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The Institutional Risk Analyst

© 2003-2023 | Whalen Global Advisors LLC  All Rights Reserved in All Media |  ISSN 2692-1812 

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Winter is Coming in Bank Credit

September 1, 2023 | Premium Service | As Labor Day 2023 arrives, investors, risk managers and just plain folks are confronted by hungry monopolies on one side and predatory politicians on the other. The Fed has engineered what may become the mother of all credit cycles, this even as prudential regulators prepare to radically increase bank capital requirements (and decrease leverage and profitability). Really can't make this stuff up.

Meanwhile, the largest Buy Side ”passive” fund sponsors now control as much as half of the daily flow in US equities, according to several researchers, and essentially act as a permanent source of stock price inflation, at least for indexed stocks. The ability of the passive fund sponsors to push equity valuations is hardly a new revelation, yet in the conflicted world of American equities the fact hides in plain sight. On Wall Street, nobody has any clothes.

Republican presidential candidate and tech entrepreneur Vivek Ramaswamy claimed financial investment giants BlackRock, State Street and Vanguard "represent arguably the most powerful cartel in human history." So true. Former South Carolina Governor Nikki Haley compares Ramaswamy to AOC, a frightening possibility, yet he is clearly in step with the times. But we digress.

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