory is building.  The only way to go from here is down.  Some people who thought themselves to be bullet proof where their jobs were concerned are having a come to Jesus moment.  A lot of paper wealth is about to go up in flames.  People with gold, cash, silver or easily convertible securities are going to be well positioned to buy some bargains.

It will be interesting to see if the Federal Reserve jumps into the fray again with Q.E., money printing, Z.I.R.P., etc.  If it does, inflation roars.  If it does not, a crash in several areas of the economy as true price discovery takes place.

So Long 2024 - to Better Days to Come

 

Meanwhile, at Clown World Central Command

 

It's a beautiful building.  Too bad so many terrible plans have been hatched there.

Truthfully, I do not envy the Fed's position at this point.  No matter what they do, someone is going to shit the bed.  They came out with a quarter point cut today.  In the commentary, they mentioned that there should be no expectations of many more further cuts.   The stock market had the typical hissy fit over that statement and many share prices dumped.  (my opinion: they were over valued in the first place and should dump no matter what the Fed did)

In the meanwhile, inflation is back.  I think that all of these "Masters of the Universe" should step back and remind themselves that a large number of their fellow Great Americans are not connected to the stock market in any meaningful way.  They do not have 401k's.  They do not own a Vanguard account.  They do not know what "Blackrock" is and they do not have a Fidelity fund.  

They do repair your toilets, cut your grass, mop your floors, stock your shelves, babysit your children, etc. usually for nominal wages.  My prediction is that they are at some point going to tire of living in the Clown World created for them by the market manipulators and interest rate setters and the go-getters and the jet-setters.  Who knows what they're capable of once they figure out who's been exploiting them just so that a small number of beautiful people can buy a second private jet or a beachfront compound in the Hamptons.

For your old Uncle Kenny, watching paint dry (a.k.a. Treasury yields) was a lot of fun today.  The long bonds are showing signs of life and the yield curve is steepening nicely.  Keep up the great work Fed and good luck with all of that "transitory" inflation.  Bwahahahahaha!

A Default Laden Recession is Baked Into the Cake

 

Bankruptcy filings are on the rise and terms for credit are tighter.

Mass Expulsion - Good for Illegal Aliens and Good for Worthless Washington D.C. Bootlickers

 

Yield - It's The Yield Stupid

Noun

The amount of something that is produced, such as the profit made from an investment. For example, "The yield of the recipe was twelve brownies"

Where it comes to T-Notes and Bonds, it is all about the yield on the bond which is dictated by the price you are willing to buy the debt for in the first place.  Pay a lot for that I.O.U. and the yield is small.  Pay a little less for the same I.O.U. and the yield is larger.  

Uncle Sam is finding "true price discovery" of the value of his debt.

That little toad over at Treasury is finding out what the free market really thinks a T-Note or Bond is truly worth.  

She can't count on the Federal Reserve to ride to the rescue and buy up the debt at Mount Everest Nosebleed prices and subsequently drive down the yield by artificial means.  At the moment, she is dependent upon the free market to make up its mind about what her pieces of paper are truly worth.

Sure, anything could happen.  The Federal Reserve could say "fuck it" and turn the spigots back on and buy up Treasury paper at nearly full face value.  That would mean telling 70% of the country to suck it up and prepare to take a wheelbarrow brimming with dollars to Wal-Mart every week to buy Great Value Mac-N-Cheese, off brand soup, Red White & Blue six packs, etc.

The Fed and our wonderful leadership of the past four years managed to put its collective tit in a wringer and now it has few palatable options where it comes to removing said tit from said wringer.  All because they just could not stand another four years of the Deplorable Orange Man as President.  So fucking stupid.

James Carville is your grandfather's Democrat - someone who doesn't have his head up his ass and a person you could have a real conversation with - sad to see it is now the party completely overwhelmed with hustlers and short sighted idiots.

When "Savings" Are Artificial

"Great Americans" were flush with savings for a brief and shining moment thanks to Uncle Sam and The Federal Reserve.  It was the best of times, it was the worst of times.  Everyone was King (or Queen) of Turd Mountain.

They leveraged those "stimmy checks", PPP loans and mortgage payments / student loan payments that were not required to be paid due to "Covid moratoriums" up to the moon.  They told their landlords to "go pound sand" and used their would be housing funds to make a down payment on a Hellcat thanks to a clueless and feckless government dictate that clearly contradicted contract law.  

Our government is a spendthrift harpy and her spouse (The Federal Reserve) is an effeminate cuck who knows no boundaries and has no balls.

Well, your Old Uncle Kenny is here to piss on your parade.  The juice is gone - embrace the suck and cough up the interest payments.