Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1.What really matters!
- Trader Z@angrybear168 – $SPY weekly tension closed bullish.
and,
- Trader Z@angrybear168 – $SPY my guess is one more shake out in October before another strong rally to the upside, I’m not fading this incoming pullback.
A target?
- Seth Golden@SethCL – Fundstrat’s Tom Lee – “It’s helpful to look at the S&P compared to its 200-DMA. The current number is at +10% above, but that’s not when we’ve seen local tops. We’ve generally seen local tops when this number is somewhere between +13% and +15%; that would imply 6,950.” $SPX $SPY $QQQ $IWM $NYA $ES_F $NDX $SOXX h/t @fundstrat @fs_insight
Reality:
- Daily Chartbook@dailychartbook – “Ever since the S&P 500 broke out to new all-time highs, the bull market playbook has been in full swing — leaders leading, laggards lagging.” @DualityResearch
So much for the leaders. Now a lot for the suffering laggards!
2. Suspicious about the Fed Data?
Before we turn to the views of some smart people, allow us to express our concerns about what we see at the Fed. Generals lead armies and, history shows that, Generals are often impacted by what their strategists & troops believe & recommend.
In that context, note that the Fed has about 550-600 Ph.D. economists on its staff, probably the largest macro-economic research team in the world. That in itself is not bad provided this large force generates & stimulates different viewpoints & strategies. What is the reality?
- 2.a First & foremost, these are all bookonomists in reality. Meaning their knowledge & experience comes predominantly from books & research papers about the economy & economic theory. There is no sub-group that looks at Treasury Interest Rates that, frankly, provide lot of more historical insight & education about the economy. As far as we know, none of the Fed Governors on the FOMC have ever managed large portfolios of Treasuries or tried to gleam from the reactions of Treasury market what the Fed should do.
- 2.b Secondly and as pointed out by Fed-analysts like Dr. Lacy Hunt, almost all of these 550-600 bookonomists are neo-Keynesians, meaning followers of Keynes. The Fed does not seem to hire or care about the other classical schools of Economics or the newer schools.
So it seems, at least to us, that the main purpose of this army of nearly 600 bookonomists is to provide a visible defense against critics & to ensure no incoming Fed official veers too far away from the established dogma. This rejection of all valid viewpoints, market data & evidence that is anathema to Fed’s chosen religion extends to the charade of questions after the Chair’s presser. The questioners are almost all from the press & are chosen to ensure that they do NOT grill the Chair & expose the true functioning of the Fed. Ironically, this was exposed by the true Fed zealot Steve Liesman of CNBC when he asked David Zervos (a candidate for the next Fed Chair) if Zervos would still let him ask a question in a Zervos presser despite his difficult questions to Zervos on CNBC.
- 2.c – Then you have the stunning spectacle of data the Fed supposedly studies before they come to a decision. Again, as Dr. Hunt has said on air, the Fed looks at the BLS data that primarily looks at monthly inputs from 360 large companies. But the US has 12 million companies that hire, retain & fire workers. In other words, the Fed only looks at 3% of the American companies, only the largest companies, to make judgements on the employment figures in the US economy. We find this utterly outrageous.
- 2.d. – And now a quick, easily implementable solution that can go a long way to improve this mess. As far as we know, there are about 12-15 payroll providers in the US. No company can process payrolls without knowing which employee was fired or hired since the previous payroll. Why can’t these payroll companies deliver these two simple figures for each company client each month or twice a month to the BLS & a group at the Fed? This would go a long way to address the utter mess of revisions the Fed delivers every month.
And further, without writing our own little paper, we recommend a few simple solutions:
- Reassign 80% of the Ph.D. bookonomists the Fed currently employs to other functions. These folks should be attractive to other entities who want an insider’s understanding about how the Fed functions.. And it would cut the Fed’s expenses by a lot.
- That would leave about 100-120 Ph.D.s for a small group of decisionmakers at the FOMC. Make these 100-120 people diverse in their specializations – different branches of monetary policy, Interest Rate specialists & FX specialists.
- Let each member of the FOMC choose 2 of these 100-120 research folks as their own research assistants. That would leave about 50-70 general staff Ph.D.s to write opinions, propose strategies for the entire Fed.
If nothing else, this would substantially lower the costs of running the world’s largest macro-bookonomist club & hopefully, via diversity of thinking & practice, make the Fed produce a better & more accurate body of work.
As a bit of support, we include this week’s clip of Stephanie Pomboy titled It’s Just Begun on this topic with a couple of her quotes below:
- “I would point out that there is very good reason to be suspicious about the reported unemployment rate.”
- “when you see things like corporate tax receipts going negative year/year & that employment is tight, it just doesn’t add up; inputs into hiring decisions is profits & when your profits are contracting, you are not running out & hiring more people; you are trying to cut hours & headcounts to salvage as much as you can”;
- “my main concern is a highly levered economy being able to accelerate its growth that at a time when interest rates are stubbornly high & that debt service is going to be rolling at higher levels that are going to be a drag on the ability to spend“
A comment similar to the one from Stephanie Pomboy above was made by Steven Van Metre in the clip on Friday, September 26 about the collapsing sales at Carmax:
- “when retail sales go, profits will follow; where profits go, hours worked & jobs are going to follow“.
That brings us to:
3. Default Warnings Starting to Pile up?
No, those are not our words. These are from the title of a Bloomberg article by Kat Hidalgo titled “Default Warnings Start to Pile up in private credit markets“. The three takeaways from this article are:
- Warnings on defaults are starting to pile up in the $1.7 trillion private credit market, prompting some analysts to raise concern about the under-appreciated risks.
- Default rates for the market are currently in the 2% – 3% range, but this rate climbs to 5.4% if non-accrual loans are added, according to a JPMorgan Chase & Co. report.
- Some analysts, including JPMorgan’s Steven Dulake and S&P Global’s Zain Bukhari believe that losses will be outsized come the downturn and that the default rate is higher than officially reported due to “disguised” defaults and generous covenant levels.
The article also quotes Moody’s Analytics as saying “Private Credit could be conduit for contagion in downturn“.
After reading this, we felt comforted about our decision to cut the MacroViewpoints ONR (overnight rate) by 50 bps to 3.75% in the last week of April. When you read about experts warnings about credit issues began surfacing, you realize that the negative movement in the economy began in April 2025. How we wish the Fed had followed us on this path! After all, what we did has been the time-honored practice at the Fed, right?
Look what Ben Bernanke said in 2010 (at minute 2:34) after screwing up in 2008:
- “Among the Fed’s response was a dramatic easing of monetary policy – reducing short-term interest rates to zero. The Fed also purchased more than a trillion dollars’ worth of Treasury securities and U.S. backed mortgage-related securities which helped reduce longer-term interest rates, such as those for mortgages and corporate bonds”.
Yeah but, you can’t really term 2010 as time-honored Fed practice, right? Ok, how about the Federal Reserve Annual Report of 1932?
- “During 1932, the Federal Reserve continued to pursue the policy of monetary ease which it had followed since the beginning of a depression. This policy was expressed through the purchase of United States Government securities in the open market & through the reduction of rates charged for discounts and for acceptances.”
So what stops the current Fed Chair from following this time-honored Fed practice? Is it lack of courage or is it to assuage the political pressure from today’s deeply-embedded Fed lobby?
Who would have thought that simple folks like us at Macro Viewpoints would prove to be more respectful followers of the eminent Fed chairs in 1932 & 2010 than Mr. Powell, the current Fed Chair?
Perhaps his Fed-ness Powell is waiting for a mega financial accident in America that deserves his attention! Sadly, he may not have to wait for long!
4. Has a $2.8 trillion market Just Exploded with a Biggest Crash in History?
Your first reaction about the title might be disbelief & a sense that too much is being made here. After all, this is not 2008. A house is a house & nothing is more American than a house to a family. And no market is as huge in size as the mortgage-securities market was then. Not even the Asset Backed Securities market.
But isn’t the family car the 2nd most American asset to a family? While not as big of an asset as a house, the car is the 2nd biggest asset most Americans own. And that is now under extreme attack, the way the house was in 2008.
Despite that thought, last week’s almost instantaneous bankruptcy of Tricolor followed by First Brands followed by the stunning disclosure of collapsing car sales by Carmax stunned us. Compared to what you read below, simple fears like defaults in private credit seem insignificant.
Below are excerpts from a serious clip that scared us.
As you read this, there are roughly 4.2 million vehicles sitting unsold in dealer lots across America leading to $200 million bleeding out every day from automobile dealer bank accounts. As a dealer said,
- “I have got $3.2 million in inventory that nobody wants. My floorplan interest is $4,800 per day. I am not selling cars anymore – I am managing a financial disaster that gets worse every morning I unlock the doors“.
The first step is dealers defaulting on floor-plan loans leading then to 1st wave of dealer bankruptcies & that is creating a secondary crisis. A bankruptcy lawyer is quoted as saying
- “I have 23 dealer bankruptcy cases on my desk right now; These aren’t small mom-and-pop stores; these are major franchises with decades of history. The floor-plan interest killed them faster than they could adapt”.
When dealers go bankrupt, their inventory gets repossessed & these vehicles then flood the wholesale market at fire sale prices . The real disaster is far more sinister & its about to get much worse as the clip says.
- “Vehicle values are collapsing so fast that millions of car owners are about to discover that they owe more on their loans that their cars will ever be worth“.
The clip calls it “a financial avalanche that is burying car owners under mountains of negative equity that they never saw coming“.
And what about Automobile manufacturers?
- “production lines are shutting down; workers are being laid off; some of America’s most iconic car companies are quietly preparing for bankruptcy; it is about a complete restructuring of an industry that employs 10 million Americans & entire communities across the mid west.”
Specifically:
- “GM just announced the closure of 6 manufacturing facilities & layoff of 18,000 workers. Ford is cutting production at 8 plants & offering buyouts to 25,000 workers. Stellantis is shutting down the Belvedere assembly plant indefinitely putting 1,200 workers on the street“
Look at all this across America and ask yourselves whether the Fed should be worried about taking steps that might help these 10 million workers & their families or continue to worry about fears of inflation expressed on CNBC TV, so casually by a Fast Money sales trader or two? Of course, the real American tragedy might be that an ignorant & arrogant Fast Money sales trader on CNBC might actually get a hearing from the Fed while an industry that employs 10 million workers is ignored. That might be today but it will not be forever.
Wait for signs that the stock market might shudder a bit & then watch the Fed fly to its rescue.
- On a personal note, our first job was in Detroit overlooking the GM building. So we still feel real pain when we see such terrible news about folks in Detroit. But they will come back, we are firmly convinced.
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