Since the FED started raising rates, Powell has been talking about "Soft Landing" over and over again. In the latest FED meeting he was asked about a soft landing, it looks to me that he is very worried about it and soft landing may not be achieved anymore.

https://reddit.com/link/123a0rc/video/dui9fe8hb7qa1/player

To follow-up on my CRE post over the weekend, I had a number of people dm me asking what my positions were or how I arrive at candidates. Well, looking over this graphic, I wasn't surprised to see A class properties already in default and/or in "Special servicing" - which is "yeah, they are a problem but we don't want to put them into default category." What's interesting to me is the last column - many of these are a large number of buildings, not just one or two. A bit harder to rent say 14 buildings to get a loan performing again than 1 building. Plus, they were CMBS - before any 2023 haircuts.

Blackstone ($BX):

• Revenues in 2021 were $22.57billion and dropped to $8.5 billion in 2022. OUCH
• Worse, net interest income dropped from $461 million to NEGATIVE $105 million.
• Long term debt rose from $7.7 billion in 2021 to $12.3 billion in 2022 - I think BX is trying to borrow to buy itself time.
• BX does have access to about $187 billion in credit to bring to bear so its not like they will go out of business. think of them as one of the Too Big To Fail CRE firms.
• BX runs an internal non traded $71 billion REIT - which they have halted withdrawals for 4 months and counting.
• Operating income dropped from $13 billion in 2021 to $4.9 billion in 2022.
• But the big data point for me is that over the last 6 months, BX insiders sold 97.83% of BX stock. Now, a lot of this selling was from various BX limited partnerships which companies like BX use to hide the salami but still, that is a crap ton of selling.
• BX has a current PE of 35 and a forward PE of 13ish while the industry has a PE of 9
• BX has a PEG ratio (PE plus what earnings are expected to grow at) of 3.43 while the industry average is .73
• By these two metrics, BX is priced at a premium, probably due to the fact that they have some very smart people working for them. But smart people cannot overcome negative momentum when it starts to affect things they cannot control.
• Finally, while they do have a nice 5% div, their payout ratio is 208%.
• So, falling revenues, falling asset performance, falling asset values, negative dividend coverage, insiders dumping. Not a good picture.

I do not think in anyway that BX is going out of business. I do believe their recent defaults of $1 billion in CMBS, not straight mortgages, are just the tip of the iceberg. The question is, how deep does it go?

For me, I believe that the CRE market dive is only starting. If a rising tide raises all ships, the opposite occurs with a falling tide.

One last note: BX earnings and revenue drops were BEFORE the last 2 months when CRE started feeling pain. Just when they were recovering from Covid, Yellen's incompetence created a huge (imo) outlier risk.

BX reports earnings soon so a surprise to the upside or the Fed announcing a cut could screw up my thesis but I think that BX will fall to $70 with a possibility for a flush to $60 my real target. Thats -13 and -23 from the current price.

So, I am looking at SEPT 60-70 puts, haven't decided yet. Projected return if BX falls to $60 would be 200%ish. MY stop will be right above this months high, $92.50. If that happens I will lose 60% on the premium. So Reward to risk is 3.3X, not great but not bad (I usually look for 10X option plays on 20% moves) if BX falls to $60 by July 1.

DISCLAIMER: You are a grown ass person so if you decide this is a trade you like, it's on you. I am not telling or recommending this to anyone. And I am prepared to manage the position on spikes or dumps if need be - this is not to me a set and forget.

TLDR: BX is very over valued by traditional metrics, insiders have sold 97% of their stock, and I am taking a shot.

Thanks and I welcome intelligent comments. Stupid comments not so much.

https://preview.redd.it/7nd3cu8em7qa1.jpg?width=1121&format=pjpg&auto=webp&v=enabled&s=4928afd09a429dca9cdd8c43b84548f7817bdf30

We live in some seriously regarded times these days so let us pool our single good brain cells and ponder this question. You ever wonder why the fed funds is approaching 5% but you are still getting dick on your current account? There are near $3 trillion at the fed REPO facility collecting 5% but you are getting ~0.6%? WTF. No wonder the less regarded among you have moved money to money market funds, 2 year treasuries, funky etfs such as OPER and even in physical gold. So far 500bn have left for MM funds and this clearly caused the banking strain since the useless banks are now borrowing from the fed in emergency facilities in size of 500bn at 5%.

But what the actual fuk!!! Why didn’t these regarded banks hike deposit rates at the same time as the fed funds? That would have surely prevented the 500bn deposit flight and they might have not got into this hot mess in the first place.

Seems to me what we have here is a classic case of fighting the fed and losing their shirt. Except this time the ones fighting the fed is the entire banking industry acting as one.

Also how is it they are able to keep deposit rates this low across the entire western world? It is as if we are in a corrupt collusive oligarchy controlling the free market interest rate, surely that can’t be happening right? This is free market capitalism with intelligent regulators who would be onto this kind of manipulation like flies on diarrhea? /s

Now having fuked the depositors for decades, fuked up on their long duration treasury bets and fuked the congress into deregulating, banks are now looking to fuk the tax payers some more by fuking yellen and fed into bailouts after they themselves fuked up causing all of this inflation in the first place. What the actual F???!!!!

Swiss Finance Minister says Credit Suisse's bankruptcy could have led to a global financial crisis without the intervention of the Swiss government.

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Swiss Finance Minister Karin Keller-Sutter said the Swiss government was forced to intervene to save Credit Suisse because the troubled bank "couldn't last a day" amid a crisis of investor confidence, according to media reports on Saturday, local time.

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In a media interview, Keller-Sutter said:

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Credit Suisse may not last until Monday. Without a solution, Swiss payment transactions with Credit Suisse will be severely disrupted and may even collapse.

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She cited expert estimates that the impact of a "disorderly bankruptcy" of Credit Suisse could reach twice the output of the Swiss economy. More broadly, "we should expect a global financial crisis" because the collapse of Credit Suisse would send other banks into the abyss.

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Last weekend, UBS's deal to buy Credit Suisse, coordinated by the Swiss government, was widely criticized for trampling on the rights of bond investors and putting a heavy burden on Swiss taxpayers in the event of a crisis. But Keller-Sutter believes the alternatives would have been worse.

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She told the press:

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All other options are more risky for the country. A temporary nationalization of Credit Suisse could last much longer than the government would like, as experience has also shown that it can take years or even decades for the state to exit ownership of a bank.

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The possibility of an orderly closure is also ruled out because not only would the losses be considerable, but Switzerland would be the first country to close a bank that is important to the global system. Now is clearly not the time for experimentation.

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Keller-Sutter also objected to equating the Swiss government's "collocation" with the bailout, saying that no government funds were flowing to the banks. But she acknowledges that the deposit guarantee is similar to an insurance policy and is an indirect form of state support.

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She also dismissed claims that the U.S. pressured Switzerland to bail out Credit Suisse. She said, "It is clear to everyone, including ourselves, that a restructuring or liquidation of Credit Suisse would trigger a huge shock to international financial markets."

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Asked about the impact of the epidemic and the current crisis on Swiss finances, Keller-Sutter said the immediate priority was to improve the Swiss government's fiscal deficit. In this regard, "there is no sign of improvement until the end of this decade"

Speaking at the China Development Forum 2023, Rae Dalio, founder, chief investment officer mentor and board member of Bridgewater, said the monetization of huge debts, the huge internal conflicts caused by the divide between wealth and values, and the conflict between international powers are three factors that "are driving all the current situations.

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According to Dalio, the world is on the "edge of danger" and could face three "seismic" changes, "if they happen, we could witness something we have not seen in our lifetime, but which has happened many times in history. These three forces, which began several years ago, have reached a crisis point and are driving all of the current events."

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The three dramatic changes, as Dalio calls them, are, first, the monetization of huge debts, where central banks print money and issue currency to buy these debts, second, the huge internal conflict caused by the divide in wealth and values, and third, the conflict between international powers. According to Dalio, all three of these factors are now emerging to the greatest extent since 1930-1945.

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Dalio believes that many indicators such as real per capita income, per capita life expectancy, and nutritional levels will improve significantly in the long run due to increases in productivity and especially technology. The evolution of this upward trend is characterized by huge cyclical fluctuations, which consist of short cycles that interact with each other to form large cycles. These large cycles are the so-called "good years" and "bad years." In addition, the events that lead to such large cycles do not occur according to a timeline, but are determined by causality, so that their occurrence is not predetermined, but manageable.

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Dalio further emphasizes that many times, the accumulation of many short cycles to form large long cycles leads to debt write-downs and monetization of huge amounts of debt when debt ratios rise and liabilities become too large to sustain. At the same time, along with financial and economic cycles, there are political cycles within countries, and geopolitical cycles between countries, and history shows that when these three forces are superimposed simultaneously, they lead to turbulent transitions, often resulting in dramatic changes in the domestic and world order of great magnitude.

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Dalio points out that since 1945 - since the establishment of the last new world order, the monetary order, which can also be called the world order of the United States and the dollar - it has gone through 12.5 short cycles until now, accumulating to form a big debt cycle, which is now quite high as a percentage of GDP, when Central banks, including the Federal Reserve, then began to tighten monetary policy to deal with inflation, causing cracks to begin to occur in the market, and the economy began to weaken.

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According to Dalio, we are now entering a big international geopolitical cycle. "What I hope is that there will be wisdom, restraint and understanding in the world and that the world will continue to be peaceful and prosperous."

First, SQQQ has a 90% margin requirement, but this increases as the position moves against you, this means you will literally be margin called if SQQQ even moves up 5%. Here's what will happen: SQQQ goes from -100 to -105, you now have 100-5=95 cash. But SQQQ's maintenance margin becomes 0.9*105=94.5, creating an imminent margin call.

Second, LETFs don't have "volatility decay," they have a path-dependent skew. This skew could be to the upside depending on volatility and magnitude of direction. If QQQ moves down quickly, SQQQ will actually be skewed to the upside because there is only 1 downside direction and no upside volatility. This creates a positive skew where SQQQ will move more than -3x QQQ. Real-world backtests of SQQQ result in -4x or more the total benchmark movement, that means if QQQ went down -25%, SQQQ will actually go up 100% or even more. The result is that even a small position of -15% SQQQ, 100% cash could result in a margin call. In 2008 for example, SQQQ if it existed would have gone up more than 4x. The -15% position would become -60% requiring probably 60% margin, however your cash would have went down to 55% and you are facing a margin call. However, there is no guarantee SQQQ couldn't go up even more than that, as the 2000 Nasdaq bubble resulted in more than 6x increase for SQQQ and unless you are liquid enough to be able to inject more cash, it is highly likely you will have to close your short position at a loss.

As the banking crisis spreads and global demand for dollars surges, central banks are rapidly reducing their holdings of U.S. debt to "cash out" and the use of the Federal Reserve's overseas liquidity tools has surged.

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Federal Reserve data showed that official foreign holdings of U.S. Treasuries fell by $76 billion to $2.86 trillion in the week ended March 22, the largest one-week drop since March 2014.

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Meanwhile, use of the Federal Reserve's Foreign and International Monetary Administration (FIMA) repurchase agreement instrument reached a record $60 billion, well above the $1.4 billion peak reached at the peak of the epidemic.

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The Fed's FIMA repurchase agreement instrument was launched on March 31, 2020, to support liquidity in global financial markets and cushion the impact of the epidemic on the global economy. The instrument allows foreign central banks and international organizations to use their holdings of U.S. Treasuries as collateral to request dollar liquidity from the Fed to ease funding pressures.

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In response to the surge in the use of the FIMA repurchase agreement tool, Barclays strategist Joseph Abate was quoted in the media as saying, "We feel the borrowing is precautionary given the dollar funding rates."

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Notably, only a small portion of the $136 billion raised by foreign official agencies from the sale of U.S. debt and FIMA repo has flowed directly back into the Fed's balance sheet or broader custody program.

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As of March 22, the balance of the foreign reverse repo pool had increased by only $3 billion, while agency securities in Fed custody (including mortgage-backed securities) had increased by only $7 billion.

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Analysis by Wrightson Bond Market Research (Wrightson ICAP) suggests that the above phenomenon suggests that much of the cash raised by central banks may have gone into the private market.

6 Key economic events this week (and why each is important):

1. Consumer Confidence data (Tuesday): A higher level of consumer confidence usually indicates that consumers are more willing to spend money, which can boost economic growth. Consumer Confidence data can be a great indicator of future spending habits.

2. Home sales data (Wednesday): The housing market is a crucial part of the economy, and home sales data can give an indication of the overall health of the housing market. Home sales data is a great indicator of future economic growth.

3. Q4 2022 GDP data (Thursday): A strong GDP report can indicate that the economy is growing, which can lead to more jobs and higher wages.

4. Treasury Sec. Yellen speaks (Thursday): As the Treasury Secretary, Janet Yellen's statements can significantly impact financial markets. She is one of the most important economic policymakers in the world.

5. PCE inflation data (Friday): A higher-than-expected inflation rate could lead to an increase in interest rates, which can impact economic growth and financial markets. PCE inflation data is a good indicator of future interest rate changes.

6. 4 Fed speakers this week: The Federal Reserve is the central bank of the United States. Its decisions can have a big impact on the economy.