Tl; dr: “Damn it, Janet!”

Bill Ackman was pissed at Janet’s apparent flip-flop

Yesterday, @SecYellen made reassuring comments that led the market and depositors to believe that all deposits were now implicitly guaranteed. That coupled with a leak suggesting that @USTreasury, @FDICgov and @SecYellen were looking for a way to guarantee all deposits reassured… https://t.co/GqaP5LYpza

— Bill Ackman (@BillAckman) March 22, 2023

Yesterday, @SecYellen made reassuring comments that led the market and depositors to believe that all deposits were now implicitly guaranteed. That coupled with a leak suggesting that @USTreasury, @FDICgov and @SecYellen were looking for a way to guarantee all deposits reassured the banking sector and depositors. 

This afternoon, @SecYellen walked back yesterday’s implicit support for small banks and depositors, while making it explicit that systemwide deposit guarantees were not being considered. 

We have gone from implicit support for depositors to @SecYellen explicit statement today that no guarantee is being considered with rates now being raised to 5%.

5% is a threshold that makes bank deposits that much less attractive. I would be surprised if deposit outflows don’t accelerate effective immediately. 

A temporary systemwide deposit guarantee is needed to stop the bleeding.

The longer the uncertainty continues, the more permanent the damage is to the smaller banks, and the more difficult it will be to bring their customers back.

…and so was the stock market.

*  *  *

Nothing sums up the ‘trapped’ Fed better than today’s price action…

• GME soaring: a legacy of record QE and helicopter money

• PACW crashing: a legacy of the fastest rate-hikes since Volcker

Fed Chair Powell hiked rates by 25bps and maintained QT (as expected), offering a dovish tilt in the statement and his comments.

But, he summed it all up succinctly early in his press conference: “It will be bumpy” describing the process of getting inflation back down, adding that it “has a long way to go.”

But as usual, all the major price action took place as Powell spoke.

As Guy LeBas (@lebas_janney2m) commented:

“The choice to start the presser with a discussion of the banking system has a clear policy message: the mini-banking crisis is the most important thing in the Fed’s thinking right now. Second is the focus on the labor markets, which policymakers still seem to view as too tight.”

Powell claimed that “deposit flows in the banking system have stabilized”, noting their strong actions, but he fails to comment on the massive rotation likely below the surface from small-banks to big-banks (since deposit flows OUT of the banking system may have stabilized but we suspect the rotation hasn’t).

Someone forgot to tell banking system investors…

Powell says FOMC considered a pause, but hike was supported by “strong consensus”.

Powell dismissed market’s expectations: “Rate cuts are not in our base case.”

Powell said some members recognized the impact of the financial system crisis on credit tightening – which could do the job of some rate-hikes.

This prompted a ramp in stocks (and bonds) as the market smells fewer rate-hikes if the credit market tightens itself.

We have our own opinion on that relative to the impact on the consumer…

If only enough banks crash we can finally stop pushing your credit card APRs to 30% https://t.co/rHn8akXs2P

— zerohedge (@zerohedge) March 22, 2023

Not exactly something stocks should get excited about.

Bloomberg’s model suggests Powell’s opening remarks from the post-meeting press conference were much more dovish than the recent trend, though still slightly hawkish, according to Ira Jersey. This move was driven mostly by more dovish statements, but also less hawkish ones, he said.

“The indicator is quite close to neutral, suggesting the possibility of a pause has increased meaningfully at the May meeting compared with the recent past.”

Then Janet struck:

*YELLEN: NOT CONSIDERING BROAD INCREASE IN DEPOSIT INSURANCE

It’s amazing how she does it every single day now

YELLEN: NOT CONSIDERING BROAD INCREASE IN DEPOSIT INSURANCE https://t.co/dPOIcHBEgq

— zerohedge (@zerohedge) March 22, 2023

And that took stocks to the lows of the day…

Equities appeared to react to this comment from Janet Yellen during Jay Powell’s press conference. https://t.co/vRrsc2d4LN

— Nick Timiraos (@NickTimiraos) March 22, 2023

Small Caps (small financial-heavy) were the ugliest horse in the glue factory while big-techs (Nasdaq) was the least bad of all…

The S&P reversed around the 50DMA then plunged back below its 100DMA…

Yesterday’s short squeeze was completely erased…

Regional banks took a hit…

With First Republic Bank getting slammed…

And PacWest plunged…

So, the goal of today was to stabilize banks and instead, they blew them up… “Damn it, Janet!”

Office REITS hammered again

Source: Bloomberg

Treasury yields jumped overnight and were drifting lower into The Fed statement. The dovish bias sparked a further plunge in rates with the short-end notably outperforming (2Y -20bps, 30Y -6bps). On the week, 2Y remains the laggard (+15bps) while 30Y is up just 4bps…

Source: Bloomberg

…and the yield curve steepened…

Source: Bloomberg

The 2Y yield dropped back below 4.00%…

Source: Bloomberg

Rate-hike expectations tumbled for the latter half of 2023…

Source: Bloomberg

The odds of a 25bps hike in May dropped from around 70% to below 50%…

Source: Bloomberg

The dollar puked to 6-week lows…

Source: Bloomberg

Bitcoin was clubbed like a baby seal, down from almost $29k to below $27,500…

Source: Bloomberg

Gold spiked on the dovish statement…

Oil extended its gains from yesterday with WTI back above $70…

Finally, it is worth noting that two stocks account for over 13% of the S&P 500 for the first time since the 1970s…

Source: Goldman

As goes MSFT and AAPL, so goes America.

Authored by Charles Hugh Smith via OfTwoMinds blog,

What the Warring Elites don’t want us to realize is that a system of transparent competition in which no fiefdom is allowed to become dominant best serves the interests of society at large.

I’ve been writing about Warring Elites for a long time (since 2007). As I have often noted, historian Michael Grant identified profound political disunity in the ruling class as a key cause of the dissolution of the Roman Empire.

More recently, I’ve observed that Our Fragmentation Accelerates (December 20, 2019).

Eras of Warring Elites have two key dynamics. One is that the Elites’ interests diverge from those of the society as a whole. In expansive eras, the many competing interests within the Elite class find common ground in supporting the status quo, and relegate their turf squabbles to the private club rooms. On the whole, the shared interests of the Elite class align with society at large.

Since I see the global status quo as fundamentally neofeudal, we can say the interests of the Nobility and Peasantry overlap: each class benefits from political and social stability, economic expansion and broad-based distribution of prosperity.

In disintegrative eras, this integrative, shared dynamic breaks down and the interests of the Elite diverge from those of society at large. The competition between neofeudal camps in the Elite class breaks into open conflict, and the result is a profound political disunity of hardened camps fighting to protect their fiefdoms from any diminishment of wealth or power.

This leads not just to political fragmentation but to social fragmentation as the Elite fiefdoms wage a propaganda battle for the hearts and minds of the Technocrat Class and the Peasantry. The propaganda war is not just to establish the traditional us and them divisions in which we are good and they are evil, it’s also about cultivating The Plantation of the Mind so that all the neat rows of thoughts and emotions serve the interests of the Plantation Owners. I’ve discussed this for many years: Colonizing the Plantation of the Mind (August 25, 2010) and Social Media’s Plantation of the Mind (May 28, 2020).

Each neofeudal fiefdom hopes we’ve seen too many movies in which the line between Good and Evil is cartoonishly clear. Each Elite fiefdom seeks to mask its single-minded devotion to its own self-interest behind fine-sounding claims of noble ideals: a Multipolar World (in which we’re free to pillage the planet), Freedom of Speech (controlled by us, of course), Decentralized Finance (which just so happens to be owned and controlled by the few) and a vast spectrum of other cover stories for the enrichment of Elite fiefdoms at the expense of society at large.

With the emergence of AI Chatbots, each Warring Fiefdom now has the means to overwhelm the media with billions of automated messages about the good and noble and idealistic goals of our Fiefdom and how the evil Central State is scheming to limit our powers of predation (Central State, Bad, our Fiefdom, Good!) or some rabble of Peasantry threatens our extraction of wealth and our death-grip on power (Nobility-owned Fiefdom, Good, Peasantry, Bad!).

The core message is always the same: increasing our wealth, power, profits and control is good for you, too. You’ll all benefit if you help us secure our fiefdom from any threats.

The propaganda is designed to not just colonize our minds but eliminate any urge to ask cui bono, to whose benefit? The single-minded self-interest of each Elite fiefdom must be hidden lest the powerless lower classes start asking if the expansion of one fiefdom’s power and control actually benefits society at large or not.

In this no-holds-barred existential struggle for supremacy, Elite fiefdoms will tear down society to weaken any potential resistance. So national interest is cast as Evil, while Multipolar Wonderfulness is Good (now the whole world can finally sing happy songs around the campfire!), any regulatory restraints are Evil while the rigged “free market” is Good (let the “market” which we control choose winners and losers; hey, surprise, we won!). Every fiefdom should be free to pillage without restraint (“Ask your doctor about Euphorestra,” etc.).

In the Era of Warring Elites, Everything is Staged (October 22, 2020). The Elite fiefdoms don’t care if society and the economy fragment and collapse; they welcome the dissolution of national purpose, civic virtue and shared sacrifice as obstructions to their own limitless greed for more power and control.

In a weakened Nation-State, the fiefdoms will be free to pillage without restraint. If society is an obstruction, they will gladly tear it down with propaganda designed to fragment the Peasantry and undermine any entity which might have the power to restrain their limitless greed. (I discuss the essential roles of national purpose, civic virtue and shared sacrifice in my book Global Crisis, National Renewal.)

Before you buy into a slickly scripted depiction of what needs to be undermined to hasten its collapse, ask to whose benefit? Exactly who benefits from promoting the collapse of this or that? We already know the answer: the Elite fiefdoms who will be free to pillage once any source of resistance has been broken into pieces.

What the Warring Elites don’t want us to realize is that a system of transparent competition in which no fiefdom is allowed to become dominant best serves the interests of society at large. Before we tear everything down, ask who will rush to fill the power vacuum with their own self-serving agenda?

In the meantime, “Ask your doctor about Euphorestra.”

*  *  *

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Starbucks Workers United, representing thousands of baristas, tweeted early Wednesday morning that more than 100 Starbucks stores “are striking to demand an end to Starbucks’ illegal union-busting campaign.” 

BREAKING: Workers at over 100+
Starbucks stores across the country are striking to demand an end to Starbucks’ illegal union-busting campaign. While the company keeps a metaphorical ’empty chair’ for us in the boardroom, we’re demanding a real seat at the table! #StarbucksStrike

— Starbucks Workers United (@SBWorkersUnited) March 22, 2023

Bloomberg reported that the work stoppage involves stores in more than 40 US cities. The union has said Starbucks’ anti-union campaign against it violates the company’s own commitment to respect its employees’ rights. 

The fight between the union and Starbucks has intensified, with both parties alleging that the other is not bargaining in good faith.

The union represents about 3% of the coffee chain’s 9,300 US stores, though the unionization movement is expanding. 

Bloomberg added:

The work stoppage comes one day before Starbucks’s annual shareholder meeting, the first for new CEO Laxman Narasimhan, who officially took the reins from Howard Schultz this week. Investors including New York City pension funds have put forward a resolution this year urging the company to conduct a labor-rights audit, and Schultz is slated to be grilled by lawmakers at a US Senate committee hearing next week.

The union posted images of unionized baristas striking on Wednesday morning:

Good morning, strike morning! We are out on STRIKE with stores up and down I-71 for fair bargaining, better wages, all our tips, fair scheduling, and more!

Join Cleveland SBWU partners at Crocker Park and/or MayLee! pic.twitter.com/bzQcCszfFX

— cleveland starbucks organizers (@ClevelandSBWU) March 22, 2023

Day 2 of the #lausdstrike happens as Starbucks workers across Los Angeles County join workers on strike at over 100 locations nationwide.

From our stores, to our schools, to the state house, and beyond, the California labor movement. Won’t. Back. Down! https://t.co/LfiL59CkSa pic.twitter.com/wLiQguP5KV

— Fight for $15 LA (@Fightfor15LA) March 22, 2023

Starting the day with the @SBWorkersUnited A.M. #StarbucksStrike crew at 88 E. Broad. Store closed, no scabs! pic.twitter.com/JhLcdVPUKF

— Jeremy Baiman (@jeremybaiman) March 22, 2023

Oviedo Mitchell Hammock is ON STRIKE pic.twitter.com/0Nn9M1JTYm

— Labor Clay (@BlastOffBlastic) March 22, 2023

We out here! Arlington Courthouse & Merrifield, Falls Church, VA #Starbucks stores checking in! #StarbucksStrike #tobeapartner #onedaylonger #wunomatterwhat #wumarjb #sbwumarjb #1u pic.twitter.com/vkFvBzM0PP

— Workers United MARJB (@WorkersUnitedMA) March 22, 2023

It’s uncertain whether coffee lovers are closely following the battle between the union and Starbucks. Customers simply desire their daily dose of a vanilla latte, white chocolate mocha, or chai latte — and nothing more. 

Coinbase shares are tumbling after-hours, down almost 20% on the day, following its disclosure that it received a notice from the SEC formally declaring the securities regulator’s plans to bring an enforcement action against the largest US crypto exchange.

SEC Chair Gary Gensler has repeatedly said many of the tokens and products offered by crypto companies are securities and that the trading platforms need to register with his agency, and in a filing this afternoon, Coinbase said the so-called Wells notice regards aspects of its exchange as well as the staking service Coinbase Earn and Coinbase Wallet.

Bloomberg reports that representatives from Coinbase have met with the SEC more than 60 times over the last nine months to try to resolve the issues, but those talks haven’t been fruitful, according to a person familiar with the matter.

“We are prepared for this disappointing outcome and confident in the legality of our assets and services,” Paul Grewal, chief legal officer of Coinbase, said in a statement.

“If needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets.”

This isn’t the first time Coinbase has received a Wells notice.

The SEC warned the company in 2021 that it considered the company’s proposed “Lend” product, which would have allowed users to earn interest by lending out their crypto holdings, to be a security. The exchange later canceled the launch.

Coinbase CEO Brian Armstrong took to Twitter to explain:

Today Coinbase received a Wells notice from the SEC focused on staking and asset listings.

A Wells notice typically precedes an enforcement action.

Two years ago the SEC reviewed our business in detail and approved Coinbase to go public. Our S1 clearly explained our asset listing process and included 57 references to staking.

Coinbase runs a rigorous asset review process and has rejected more than 90% of assets that have applied to be listed on the platform.

While we understand that this is all part of the journey to reforming our financial system, we are right on the law, confident in the facts, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court.

We are proud to stand up for our customers and the industry in these moments.

Going forward the legal process will provide an open and public forum before an unbiased body where we will be able to make clear for all to see that the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets.

In the meantime, Coinbase will continue to do what we do best: build the most trusted products and services in order to advance our purpose of updating the financial system, and creating more economic freedom in the world.

We’re excited to work with all governments and regulators around the world who are focused on putting in place clear rules to regulate the crypto industry.

Additionally, Decrypt reports that earlier on Wednesday, Coinbase had notified users it will suspends Algorand staking rewards on March 29.

Last August, after the U.S. sanctioned Ethereum mixing service Tornado Cash and wallets that had used it, Armstrong said that if threatened by regulators, he would rather shut down Coinbase staking than censor transactions.

Armstrong concluded a subsequent blog post with a clear message to the regulators:

Tell us the rules and we will follow them. Give us an actual path to register, and we will register the parts of our business that need registering.

In the meantime, the U.S. cannot afford for regulators to continue to threaten the good actors in the crypto industry for doing the same legal and compliant things they’ve always done.

This unfair approach will only drive innovation, jobs, and the entire industry overseas. At our core, we are the very same company that we were on April 14, 2021 when we became a public company at the end of the lengthy process with the SEC itself. We remain confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets.

In the meantime, Coinbase will continue to do what we do best: updating the financial system by building the most trusted products and services to advance our mission of creating more economic freedom and opportunity around the world.

The Wells Notice follows the SEC’s suing Tron founder Justin Sun (and a number of celebrities) on allegations the TRX and BT tokens are unregistered securities (among other charges).

Does anyone else see a very recent pattern, between Silvergate, Signature Bank, and now this – did Liz Warren lay down the law to bring a dragnet against crypto?

WAR ON CRYPTO https://t.co/Uk0r2J8tu9

— RYAN SΞAN ADAMS – rsa.eth 🏴🦇🔊 (@RyanSAdams) March 22, 2023

Who knows, maybe this could go to SCOTUS? Now that crypto has clearly become the Democrats’ latest boogeyman.

Just hours after we wrote about maniacal price cutting in the automotive industry in China, China’s auto industry association is urging automakers to “cool” the hype behind price cuts.

The statement was made in order to “ensure the stable development of the industry”, Automotive News Europe reported on Tuesday. 

The China Association of Automobile Manufacturers even went so far as to put out a message on its official WeChat account, stating that “A price war is not a long-term solution”. Instead “automakers should work harder on technology and branding,” it said. 

The consumer disagrees…

Recall we wrote earlier this week that most major automakers were slashing prices in China. The move is coming after lifting pandemic controls failed to spur significant demand in China, the Wall Street Journal reported this week. Ford and GM will be joined by BMW and Volkswagen in offering the discounts and promotions on EVs, the report says. 

Retail auto sales plunged the first two months of the year and automakers are facing additional challenges in trying to transition their business models to prioritize EVs over conventional internal combustion engine vehicles. 

Ford is offering $6,000 off its Mustang Mach-E, putting the standard version of its EV at just $31,000. Last month, only 84 of the vehicles were sold, compared to 1,500 sales in December. There was some pulling forward of demand due to the phasing out of subsidies heading into the new year, and Ford had also cut prices by about 9% in December. 

A spokesperson for Ford called it a “stock clearance”. 

Discounts at Volkswagen are ranging from around $2,200 to $7,300 a car. The cuts will affect 20 gas powered and electric models. Its electric ID series is seeing price cuts of almost $6,000. The company called the cuts “temporary promotions due to general reluctance among car buyers, the new emissions rule and discounts offered by competitors.”

Even more shocking is Citroën-maker Dongfeng Motor Group, who is offering a 40% discount on its C6 gas-powered sedan, now priced at $18,000. 

Kelvin Lau, an analyst at Daiwa Capital Markets, told the Journal that automakers are also trying to get rid of 500,000 vehicles collectively stored in their inventory, most of which are older vehicles that won’t meet new emissions standards.

David Zhang, a Shanghai-based independent automobile analyst, added: “Some car makers have been seeing very few sales. At this rate, the manufacturers’ production and dealership networks will collapse.”

Authored by Nick Giambruno via InternationalMan.com,

The eNaira is Africa’s first central bank digital currency (CBDC).

Central bankers, academics, politicians, and an assortment of elites from over 100 countries hoping to launch their own CBDCs have closely followed the eNaira.

They used Nigeria—Africa’s largest country by population and size of its economy—as a trial balloon to test their nefarious plans to eliminate cash in North America, Europe, and beyond.

Are you concerned about CBDCs?

Then you should be paying attention to what is happening in Nigeria.

That’s because there’s an excellent chance your government will reach for the same playbook when they decide to impose CBDCs in your area—which could be soon.

CBDCs enable all sorts of horrible, totalitarian things.

They allow governments to track and control every penny you earn, save, and spend. They are a powerful tool for politicians to confiscate and redistribute wealth as they see fit.

CBDCs will also enable devious social engineering by allowing governments to punish and reward people in ways they previously couldn’t.

CBDCs are, without a doubt, an instrument of enslavement. They represent a quantum leap backward in human freedom.

Unfortunately, they’re coming soon…

Governments will probably mandate CBDCs as the “solution” when the next real or contrived crisis hits—which is likely not far off.

That’s why you must pay attention to what is happening in Nigeria. That way, you can know what to expect and take preventative action.

Here are the top five insights from the eNaira.

Insight #1: Don’t Take the Bait… Reject CBDC Incentives

In Nigeria, the government implemented discounts and other incentives to increase the adoption of eNaira.

In North America and Europe, expect the government to require CBDCs to receive welfare payments, a potential universal basic income, so-called “inflation relief checks,” or whatever the next cockamamie scheme is.

Think of these incentives like the cheese in a mousetrap.

Insight #2: Simultaneous Moves To Eliminate Cash

To help boost eNaira adoption, the Nigerian government announced a plan to remove the legal tender status of various high denomination bills, rendering them worthless.

According to the World Bank, over 55% of the adult population in Nigeria does not have a bank account and is dependent on physical cash.

The Nigerian government must have known phasing out cash would be a disaster for a majority of the population, but they plowed ahead anyways—so much for democracy.

When your government imposes a CBDC, expect simultaneous measures to force people out of cash, regardless of the costs.

Those measures could come in many flavors, but I would bet they would first look to phase out large denomination bills by removing their legal tender status.

We’re already seeing this happen…

For example, the EU has already phased out the 500 euro note.

The $100 bill is the largest in circulation in the US, but that wasn’t always the case. At one point, the US had $500, $1,000, $5,000, and even $10,000 bills.

The government eliminated these large bills in 1969 under the pretext of fighting the War on (Some) Drugs.

The $100 bill has been the largest ever since. But it has far less purchasing power than it did in 1969. Decades of rampant money printing have debased the dollar. Today, a $100 note buys less than $12 in 1969.

Even though the Federal Reserve has devalued the dollar by over 88% since 1969, it still refuses to issue notes larger than $100.

With CBDCs on the horizon, I think the US government will not only never issue another bill higher than $100 but will probably look to phase out the $100 bill under various pretexts.

Insight #3: Bank Restrictions

Most people think of the money they deposit into the bank as a personal asset they own.

But that’s not true.

Once you deposit money at the bank, it’s no longer your property. Instead, it’s the bank’s, and they can pretty much do whatever they want with it.

What you really own is the bank’s promise to pay you back. It’s an unsecured liability, which makes you technically and legally a creditor of the bank.

And since the banking system is intertwined with the government everywhere, it’s only prudent to expect governments to place more restrictions on bank accounts as CBDCs debut.

This is exactly what happened in Nigeria.

Cash withdrawal limits and debit card transaction restrictions were imposed, among other measures. In addition, capital controls made it challenging to send money out of the country.

I wouldn’t be surprised to see the forced conversion of bank deposits into the eNaira—at an unfavorable rate.

Here’s the bottom line. Expect all sorts of restrictions—and possible confiscations—to be imposed on bank accounts when a CBDC is released.

Insight #4: Rising Inflation

Amid the eNaira rollout, Nigeria is experiencing some of the highest inflation levels in its history.

This is not surprising. CBDCs make it even easier for the government to debase the currency.

So, it’s reasonable to expect more inflation when CBDCs come to town.

Insight #5: Social Unrest

In another predictable development, frustrated Nigerians took to the streets over the government’s actions to restrict cash and bank accounts. There was a violent scramble to exchange old notes before the government deemed them worthless. Riots broke out in several locations.

There’s an excellent chance the destructive restrictions imposed alongside CBDCs could create social unrest anywhere.

Conclusion

To summarize, here are the top five insights from Nigeria’s CBDC experience.

Insight #1: Don’t Take the Bait… Reject CBDC Incentives

Insight #2: Simultaneous Moves To Eliminate Cash

Insight #3: Bank Restrictions

Insight #4: Rising Inflation

Insight #5: Social Unrest

As CBDCs come to your neighborhood, you now know what to expect.

Governments will probably mandate CBDCs as the “solution” when the next real or contrived crisis hits – which is likely not far off.

There’s an excellent chance more inflation and financial chaos is coming soon.

Are you ready for it?

That’s why I just released an urgent PDF guide, “Survive and Thrive During the Most Dangerous Economic Crisis in 100 Years.” Download this free report to discover the top 3 strategies you need to implement today to protect yourself and potentially come out ahead. With the global economy in turmoil and the threat of a “Great Reset” looming, this guide is a must-read. Click here to download it now.

Via Global Macro Monitor,

Here is a follow-up on last week’s chart with some excellent granular detail.   

Interest payments on the national debt during the current fiscal year (October to February) are up 29 percent y/y, one of the fastest-growing expenditure components of the Federal budget (see table below). 

Revenues are down, especially individual income taxes, which may reflect the slowing economy.  

Theory dictates (ceteris paribus) that government tax revenues should be rising with inflation, however.  Hmmm. 

The fact income tax receipts are lower but self-employment tax revenues (1099 employees) are higher, coupled with what is happening with the employment data, can we hypothesize that high income earners are leaving the workforce (or getting fired) and starting their own businesses, such as consultants, for example?  

Or could it be just a timing issue? 

The overall deficit is exploding, btw, up 50 percent.  

If the current situation normalizes and Treasury securities lose their flight-to-quality bid, interest rates are going to spike faster than one of Elon’s rockets. 

The Fed decision has may have come and gone but the hot takes from Wall Street experts are just starting. Below we excerpt from some of the more notable reactions to the Fed’s latest 25bps hike.

Jan Hatzius, chief economist at Goldman:

The FOMC raised the target range for the federal funds rate by 0.25pp to 4.75-5%. The post-meeting statement noted that, while the “banking system is sound and resilient,” the recent banking stress is likely to “weigh on economic activity, hiring, and inflation.” The FOMC removed the reference to “ongoing” hikes in the post-meeting statement and noted instead that “additional policy firming may be appropriate.” The Committee reiterated that it “remains highly attentive to inflation risks.” The median dot in the Summary of Economic Projections shows a funds rate of 5.125% at end-2023, unchanged from the December projections. The median projection in the SEP showed lower GDP growth and somewhat higher core inflation in 2023 and 2024.

Eric Winograd, senior US economist at AllianceBernstein:

“So far my takeaway is that the committee has left all the hard work for Chair Powell in his press conference. If you just look at the statement and the materials, there isn’t a change to their outlook from a few months ago, so he will have to describe how they are thinking about the banking issues as they relate to the economy.”

Quincy Krosby, chief global strategist for LPL Financial:

“The statement acknowledged that the backdrop remains uncertain in terms of economic activity that may be constrained as financial conditions tighten. Certainly, the press conference will be more in-depth as reporters seek to ascertain the Fed’s forward trajectory, as the futures market sees another 25 basis point hike in May and the beginning of rate cuts in the summer.”

Peter Boockvar, author of the Boock Report:

“I said this morning that this over-hyped meeting was most likely going to be a non-event and it certainly was. That said, the Powell press conference will certainly be a forum for more notable market moves. We’ll see how he does the financial stability vs price stability dance.”

Ira Jersey, strategist at Bloomberg Intelligence:

“The 25-bp hike and dovish statement was in line with our expectations. Another hike to a peak policy rate will be highly dependent on bank turmoil not becoming systemic. We note that it is institutions with little to no reserves that have been affected so far. In fact, as deposits have moved from smaller banks to money-center banks, bank reserves have increased by about $200 billion, which has driven bank net interest margins higher even amid an inverted yield curve. The issue is the distribution of those profits — smaller institutions aren’t able to take advantage.”

More from BI’s Jersey:

“For the rate market, though the shape of the curve may shift abruptly over the next month, we think there may be a bias toward bull steepening going forward. Even if rate cuts don’t materialize as the market currently expects, it will continue to price for such an event for the time being.”

Eddy Vataru, portfolio manager at Osterweis Capital Management:

“My biggest takeaway from this statement is the change here. The Committee anticipates that some additional policy firming may be appropriate. So I think they’re leaning on tighter conditions, courtesy the bank debacle. They might not hike at all anymore, or at the very least they’ll balance the two. And they’ll explicitly pay attention to financial conditions. They might be done. They’ll pause for a while though until they can’t. We had a good chunk of a hike priced in for next month but I think they might pause now.”

Bloomberg Economics’ US team says:

“The Fed weighed the pros and cons of a wait-and-see approach against a continuation of hikes, and chose the latter. That signals an unconditional commitment to the price-stability leg of the Fed’s dual mandate. We think they made the right decision.”

Source: Bloomberg, primary sources.

After the FBI conducted a raid on a journalist last April, Rolling Stone national security reporter Tatiana Siegel wrote that it was “quite possibly, the first” carried out by the Biden administration on a reporter – in this case, former ABC national security reporter James Gordon Meek, who was previously an investigator for the House Homeland Security Committee.

The RS article, which casts Meek as an unimpeachable truthsayer, framed the raid as an abuse of power, NPR reports.

“Meek appears to be on the wrong side of the national-security apparatus,” reads the article.

Siegel’s sources told her that “federal agents allegedly found classified information on Meek’s laptop during their raid.” But what we didn’t know at the time was that Rolling Stone Editor-in-hief Noah Shachtman – a friend of Meek, made the rare decision to personally edit Siegel’s article to remove all mention that the raid was part of a federal investigation into child porn.

As edited by Rolling Stone Editor-in-Chief Noah Shachtman, however, the article omitted a key fact that Siegel initially intended to include: Siegel had learned from her sources that Meek had been raided as part of a federal investigation into images of child sex abuse, something not publicly revealed until last month.

Why did Rolling Stone suggest Meek was targeted for his coverage of national security, rather than something unrelated to his journalism?

…

When Siegel detailed the seriousness of the allegations against Meek, Shachtman warned her against turning in a story that included the words “child pornography” in it. –NPR

According to the report, Shachtman “considered Meek a peer with whom he was friendly,” and told colleagues that the two men “travel in the same professional circles.”

Shortly before Shachtman joined Rolling Stone, Meek suggested on Twitter that Shachtman should pay attention to an obscure band from Niger — the location of the botched military mission that Meek helped investigate for ABC. Shachtman replied by linking to an earlier review.

Meek soon emailed Shachtman to gauge interest in covering his Hulu documentary series. The new Rolling Stone editor passed the note along to colleagues; the magazine posted a glowing review some weeks later, in November 2021. -NPR

Shachtman also insisted that staffers use a generic photograph instead of Meek’s image. “let’s not use a picture of the guy in question, james gordon meek,” he requested, adding “something FBY-y please.”

According to NPR, citing two anonymous sources, Washington attorney Mark “I’ve gotten clearances for guys who had child porn issues and love hanging out at Disney World by myself” Zaid called Shachtman on Meek’s behalf while Siegel was writing up the story.

Zaid confirmed to NPR that he called Shachtman – and admitted that Meek was a longtime friend and client who he was representing on any potential prosecution or investigation of his potential possession of classified material.

Then things get even weirder

According to the report, “The accounts given by the associates, colleagues and friends of the two key figures — Siegel and Shachtman — diverge here.”

According to what Siegel told others, Shachtman and she agreed that the article would reflect that the FBI’s interest stemmed from concerns of possible criminal behavior outside the scope of Meek’s work — that is, it had nothing to do with national security or journalism.

Shachtman later told others that he did not believe that she had nailed down her sourcing adequately. Rolling Stone parent company Penske Media notes that authority to make such choices for Rolling Stone’s coverage lies with Shachtman. “That was true in this case, as reflected in the final edits to the story,” the company said in a statement to NPR. “Some material was added late in the process, other material was dropped.” -NPR

Aaaand it’s gone

As NPR reports, after Siegel had to step away from the article to care for her ailing mother, Shachtman changed Siegel’s draft to remove all suggestions that the raid was about anything other than Meek’s FBI reporting, just hours before it was set to go to publication – saying only that the FBI had allegedly found “classified information” on Meek’s devices.

The article left many readers with the distinct impression that the investigation was linked to Meek’s reporting — which could lead to a clash of the government and the press. Rolling Stone’s official Twitter account promoted the story this way: “Exclusive: Emmy-winning ABC News producer James Gordon Meek had his home raided by the FBI. His colleagues say they haven’t seen him since.” The tweet’s thrust was echoed by WikiLeaks, Glenn Beck and the Freedom of the Press Foundation, which wrote, “If this was related to his work, as this @RollingStone report suggests it might be, it is a gross press freedom violation.” -NPR

Aaaand she’s gone

According to colleagues and friends, Siegel says she didn’t know about the changes to her story until it appeared online, and was furious about what she considered Shachtman’s interference with the independence of her reporting.

Two months later, Siegel accepted a position at a sister publication.

My how the wagons circle…

Having raised rates by 25bps (as expected) and offered a dovish bias to the statement with regard future rate-hikes, Fed Chair Powell now has the unenviable task of threading the needle between too-dovish (what does Powell know about just how bad the banking crisis really is…and what will that do to inflation) and too-hawkish (omfg, Powell’s going to kill the banks to crush inflation).

The goldilocks path, we are sure, will involve Powell using the words “we have the tools” and cajoling reporters along into believing that “the banking system is sound” – which of course ‘in aggregate’ it is, but the whole point is the massive decoupling between reserve rations of smaller banks and larger banks (and the contagion from the former on the economy and the rest of the banking system).

At the presser, Bloomberg looks for Powell to say interest-rate policy is the primary tool for achieving the Fed’s dual mandates of price stability and full employment, and shouldn’t be used as the first line of defense against threats to financial stability.

Powell will reject the idea that opening the Fed’s liquidity tool kit, and banks’ use of the discount window, represent an end to quantitative tightening.

Of course, he could just say f**k it!

LFG pic.twitter.com/hLbq2RPW1D

— Nick (🏆,🏆,🏆) (@NickatFP) March 22, 2023

Keep in mind that it’s been a consistent pattern that stock markets tended to rebound soon after Powell speaks at press conferences.

Watch Powell walk the tight-rope live here (due to start at 1430ET):