You need a PLUS account to view this content. Try one month of PLUS for FREE.
Already have an account? log in
Is The Fed Behind The Curve Again?
The Fed was certainly behind the curve hiking rates. Jerome Powell admitted as much during his interview with 60 Minutes taped on February 1 and aired three days later.
"In hindsight, it would've been better to have tightened policy earlier," Powell told Scott Pelley. "I'm happy to say that."
Happy to say it is of course something different from being happy about it. Powell just meant he's not trying to obscure the fact that the Fed should've acted sooner.
Unfortunately, this isn't the first
I don’t grasp the message of Wilson’s 2Y UST – FF chart. It is simply a chart of how positively or negatively sloped the front end of the yield curve is, and designates a positively sloped curve as “loose” and a negatively sloped (inverted) curve as “tight”. The general inversion of the curve (10Y – FF, 10Y – 2Y, etc) is well-known. Does Wilson say that focusing on 2Y – FF adds predictive power?
This piece reminded me of the “near term forward spread”, as popularized in this FEDS Note. https://www.federalreserve.gov/econres/notes/feds-notes/dont-fear-the-yield-curve-reprise-20220325.html While I don’t have a chart of the NTFS on my screen, I assume it is now quite negative.
I’m sorry, but to imply that we are going to go in the tank economically because of near-sighted CRE developers who couldn’t figure out how to make money with long rates of ~4.5% is just wrong. They couldn’t see Covid coming, sure. No one did either. But where they went wrong was when they all put on rose colored glasses and kept building. Instead of taking a break and checking a couple years ahead before making some adjustments and picking up their growth again, they chose to play let’s pretend and the banks let them. Being wrong in real estate is genetic. It’s why I don’t own any of the stuff. I only lend. Some stuff is down now but it will come back and I’m still getting my cash flow. There is a pandemic of overbuilding every 10-15 years creditors get a really bad case of FOMO (Xycam won’t shorten this kind of cold) and delinquencies rise, and banks need lots of aspirin and bed rest. They all drink lots of fluids and eventually there is forgetting. Me, I want to see more months of pain until everyone yells “uncle” and swears not to do it again …. for a while.