David Sommers @dgsommersmkts Twitter profile | Pikagi

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David Sommers

@dgsommersmkts

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Sharing data, history, independent thought on markets, gold, life, liberty. Not investment advice/marketing Retweets≠endorsements. Do your own due diligence.

Joined April 2023

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@dgsommersmkts

David Sommers

5 months

Paul Volcker, October 25, 2018: "The real danger comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets. Ironically, the “easy

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@dgsommersmkts

David Sommers

6 months

@FitFounder Live in the present moment as much as you can. Priortize sleep, exercise, and good nutrition. Smile as much as you can and avoid arguments whenever possible.

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David Sommers

1 year

@KobeissiLetter 100% correct. And then add to that health insurance, and it gets even more unaffordable.

FRED Economic Data

Personal consumption expenditures: Net health insurance: Medical care and hospitalization

fred.stlouisfed.org

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David Sommers

4 months

@KobeissiLetter And perhaps a natural progression for an economy increasingly supported by inflationary deficit spending.

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David Sommers

4 months

@KobeissiLetter I think that all of these markets seem to be expressing a view that the Fed is losing the battle against inflation. That seems to be the common theme here.

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David Sommers

4 months

@KobeissiLetter I would follow Chair Volcker's lead and publicly insist to Congress and the Administration, and whichever Congress/Administration is in power in 2025, that inflation comes from budget deficits, and the only way to fight inflation is by reducing deficits and balancing the budget.

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David Sommers

11 months

@zerohedge Debt rising at this pace is going to make the US's interest expense problem even worse than this chart (which ends at Q2) depicts.

FRED Economic Data

Federal government current expenditures: Interest payments

fred.stlouisfed.org

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@dgsommersmkts

David Sommers

6 months

@GRDecter No, it doesn't end well, especially as the interest expense on that growing debt skyrockets exponentially, making the debt problem even worse.

FRED Economic Data

Federal government current expenditures: Interest payments

fred.stlouisfed.org

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David Sommers

6 months

@KobeissiLetter Meanwhile, the Bank Term Funding Program expires March 11, in 34 days.

FRED Economic Data

Assets: Liquidity and Credit Facilities: Loans: Bank Term Funding Program, Net: Wednesday Level

fred.stlouisfed.org

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David Sommers

1 year

@KobeissiLetter Agreed 100%, this is exactly right. The Fed's balance sheet saw a similar, if a bit less dramatic, explosion since 2020, following years of its own massive growth after 2008. Why would the Fed be surprised about inflation, indeed?

FRED Economic Data

Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level

fred.stlouisfed.org

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David Sommers

9 months

@KobeissiLetter The only really feasible long-term plan is going to be inflationary policy -- there is no political appetite to raise more revenues or cut spending, and interest expense is soaring. Fed will likely need to reverse QT back to QE.

FRED Economic Data

Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level

fred.stlouisfed.org

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David Sommers

5 months

@elerianm Yes, but isn't the unprecedented US peacetime deficit spending since 2019 a really important factor to consider in both the US economy's growth during these years, as well as the potential bill that might come due in the future for that spending?

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David Sommers

11 months

@zerohedge Kind of shocking at first glance. Maybe it has something to do with the US's fiscal year end?

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David Sommers

6 months

@KobeissiLetter The jobs at all of these companies seeing layoffs tend to be full-time, high pay, high benefit jobs. The jobs number from yesterday includes many more part-time, lower pay, snaller benefit jobs than the ones mentioned above that have been lost.

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@dgsommersmkts

David Sommers

6 months

@KobeissiLetter And these price increases are all happening despite energy prices being more or less contained, for the moment. What happens if energy prices start to rise, because of inflation, geopolitical issues, or other supply/demand dynamics?

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David Sommers

6 months

@zerohedge The jobs at all of these companies seeing layoffs tend to be full-time, high pay, high benefit jobs. The jobs numbers from recent NFP reports include many more part-time, lower pay, smaller benefit jobs than the ones mentioned above that have been lost.

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David Sommers

1 year

@Schuldensuehner These are price controls designed to offset harmful inflationary policies already in place -- these kinds of price control measures typically cut off supply and make price increase pressures worse.

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David Sommers

7 months

@elerianm This chart shows the effect of approximately 3.9% YoY price increases in CPI ex food and energy over the last 50 years.

FRED Economic Data

Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average

fred.stlouisfed.org

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David Sommers

4 months

@KobeissiLetter Fed is slowing the pace of its balance sheet runoff with its balance sheet still at 82% (!) of its peak level, 15+ years after the GFC.

FRED Economic Data

Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level

fred.stlouisfed.org

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David Sommers

5 months

@KobeissiLetter These revisions, along with the rising unemployment rate, will likely revive questions about how close the US is to a recession, especially given the historical coinciding of rising unemployment rate and recessions.

FRED Economic Data

Unemployment Rate

fred.stlouisfed.org

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David Sommers

1 year

@KobeissiLetter Regardless of how he proceeds on rates, the US govt continues to explode deficits higher. Deficits need to be financed. President Reagan on inflation, February 5, 1981: "We know now that inflation results from all that deficit spending." CBO: Deficits % of GDP

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David Sommers

6 months

@KobeissiLetter Won't it need to be the Fed via more inflationary, QE type programs? And as the debt matures and is refinanced at higher rates along with new debt issued to fund the huge deficits, the interest expense is going to skyrocket even higher.

FRED Economic Data

Federal government current expenditures: Interest payments

fred.stlouisfed.org

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@dgsommersmkts

David Sommers

10 months

@FitFounder Get lots of sleep, exercise every day (and as much as possible) and try to live in the present moment.

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David Sommers

6 months

@KobeissiLetter And yet at the same time, the US Treasury has issued an additional $963 billion of debt in the first 150 days of Fiscal 2024. The US's deficit spending policies are inflationary and remain a tailwind for cost increases regardless of Fed rate policy.

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David Sommers

5 months

@KobeissiLetter The problem is, even 2% year over year prices increases, let alone 3% YoY price increases, are an enormous burden on US households. The annual increase should be zero. In fact, with technological innovation, we should be enjoying the benefits via price decreases.

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David Sommers

7 months

@KobeissiLetter They are really caught between a rock and a hard place of their own making. The banks and national budget (and many parts of the indebted economy) need rates to be lower, but the Fed knows inflation is still a major problem. The communications show how trapped they are.

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David Sommers

3 months

@KobeissiLetter Perhaps because he can't find bargain assets as he has throughout his career? Because assets are currently mostly overvalued on historical metrics?

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David Sommers

8 months

@KobeissiLetter And banks are at maximum exposure to these loans, as the total of all commercial loans keeps hitting all-time highs, despite these problems.

FRED Economic Data

Real Estate Loans: Commercial Real Estate Loans, All Commercial Banks

fred.stlouisfed.org

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David Sommers

1 year

@TaviCosta Yes. The central banks must be bluffing, since neither the US nor the UK is having any kind of serious legislative conversation about raising revenue or cutting spending to balance the budget -- therefore currency debasement really seems like the only path to pay for deficits.

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David Sommers

1 month

@KobeissiLetter Powell isn't connecting the dots in his communication. The budget deficit *is* very large and unsustainable, but it's also inflationary and an enormous challenge to any effort to control inflation. He must communicate that point to Congress and the Administration. Source: CBO

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David Sommers

5 months

@KobeissiLetter One significant factor for debt issuance at these levels is the skyrocketing interest expense -- already at twice the annualized levels of early 2020 and possibly looking to head much higher.

FRED Economic Data

Federal government current expenditures: Interest payments

fred.stlouisfed.org

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David Sommers

11 months

@KobeissiLetter History rhymes: "As Arthur Burns, the chairman of the Federal Reserve at the time, explained in 1974, the “manipulation of oil prices and supplies by the oil-exporting countries came at a most inopportune time for the United States. In the middle of 1973, wholesale prices of

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David Sommers

4 months

@KobeissiLetter Maybe. Is it possible also that, in addition to geopolitical tensions rising, market participants, including central banks, see the trend in dollar's purchasing power accelerating lower? Gold's rise is really the fall of the dollar's value versus gold.

FRED Economic Data

Consumer Price Index for All Urban Consumers: Purchasing Power of the Consumer Dollar in U.S. City Average

fred.stlouisfed.org

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David Sommers

9 months

@GRDecter Of course this needs to be watched very closely -- upticks in unemployment rate historically coincide with recessions, and now as much as ever the belief in the economy is heavily tied to the belief that the labor market is still "robust."

FRED Economic Data

Unemployment Rate

fred.stlouisfed.org

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David Sommers

4 months

@KobeissiLetter It means that existing homeowners, many of whom have mortgages with interest rates fixed at levels far below what is available now or what was available prior to the GFC, are very unwilling to sell.

FRED Economic Data

30-Year Fixed Rate Mortgage Average in the United States

fred.stlouisfed.org

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David Sommers

4 months

@KobeissiLetter I think the economy's performance continues to be "K-shaped" with certain groups doing well but many getting left behind. The poor performance of some of these companies might reflect their exposure to customers who largely belong to the groups being left behind.

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David Sommers

1 year

@DowdEdward Very interesting and plausible theory. I assumed they left it uncapped b/c they thought using the number needed on the increase ($4 trn? $5 trn?) was so so high that they were concerned it would focus the public too much on how bad the deficits and debts coming are. Either way

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David Sommers

10 months

@elerianm Agreed 100%. this volatility is not normal or desirable. It probably comes from uncertainty on messaging from Fed, as well as enormous projected debt increases over next several decades, and resulting risks of inflation. CBO: Federal Debt Held by the Public, 1900 to 2053 % GDP

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David Sommers

9 months

@zerohedge Yes, but cutting rates *and* restarting QE with deficit spending raging on will likely be a permanent surrender to inflation.

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David Sommers

8 months

@elerianm Yes, I am surprised. The Fed certainly seems to be declaring victory over inflation with today's press release and commentary. They risk throwing fuel onto the still burning inflation fire, given inflationary pressures in the economy and ongoing (and growing) deficit spending.

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David Sommers

4 months

@KobeissiLetter The Fed's hope for a pivot is getting overwhelmed along with its fight against inflation because inflationary deficit spending has expanded the money supply for years and is projected to continue at similar levels at least for the foreseeable future.

FRED Economic Data

Federal Surplus or Deficit [-]

fred.stlouisfed.org

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David Sommers

4 months

@KobeissiLetter Markets also often price gold based on the level of faith that they place in the ability of central planners (government, Fed, etc) to guide successfully the economy and markets. The more the markets believe that those planners are doing a poor job, or cannot do the job at all,

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David Sommers

5 months

@KobeissiLetter It doesn't seem sustainable. This is all happening with personal savings falling steadily, especially in the last year, and well below the amounts "saved" after the Covid Era stimulus.

FRED Economic Data

Personal Saving

fred.stlouisfed.org

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David Sommers

2 months

@KobeissiLetter Yes, work from home certainly seems to have become a permanent aspect of US employment. Another indication of falling office occupancy is the significant dropoff in office and administrative support jobs, well below pre-pandemic levels, having never recovered after 2020.

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David Sommers

11 months

@INArteCarloDoss Agreed 100% -- Fed was never in the mortgage market prior to 2009, there is no reason for this to be a permanent state of emergency/affairs.

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David Sommers

5 months

@TaviCosta Yes, and the cost of manufacturing mining machinery and equipment has been skyrocketing, which will likely curtail supply even further.

FRED Economic Data

Producer Price Index by Industry: Mining Machinery and Equipment Manufacturing

fred.stlouisfed.org

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David Sommers

10 months

@KobeissiLetter And we are now in month 20 of the Fed's rate hike cycle -- it often takes 24 months or so for a recession to take place and/or the Fed to reverse course on rates.

FRED Economic Data

Federal Funds Effective Rate

fred.stlouisfed.org

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David Sommers

10 months

@KobeissiLetter Yes, though those costs of building new houses are much higher than they were just a few years ago. Even with a recent moderation, the cost of construction materials is still up over 40% since early 2020.

FRED Economic Data

Producer Price Index by Commodity: Special Indexes: Construction Materials

fred.stlouisfed.org

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David Sommers

1 year

@PeterSchiff Yes, at the same time, the cost of home maintenance is skyrocketing. That should, logically speaking, also cause housing prices to fall. Home maintenance expense is a double since 2009, which is a 5.5% annualized cost increase.

FRED Economic Data

Expenditures: Maintenance, Repairs, Insurance, Other Expenses for Owned Dwelling by Housing Tenure: Home Owner

fred.stlouisfed.org

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David Sommers

3 months

@KobeissiLetter And yet despite these job additions, the number of US manufacturing jobs remains at multi-decade lows, only 2/3 of the peak level of manufacturing jobs in... 1979.

FRED Economic Data

All Employees, Manufacturing

fred.stlouisfed.org

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David Sommers

4 months

Paul Volcker, October 25, 2018: "A 2 percent target, or limit, was not in my textbooks years ago. I know of no theoretical justification. It’s difficult to be both a target and a limit at the same time. And a 2 percent inflation rate, successfully maintained, would mean the price

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David Sommers

4 months

@KobeissiLetter The Federal government is on pace to issue more than $2 trillion of new debt in the current fiscal year to finance deficit spending. It is very difficult to fight a fire when someone is pouring gasoline on it.

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David Sommers

1 year

@KobeissiLetter This is an amazing reflection of the effects of similar inflationary policies implemented by certain like minded central banks worldwide.

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David Sommers

9 months

@nut_history Shoeless Joe should be in the Hall of Fame.

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David Sommers

8 months

@GameofTrades_ Yes, and extending it out slightly earlier, we see that the Fed had paused its rate hikes in the summer of 2006. It took a year after the pause in 2006 for the problems to start to show. What will happen this time around?

FRED Economic Data

Federal Funds Effective Rate

fred.stlouisfed.org

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David Sommers

2 months

@KobeissiLetter Yes, it appears so. The unemployment rate is rising while many new jobs are part-time, and the Labor Force Participation rate remains at multi-decade lows outside of the Covid era. These are concerning signs for the labor market.

FRED Economic Data

Labor Force Participation Rate

fred.stlouisfed.org

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David Sommers

11 months

@KobeissiLetter History rhymes: "As Arthur Burns, the chairman of the Federal Reserve at the time, explained in 1974, the “manipulation of oil prices and supplies by the oil-exporting countries came at a most inopportune time for the United States. In the middle of 1973, wholesale prices of

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David Sommers

3 months

@KobeissiLetter Fed can't do much, it's a bit trapped and needed to take action years ago to avoid the current problems the Fed faces now. This data sounds possibly like the start of some kind of an inflationary recession, or at least that the market thinks the Fed might need to deal with one.

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David Sommers

1 year

@KobeissiLetter US population is up about 12% since 2006, but the percentage of renter occupied housing units is up 28% since 2006. It would make sense given the lack of affordability that renter occupied housing would continue to grow faster than the population does.

FRED Economic Data

Housing Inventory Estimate: Renter Occupied Housing Units in the United States

fred.stlouisfed.org

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David Sommers

4 months

@Schuldensuehner It is very difficult to contain inflation with deficit spending running at record peacetime, non-recession levels.

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David Sommers

1 year

@KobeissiLetter That's amazing -- even as recently as 2020, the share of US homes bought by investors was only 12.6%, though the trend had mostly been rising over the last two decades. Clearly a dramatic further change over the last three years. (Source: Redfin)

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@dgsommersmkts

David Sommers

4 months

Ludwig von Mises, The Theory of Money and Credit, 1953: "A government always finds itself obliged to resort to inflationary measures when it cannot negotiate loans and dare not levy taxes, because it has reason to fear that it will forfeit approval of the policy it is following

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David Sommers

4 months

@KobeissiLetter Maybe the same thing that happened with big tech in '99/'00? "When they were hot, they were very, very hot. But when they were not, they were losers... The Nasdaq composite index leaped 85.6 percent -- a performance that exceeded the gain for any major index in any year in the

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David Sommers

10 months

@KobeissiLetter The Fed's interest rate policy may prove to be fairly powerless versus the ongoing deficit spending and a resulting skyrocketing debt load, all of which is inflationary. CBO: Federal Debt Held by the Public Percentage of GDP

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David Sommers

1 month

If the Fed cuts now, with YoY Core CPI still at 3%+, inflationary deficit spending continuing with no end in sight, and rates still not particularly high by historical measures, how can the Fed make the case that it is truly vigilant on controlling inflation?

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David Sommers

8 months

@KobeissiLetter And banks have large exposure to commercial real estate loans, as the total of all CRE loans at the banks keeps hitting all-time highs, despite these problems.

FRED Economic Data

Real Estate Loans: Commercial Real Estate Loans, All Commercial Banks

fred.stlouisfed.org

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David Sommers

1 year

@nut_history KC. I see powdered blue and I see George Brett hitting .390 in 1980.

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David Sommers

7 months

@TaviCosta Agreed 100%. Amazingly, despite all of the well-known issues in the commercial real estate sector (especially with office properties), banks' exposure to these loans rose to another all-time high in December.

FRED Economic Data

Real Estate Loans: Commercial Real Estate Loans, All Commercial Banks

fred.stlouisfed.org

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David Sommers

3 months

@KobeissiLetter Because it continues to be difficult to find the high-paying, high benefit full-time jobs which can provide families with the chance to keep up with the quickly rising costs of living?

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David Sommers

8 months

@KobeissiLetter Fascinating chart. While there was a downtick yesterday in the unemployment rate (powered by healthcare and govt job increases), labor market appears to be weakening. More weakening would lead to UR rising, recession, and the gap closing with S&P falling.

FRED Economic Data

Unemployment Rate

fred.stlouisfed.org

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David Sommers

5 months

@KobeissiLetter Fed is in an impossible situation, much of it is of its own making. They can't raise rates, as there is too much debt owed at govt and at every level in the economy for higher rates. Cutting rates will likely ignite inflation pressures further. Maybe best is to hold rates here?

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David Sommers

2 months

@KobeissiLetter This is a remarkably resilient market, as was the 2016-2018 market. But would either market have held up in quite the same way, had the Fed not supported it with a balance sheet 5-10X the size of its pre-GFC balance sheet, loaded with UST bonds and mortgage-backed securities?

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David Sommers

6 months

@GRDecter Banks' exposure to commercial real estate loans hit another all-time high in December.

FRED Economic Data

Real Estate Loans: Commercial Real Estate Loans, All Commercial Banks

fred.stlouisfed.org

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David Sommers

8 months

@KobeissiLetter Ultimately, regardless of the exact Fed Funds rate, we are likely to see significant inflation, as the US's debt issuance continues to skyrocket in the foreseeable future. CBO: Federal Debt Held by the Public Percentage of GDP

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David Sommers

4 months

@KobeissiLetter Another factor in rising vehicle insurance costs is rising vehicle maintenance and repair costs -- up 33% over the last 4 years.

FRED Economic Data

Consumer Price Index for All Urban Consumers: Motor Vehicle Maintenance and Repair in U.S. City Average

fred.stlouisfed.org

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David Sommers

13 days

@KobeissiLetter Yes, inflation is still too high -- and ongoing deficit spending, which is inflationary, shows no sign of slowing down, and presumably would only increase if and when the US economy enters a recession. Source: CBO

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David Sommers

9 months

@KobeissiLetter The plan, whatever it is, will almost certainly involve some sort of inflationary policy. It's important to note the effect inflationary policies have already had on the purchasing power of the dollar over the last 100+ years.

FRED Economic Data

Consumer Price Index for All Urban Consumers: Purchasing Power of the Consumer Dollar in U.S. City Average

fred.stlouisfed.org

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David Sommers

5 months

@TaviCosta In the stagflation period of the late 1970s, the price of silver moved up from just under $5 per ounce in early 1978, to a high of $49.45 in January 1980 -- and that move was without the benefit of the demand for silver from green energy initiatives that we see today.

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David Sommers

4 months

President Ronald Reagan, April 24, 1985: "The simple truth is: No matter how hard you work, no matter how strong this economy grows, no matter how much more tax money comes to Washington, it won't amount to a hill of beans if government won't curb its endless appetite to spend.

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David Sommers

1 year

@PauloMacro A recession could make inflation far more fierce by cutting down businesses and reducing all kinds of capital investment, including in natural resource extraction, killing supply. Decent chance that Westerners are going to be forced to think about it soon, given current trends.

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David Sommers

9 months

@GRDecter "Our people are simply sick and tired of wasteful Federal spending and the inflation it brings with it." -- President Carter, 1978 "We know now that inflation results from all that deficit spending." -- President Reagan, 1981 CBO: Federal Debt Held by the Public % of GDP

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David Sommers

8 months

@KobeissiLetter Deficit spending is out of control. Skyrocketing interest makes the situation worse. With $33.8 trillion debt outstanding, if US refinanced at current yield on 10-year UST bond (4.27%), expense would be $1.44 trillion, 50% higher than top of this chart.

FRED Economic Data

Federal government current expenditures: Interest payments

fred.stlouisfed.org

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David Sommers

6 months

@KobeissiLetter @RealEJAntoni There doesn't seem to be any plan here, and very little discussion in Washington of the problem. Interest expense on that growing debt is also skyrocketing exponentially, making the debt problem even worse.

FRED Economic Data

Federal government current expenditures: Interest payments

fred.stlouisfed.org

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David Sommers

9 months

@KobeissiLetter Agreed, and along with these locked in mortgage rates, the Fed's unprecedented, 15 year involvement in the MBS market almost certainly has had (and will continue to have) a major impact on the strength is in the housing market.

FRED Economic Data

Assets: Securities Held Outright: Mortgage-Backed Securities: Wednesday Level

fred.stlouisfed.org

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David Sommers

4 months

@zerohedge Meanwhile prices paid rose at a faster pace -- another stagflationary trending report.

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David Sommers

1 year

@KobeissiLetter One thing to watch for is the cutback of investment in resource extraction in the US, especially if a recession decreases that investment further. That lower investment in resource extraction is one reason why a recession can make prices higher, especially for energy.

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David Sommers

4 months

@KobeissiLetter Yes, and consider that banks are also exposed to a record high in consumer loans at the same time, nearly $2 trillion in February.

FRED Economic Data

Consumer Loans, All Commercial Banks

fred.stlouisfed.org

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David Sommers

3 months

The Fed is, at the moment, losing its fight with inflation with deficit spending continuing at record non-recession, peacetime levels. And projections indicate no end in sight for this kind of spending, for decades. Source: CBO

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David Sommers

2 months

@KobeissiLetter Even if they are below expectations, inflation driven year over year cost increases of 3.3-3.4% are still an enormous burden on US households, which have already suffered through decades of unrelenting price increases.

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David Sommers

5 months

The problem is, even 2% year over year prices increases, let alone 3% YoY price increases, are an enormous burden on US households. The annual increase should be zero. In fact, with technological innovation, we should be enjoying the benefits via price decreases.

@KobeissiLetter

The Kobeissi Letter

@KobeissiLetter

5 months

Since the Fed began raising rates in March 2022, they have made it clear that 2% inflation is their target. Most recently, February CPI inflation JUMPED for the second straight month to 3.2%. Core CPI inflation is still at 3.8% which is nearly double the Fed's long-term

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David Sommers

7 months

@KobeissiLetter My guess is still, no soft landing. Also, the prior two months' reports were revised *downwards* (surprise) by 71,000 jobs.

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David Sommers

9 months

@KobeissiLetter Agreed 100%, this debt crisis is real and getting more serious. And another important question and concern is, who is holding onto all of these loans as assets? How much at risk are those institutions if losses start to mount?

FRED Economic Data

Motor Vehicle Loans Owned and Securitized

fred.stlouisfed.org

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David Sommers

9 months

@profstonge And that's of course in addition to each household's "share" of the national debt, $33.704 trillion and skyrocketing higher by the month.

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David Sommers

4 months

@KobeissiLetter Worth noting also that the Fed has distorted the housing market, both prices and rates, for years by its unprecedented (prior to 2009) purchases of mortgage-backed securities. The Fed still holds 87% (!) of its peak MBS holdings, 15+ years after the GFC.

FRED Economic Data

Assets: Securities Held Outright: Mortgage-Backed Securities: Wednesday Level

fred.stlouisfed.org

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David Sommers

4 months

The US Treasury yield curve has been inverted for over 17 months (and counting).

FRED Economic Data

10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity

fred.stlouisfed.org

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David Sommers

6 months

Henry Hazlitt, Man Vs The Welfare State, 1970: "The supply of gold is governed by nature; it is not, like the supply of paper money, subject merely to the schemes of demagogues or the whims of politicians. Nobody ever thinks he has quite enough money. Once the idea is accepted

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David Sommers

9 months

@KobeissiLetter The markets' anticipation of pause and then rate cuts really seems premature given continued inflationary pressures and deficit spending.

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David Sommers

9 months

@KobeissiLetter The ratio of a price of an ounce of gold to S&P level was as high as 1.69 as recently as August 2011. That ratio is currently only 0.44. Gold would need to be over $7,500 per ounce, given the current S&P level of 4549, for that ratio to equal the ratio in 2011.

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David Sommers

8 months

@TaviCosta A very important development. Current rates at all durations, even if lower than they were earlier in 2023, are likely going to be higher than rates were when the debt was originally issued -- putting even more upward pressure on interest expense.

FRED Economic Data

Federal government current expenditures: Interest payments

fred.stlouisfed.org

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David Sommers

11 months

@KobeissiLetter Yes, short maturities are a huge problem, on top of rising debt and rates, for the US government. If the entire debt needed to be financed at the current Fed Funds rate (5.5%), then interest expense would nearly double from this chart, to $1.81 trillion.

FRED Economic Data

Federal government current expenditures: Interest payments

fred.stlouisfed.org

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