I don’t think macro people understand this is how inflation is working
We have elevated sustained core inflationary pressure that continue to build in corporate cost structures & then when there’s any input pressure they have to price it + the core costs
Cycle repeats non stop
Unless you have friends in the RIA industry, you can’t even fathom the level of abstractions from investing that are emerging mostly to defer taxes. So much tax deferral
Everyone understands stocks will never go down so why ever sell. People structuring ways to diversify
Today, @USTreasury and @IRSnews issued a notice on tax-motivated investment strategies that makes clear Treasury is serious about cracking down on transactions designed to dodge taxes or exploit our federal tax code. The companion Revenue Ruling also takes on prearranged §351 ETF conversions designed to avoid tax. Our message on these conversions is clear: they don’t work under existing law.
You know what private equity exposure really needs?
More leverage as rates go up
Margin loan on your 7x levered Midcap equity exposures
Back to the build up to Iran where stocks just refused to go down amid so many bad headlines and actually negative developments
That one ended in a crash up / straight up move
"Not Seen Since 2000...": Top Goldman Derivs Trader Says Equities 'Refuse To Price Any Panic' zerohedge.com/markets/not-se…
Goldman trying to spreadsheet it
This could be a problem: Goldman sensitivity table shows that in a worst case scenario where hyperscaler ROIC on capex is 0 (token costs collapse, token demand goes to open models, etc) they still need to spend $920BN every year just to cover depreciation and running costs
Continuing to subsidize housing demand obviously won’t work
Congress would do better to subsidize residential building commodities (lumber, OSB, concrete), subsidize mortgages on new builds, & fund it by taxing existing homes
Have to incentivize new supply. Its not hard at all
For millions of young people across America, homeownership seems further out of reach than ever before.
Here's my proposal: we can help restore the dream of homeownership with a 5 to 1 federal match for first-time homebuyers saving for a downpayment.
merkley.senate.gov/merkley-p…
@TheStalwart @conorsen @kylascan
The above is my policy pitch to stimulate new housing supply
The Homebuilding industry is so competitive that any reduction in inputs gets passed through as lower pricing. Lumber, OSB, and concrete are all very competitive industries and operate at cash costs. You could also try to price regulate industries that are oligopolistic in the supply chain like VMC/MLM who take 5% price every year.
The mortgage subsidy on new is key and would be easy to roll out. There are lots of mortgage subsidy programs in the market already, many offered by builders. What we need to as a country though is subsidize is new construction.
You could theoretically take the mortgage costs down on new builds to zero through the existing mechanisms we have. It would just cost a lot to do it
So how does it get paid for? Taxes on existing property would work (and also lower prices) but be unpopular with boomers. You could try to just tax undeveloped land (also lowering construction inputs). Maybe Data centers. Or just general corp funds
Unlikely it would ever happen but do think it would work pretty fast to grow production of homes
Government can create incentives to add supply. Zoning is obvious but the below would work
1) lower the cost to build
2) make new homes cheaper relative to existing homes by discounting mortgages
3) fund it with taxes on other real estate, ideally land that could be developed
@TheStalwart @conorsen @kylascan
The above is my policy pitch to stimulate new housing supply
The Homebuilding industry is so competitive that any reduction in inputs gets passed through as lower pricing. Lumber, OSB, and concrete are all very competitive industries and operate at cash costs. You could also try to price regulate industries that are oligopolistic in the supply chain like VMC/MLM who take 5% price every year.
The mortgage subsidy on new is key and would be easy to roll out. There are lots of mortgage subsidy programs in the market already, many offered by builders. What we need to as a country though is subsidize is new construction.
You could theoretically take the mortgage costs down on new builds to zero through the existing mechanisms we have. It would just cost a lot to do it
So how does it get paid for? Taxes on existing property would work (and also lower prices) but be unpopular with boomers. You could try to just tax undeveloped land (also lowering construction inputs). Maybe Data centers. Or just general corp funds
Unlikely it would ever happen but do think it would work pretty fast to grow production of homes
The idea that higher interest rates won’t cool inflation is so pervasive. It’s comical really
Bill is old enough he should know but we have gone so long without restrictive monetary policy no one knows what it means anymore
I can guarantee you at 7% FFR inflation would go down
The presumption that the Fed raising short-term rates reduces inflation is predicated on the belief that higher rates reduce demand and investment.
But what if higher rates don’t reduce demand and investment because the demand for intelligence and energy is unaffected by higher rates because winning the race for super intelligence has a near infinite ROI and the demand for compute will remain incalculable.
Why won’t higher rates at this unique moment in history therefore lead to more inflation as interest costs are embedded in everything?
And the problem is compounded as the more the Fed raises rates, the more inflation we will have and the more the Fed will need to raise rates further and so on.
But what if the old models don’t apply to the current paradigm and the Fed is wrong?
I think the Fed might have just made a mistake. Am I right or am I wrong?
@NickTimiraos @TimDuy @colbyLsmith
Fed has been below the Taylor Rule for so much of the last 15 years that I think almost everyone in markets has forgotten the Fed can affect inflation
Whether or not they want to do it is a totally separate topic
Wealth effect nation
Rising share of HH net transferring money from securities account to pay for daily expenses in recent years, particularly at the top end. All ages, not just boomers. Clear example of the dissaving driven economy.
jpmorganchase.com/institute/…
Will be hilarious if we sign an MOU again on Monday
US industrial economy is organized to maximize for profits, not for volumes
We have had flat industrial production for 20 years and when demand increases it all just gets flowed through to price not volume
Great for earnings. Causes very persistent inflation. That’s the US
