I wanted you to watch Mr. Hugh Hendry wax poetic over the current crisis, a viewpoint that I share with him almost identically. Although in recent years he’s debased himself marooned on an island tripping on acid, back during the financial crisis of 2008 — no one had been better.
HUGH HENDRY THINKS US GOVT WILL FREEZE AMERICAN BANK DEPOSITS $XLF
pic.twitter.com/mBzeQljUyX— The_Real_Fly (@The_Real_Fly) May 5, 2023
The gist of his argument is that the current crisis is Fed managed and there is nothing they can do to stop it — because people will not leave money at banks for 1% and would prefer t-bills at 5%. This is called “cash sorting” and this is why SCHW will trade to zero when this is all said and done.
The unrealized treasury losses on bank balance sheets will need to be realized once capital flies, forcing them to take losses they never needed to take. The only way to stop it — they’ll FORCE you to keep your money at your bank.
If you like your bank, you can keep your bank.
I traded shitty today — yet still managed +245bps. I took a 20% hedge via TZA at the close, in spite of being bullish. I did this because I know, at some point, it’s gonna end and when it does — ALL STOCKS will hit rockbottom and there won’t be anywhere for you to hide. You’ll try to hide underneath a rock or perhaps wedged in between a crevasse — but the market will find you and rip your arms and legs from your torso — kicking you into the pits of hell to repent for a life of waste and greed.
I depart for Europe next week for two weeks. I remind you of this because I will sparsely update the blog for the next 2 weeks or so. You are welcomed to join Stocklabs and talk to my fellow traders in there if bored, or you can fuck off for a fortnight and check in with me towards the end of May.
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Gee, what if the banks started paying depositors market rates? That would stop the flow. But no, then they wouldn’t get the free bail out.
Forcing deposits to stay at banks sounds good but what does that entail? If I have an account it prevents me from draining reserves but I can create a new account somewhere else and redirect fund flows into it. At most it delays the process by about the regular outflows of spending.
For most people that’s not even a month. A couple months to a year for business accounts?
SemiRelatedly:
The Kremlin was attacked.
If it was attacked by our proxies, it would demand a response from Putin. If it was done by a faction within Russia as a false flag, then why the would our Sec of State support the narrative that any false flaggers were promoting by announcing additional aid for our Ukrainian puppets just hours after the Russian capital was attacked?
Russian people and politicians are understandable quite ginned-up. How are markets rallying in the face of DC’s insanity? Seemingly it’s just the standard ‘rally in the face of apparently bad news’ is great news. Or are we in the west so clueless as to not recognize how very dangerous is the game that our Strangelovian DC masters are playing?
Anyway, I did not profit from the rally and am positioned to get further fucked should the rally extend into next week.
Loved listening to Hendry, but I cannot ever agree with his conclusion:
“We adults are going to have to break more things until the Fed goes back to ZIRP”
I’m sorry Hugh if you took on too much risk and your portfolio is about to bust, but the rest of the world is not going to rescue you guys anymore … you’ll be OK …
Same, but he was talking about how he sees things playing out and how it stands now with the current system, right? He started out with being hedged to the max