Tony Carfang

Treasury, Payments, Financial Regulation and Liquidity Mgt.

[Tony Carfang @TheCarfangGroup]

The Fed’s Big Bath Moment

The Federal Reserve has an $850 billion problem hiding in plain sight. My new article argues that the Fed should consider taking the hit now and move on with a clean slate.
https://t.co/IXduEa9qQp

[Tony Carfang @TheCarfangGroup]

Stablecoins are booming.
But will regulatory tailwinds create a collateral crunch in government securities?
📉 Echoes of 2015? Read: "Collateral Scarcity: Preventing Market Stress from Becoming Contagion" https://t.co/Lk8frCaERM

⚖️ #Stablecoins #FinReg #Collateral #UST #LiquidityRisk

[Tony Carfang @TheCarfangGroup]

Gold touched $3,500 per ounce this morning, up 30% on the year. The pre-August 1971 price was $35.00 per ounce.​  It's now up 100 fold in 54 years.
​
FYI, nominal U.S. GDP is up only 25 fold over the same time period.

[Tony Carfang @TheCarfangGroup]

WSJ reports the Fed had operating loss of $77.6 billion last year and $114.3 billion in 2023 after years of small profits. Somehow, it did not choose to report that unrealized losses on its securities holdings topped $1.063 trillion. Hmmm.

[Tony Carfang @TheCarfangGroup]

How long does inflation last? The 10 yr. treasury is up 70 bps in a few short months and gold is at a record. What is the market signaling? See our "Inflation Trivia" post from 2022 for some amazing insight. https://t.co/uI6K3rNA2d

[Tony Carfang @TheCarfangGroup]

Gold hit new all time high of $2,750 per ounce. 10 yr. Treasury is now 50 bps higher this morning than when Fed announced its 50 bps rate cut. What message to you see in these signals?

[Tony Carfang @TheCarfangGroup]

Just published Fed balance sheet shows unrealized losses of $1.075 trillion. That's over 14.5% of the Fed's total assets. Commercial banks with that ratio would be closed immediately. Is this a problem?

[Tony Carfang @TheCarfangGroup]

Gold closed today at an all time record of $2,474. That's up from $35 when U.S. dropped Bretton Woods in 1971. Some say it is no longer an inflation signal, rather just reflecting huge China purchases. Is that just wishful thinking? I'm concerned. After all, inflationary monetary and fiscal stimulus are still well above trendline.

[Tony Carfang @TheCarfangGroup]

@ElonMuskAOC 4

[Tony Carfang @TheCarfangGroup]

As we predicted, the Fed stress test was mathematically impossible to fail. In Fed's severe adverse scenario, bank credit losses are offset by skyrocketing bond gains as 10 yr treasury falls to 80bps. We believe true adverse scenario keeps mid-term rates higher, even as bank credit losses mount. Too bad Fed didn't test that one.
#federalreserve #stresstest #inflation

[Tony Carfang @TheCarfangGroup]

@MuskUniverseUsa CRAZY

[Tony Carfang @TheCarfangGroup]

Annualized interest on Federal debt just surpassed $1.1 trillion. Too bad Feds didn't term out their 1.57% average rate at YE 2021. That would have saved over $500 billion in interest expense in 2024 alone.

U.S. public debt set record $34.6 trillion and average interest rate on that debt rose from 3.11% at year end to 3.22% at end of Q1.

[Tony Carfang @TheCarfangGroup]

@elonmuskusaaaaa 68

[Tony Carfang @TheCarfangGroup]

Two divergent policies. Passive Quantitative Tightening (Fed letting its portfolio run off) vs Active QT (Bank of England and Riksbank who are selling their bonds).

Central banks took on massive amounts on long term bonds at ultra-low rates during QE. As rates rose, huge unrealized losses began appearing in the fine print of the footnotes to their financial statements, $941B on Dec 31 at the Fed. (higher by now since market rates are rising again)

Rather than take the unrealized losses and moving on, the Fed appears on course to hold these securities at negative spreads for what could be a decade or more. Other the other hand, BoE and Riksbank are selling their bonds at losses at a taxpayer cost of $110B and $4B respectively.

Although U.S. Fed dismisses the losses as unimportant because they are "unrealized", the negative spread will nevertheless saddle U.S. taxpayers with a $1T tab, just not all at once.

https://t.co/dWFDuyWwVv

[Tony Carfang @TheCarfangGroup]

Gold just hit all time record $2,240 per ounce. Is market playing an April Fools joke on the soft landing believers?

[Tony Carfang @TheCarfangGroup]

@elonmuskADO 2

[Tony Carfang @TheCarfangGroup]

@ThebestFigen 30

[Tony Carfang @TheCarfangGroup]

@elonmuskusaaaaa 30