The Institutional Risk Analyst

The connection between expanding the balance sheet via open market purchases of Treasury debt and bank reserves is one of the starkest illustrations of how federal budget deficits translate directly into inflation.

In the strange world of Washington, speaking truth in public is a capital crime. Truth is often revealed accidentally.

Notice that the Fed stress test is silent on trillions of dollars in mark-to-market losses facing US banks from COVID-era securities

We see higher credit costs, narrowing NIM and still rising funding costs squeezing the banking industry in Q1 2024...

Q: What do Silicon Valley Bank, First Republic Bank, Signature Bank and New York Community Bank have in common? Auditor, KPMG.

Volatility remains perhaps the biggest risk factor today, mostly because of a lack of visibility on unexpected risks.

The real question is not whether the FOMC can get inflation down to the 2% target but whether it can keep asset prices rising indefinitely

Central bankers cannot quantify any of the key benchmarks of current monetary policy beyond metaphors about stars and clouds

The Fed by definition cannot make a profit and is always an expense to the Treasury, thus operating losses are a expense to the taxpayer

As the FOMC moves short-term rates towards 6%, we expect to take another run at double-digit rates for prime residential mortgage loans.

The US banking industry has been rendered insolvent by the Federal Open Market Committee

Little attention is being paid to the collateral damage being done by the FOMC to the debt capital markets

QE has created a gigantic interest rate mismatch across markets for banks, non-banks and other financial intermediaries including the GSEs

The real message to the FOMC is this: hike another 75bp in July and then let the Fed funds target sit for a few meetings...

Chairman Powell’s demeanor during the press conference when he spoke with Mike McKee suggests a man who knows he has a problem.

Even as Powell signals willingness to take interest rate targets higher, he has put off a decision on the Fed's balance sheet until June.

Will Fed Chairman Jay Powell fold in terms of further rate hikes if the S&P 500 falls 1,000 points in a day?

There a brisk debate ongoing in the fixed income markets over how much the Federal Open Market Committee will raise interest rates and when

The Powell FOMC has lost all credibility when it comes to financial markets or managing inflation and independence from the US Treasury

And in the meantime, we view the end of QE as a net negative for global stocks as well as crypto. Everything is correlated in a crowd.