Byron Anderson

Fed Balance sheet as a % of GDP. Can you see when the Fed went fully interventionist? How do we ever unwind this much manipulation without pain? Forget ever going back to baseline +/- 6% short duration balance sheet. If Logan is correct, QE is here to stay forever. The not so hot take is that the Fed will never end manipulation. Fed's Logan: The Fed should buy more shorter-dated assets WHEN Fed purchases resume. Logan says its about mirroring Treasury issuance. Maybe Congress can do its' job and push back a little before allowing this AGAIN? Don't worry the Fed that didn't react to inflation for a year and stagnated the housing market with QE has this covered. The problem is Logan thinks the big balloon is the normal part of that curve. These people have ZERO reverence for the US economy. bloomberg.com/news/articles/…

Look through inflation if a ceasefire sticks, the Fed will. Expect the curve to steepen before yields start to hit growth and consumer. Recent history (Ukraine invasion) says it will take oil ~ 6 months to normalize. Sell treasury rallies and reposition for credit opportunity.

Here we go! We talk economic indicators, Lowes and lagging wages. We end on outmigration and rates. Tune in to The Cow Guy Close on RFD-TV daily from 12:30pm CST and 1:30pm EST. @AJInsight @cboesib @ABLafferJr @PacerETFs @ByronAndersonII @AshleePitzl @OfficialRFDTV @CowGuyClose

The market and all the politicians believe the Fed will go back to buying the bond market into submission so no need to worry. We hear this from Bessent and the President now. When they tried to cut spending the machine had an aneurism. Play this out for any longer time period and of course this will end poorly. There aren’t many willing to implement hard choices to rightsize our situation. Yellen and Brainard had decades of data from Japan telling them balance sheet purchases don’t work to raise inflation but to no avail. So now we borrow to fund massive deficits that aren’t productive spending. We have the choice to allow normalization but that means reduced spending, entitlement cuts, and asset price pain. Politicians and markets have zero want to solve the problem, so we will continue on the same path as Japan. I’ve written about this prior that soon we will never see the end of QE. We don’t grow our way out without getting rid of the deficit. Every recession requires a magnitude larger response to restart the economy and our debt increases more rapidly after every intervention. We already have the Fed looking to buy over $600bn of t-bills this year. Bessent is managing issuance to try and lower borrowing costs. Fingers in the dam. Manipulation of rates is first and then the bond market will follow at some point, aka more Japan. We have the 30 year roadmap from Japan that shows we are heading toward stagnation at best but we still don’t heed the warning, or no one cares anymore. Even with Fed manipulation we are only a decade or so behind Japan in debt/gdp. Unfortunately, the “easy” way is usually the way that is chosen.

the situation in Japan should be a clear cautionary tale regarding excess debt. I’m not convinced we are taking it seriously. Neither do silver traders.

If we remove everything from the inflation measurement that matters, what’s left? No food, no energy, Miran wants housing gone too. I can manipulate inflation lower too, just remove everything then we have 0% inflation in perpetuity. 🫣

It's Friday! Finally. We talk CPI, 10-year yield & visit Doin' it Wrong Dairy. We end on the bridge payments & bonds. Tune to The Cow Guy Close RFD-TV daily from 12:30pm CST and 1:30pm EST. @jimiuorio @ntengler @carleygarner @ByronAndersonII @apitzl @OfficialRFDTV @CowGuyClose

@StealthQE4 I think markets were expecting tariffs to be over turned today, so there was caution.

10 year yield right back up to 3 month highs despite the Fed announcing t-bill QE. The bond market is rejecting what the Fed did Wednesday:

@RealEJAntoni But they are reducing duration with the MBS rolloff so small manipulation win.

@RealEJAntoni I missed that. Thank you.

BOOM! Just as expected, Fed is restarting QE w/ Powell acknowledging that money markets forced their hand - we're going to print so much money...

@RealEJAntoni I agree they didn’t announce QE. They said they were going to shift MBS rolloff to t-bills to shorten duration of the balance sheet to align with overall treasury market. SOMA purchases will be interesting this month if that is true.

@ByronAndersonII No, this is in addition to the rollover of MBS into Treasuries; Fed did not announce QE months ago - on 10/29 they said QT would end 12/1; and this is not a move away from market manipulation but doubling down via YCC

@mortgagetruth @KirkChivas Exactly.

@ByronAndersonII @KirkChivas So you're saying slippery slope to the early 2000s stuff?

Regarding Fannie/Freddie removing their credit score minimums. A reader told me he just approved a rate and term refi w/ a 487 FICO score!! At first I was appalled, then thought at least they're lowering their payment and reducing risk. It's actually a good use case.

@mortgagetruth @KirkChivas It never stays at exceptions like this. Especially if Fannie/Freddie get spun out again.

@KirkChivas Like I said, I was shocked. Then I said, wait, if they're actually lowering their payment and not taking on any new debt, it makes sense. What's your issue with it?

If the Fed resists the urge to manipulate yields again, housing will normalize. The prior Fed manipulation created the affordability problem BUT. The majority have low mtg rates, fnma/fhlmc required good lending standards, and most have an equity buffer. This will allow a combination of wages to increase enough and housing prices to deflate without a catastrophe. In the meantime municipalities should build affordable first time homes to restart the housing cycle. We just need patience to get rid of Fed manipulation and that takes time.

Zimbabwe just kept printing money because they couldn’t use their balance sheet to buy all their debt and keep interest rates low. What @spomboy is advocating they will do is keep buying yields lower. The US pumps asset prices perpetually to a stagnation not hyperinflation. Exactly where we are with housing. We could let housing normalize but Trump will probably get lower rates with his capture of the Fed possible and markets advocating for them. Death by a 1000 cuts. This is the MMT outcome. Japan has 230% debt to GDP and BOJ owns the majority. BOJ also owns equities and funds to stabilize business. Japan didn’t get inflation from all of this terrible monetary policy they got low growth, low inflation and stagnation of the economy. Bond markets force the fiscal hand of politicians by raising yields. The Fed has lost its purpose and given politicians a way to side step accountability. Politicians need pain to change their way, not the media advocating for the slow march to stagnation.

@ByronAndersonII @spomboy No-Zimbabwe

We agree. I just think it happens closer to 5% than 6%…

Janet Yellen was a big cause of the current monetary debacle both at the Fed and Treasury. She saw Japanese monetary mistakes for decades and still decided to take the US down the same path. Her obsession with ZIRP even though we were already out of the crisis. Balance sheet purchases to eliminate the bond market, which allowed politicians to spend without care. The Fed is supposed to be the check to our political class not enable them to be fiscally imprudent. Then to top it off not extending debt issuance when rates were still at zero. Come on seriously.

A Republican president once picked Ben Bernanke—a future Nobel laureate—because expertise mattered more than spin. That norm, picking Fed chairs for brains not loyalty, does more to protect your paycheck than any campaign slogan.

@The_Old_DC @spomboy Sad state that a politician doing his actual job is thought of as

@ByronAndersonII @spomboy An altruistic politician with a spine?! 🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣🤣

So we go back to yesteryear admission levels. I’ll use UCLA which currently has a 9% accept rate. How about in state applicants? Estimate of 10-15% acceptance. How about for the nursing program? 1%. Medical school? 2-3%, while watering down standards for “preferred” students. A State school that gets tax payer dollars from the UC system rejects around 90% of in state students. In the 90’s that acceptance rate was closer to 40%. Universities got greedy, reduced overall acceptance rates, supply reduction. Then shifted from in state students who pay less to more out of state and foreign students while still taking taxpayer dollars all while increasing tuition costs. But sure Trump tariffs are the problem.

If you want to make America affordable you have to increase supply. It is that simple. Unfortunately current tarriff policy, immigration policy, student loan policy, are all aimed at reducing supply which is driving up prices.

@crampell @rinsana Unlesss Trump is somehow able to get rid of Lisa Cook. Then maybe not so pro-forma.

@rinsana Correct, regional Fed presidents have to get approved by Fed Board in DC. Usually a pro forma thing

Yeah this is bad. Trump admin appears to be laying the groundwork to purge regional Fed presidents, all of whom are up for reappointment in February.

The Fed changed the game. If the Fed said they were turning on the QE machine again and started buying 10s en masse again would the vigilantes unload everything or start buying? We saw the outcome the entire decade of the 20-teens. They all know the Fed can delete the bond market influence at any time now. Don’t fight the Fed.

If true, then these bond investors don’t have that much power in the market. Everyone thinks Hassett is the guy and bond and currency markets have barely moved. Bond investors warned US Treasury over picking Kevin Hassett as Fed chair ft.com/content/ad4bfd…