Howard Marks, Negative Rates And The Permanent State Of Exception

In his latest memo, dated October 17, Oaktree’s Howard Marks tried something different. Rather than delivering a series of musings centered around current events and general goings-on across capital markets, Marks endeavored to grant a request. As he writes in the introduction,  Ian Schapiro, the leader of Oaktree’s Power Opportunities, asked Howard to weigh in on negative rates. Howard says his initial response was "immediate and unequivocal". To wit: “I can’t.  I don’t know anyth

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3 thoughts on “Howard Marks, Negative Rates And The Permanent State Of Exception

  1. Re: “they’re going to have to start amending the entry-level finance textbooks”

    Writing a new banking narrative at this point is like describing how a hypothetical cat can simultaneously be dead and alive in a sealed bank vault. In the case of fat cat bankers, the poison inside the bank vault is Dodd-Frank+Basel regulation and the transformation and or application of risk management. The experiment phase our financial world is thus a magic show where we all wait to see the outcome of a transformation, where quantitative easing has either produced results or not. It seems challenging to make a case that QE has delivered quantifiable positive results, in fact the poison of banking regulation demonstrates that fat cat bankers can’t survive.

    It’s interesting to read about the origin of Schrödinger’s cat:

    Note that the charge of gunpowder is not mentioned in Schrödinger’s setup, which uses a Geiger counter as an amplifier and hydrocyanic poison instead of gunpowder. The gunpowder had been mentioned in Einstein’s original suggestion to Schrödinger 15 years before, and Einstein carried it forward to the present discussion.

    The gunpowder of regulation that blows the fat banker cats to little pieces should be viewed as a physical world reality, where banks have to prove they are alive and that their living wills are based on objective factual, observable physical evidence that is verifiable — versus a state where the fat cat banker lives in a shadow world, expanding risk and depending on regulations that offer them nine lives — or a perpetual framework to exist as ghosts that hover around perfume-scented derivative molecules that are the basis of money laundering.

    In re-writing textbooks and adding chapters in How to Front Run Bank Regulation, a case could be made that quasi-measurement tools could be developed, where society could look inside the bank vault on a more frequent basis, e.g. Zeno effects could be used to allow a real-time fat bankercam which allows all of us sitting at home to keep an eye on the vault 24×7 and watch what’s going on, versus being placed in a position where nobody is able to watch the cat and thus depend on unreliable news and reporting which is often fraudulent.

    In order to save the financial system from collapse and corruption society needs a bankcam that allows for realistic observation of financial conditions. The only reason that ZIRP is being discussed is to further a fraudulent story that empowers banks to avoid implementing regulations. If the fat cat bankers can’t survive with their current food stamps they need to fail and then more banks will need to be nationalized and then watched like hawks.

  2. And another thing, ZIRP ideology is basically window dressing, that pulls down the curtain during the magic circus show and what it apparently does is warp and manipulate time in a way to allow banks to gain breathing room, as they have panic attacks related to failing, time-after-time. Giving dead cats more lifelines doesn’t fix the exploded fragmented cat.

    Also see: Baum in the 1890s edited the major national magazine for advertising in store windows, and was familiar with the elaborate mechanical displays of the Christmas story that attracted tens of thousands of spectators to the display windows of Marshall Field’s, Carson Pirie Scott, and other Chicago department stores.[3] The spellbinding mechanical ingenuity (based on intricate clockwork) led many viewers to believe there must be a man behind the screen who worked all the levers.

  3. If a corp borrows at a neg rate just means it has funds that earn a more negative ‘bank rate’. So it’s about investing elsewhere at a positive risk adjusted return, and so presumably there aren’t any such investments?

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