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cover of episode Danielle DiMartino Booth: The Fed's Impossible Dilemma

Danielle DiMartino Booth: The Fed's Impossible Dilemma

2025/4/23
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Danielle DiMartino Booth: 我认为美联储对当前经济形势的应对是失败的。早在贸易战之前,美国经济就已经显现出疲软的迹象,例如公司营收持续下降,这表明经济已经遭受重创。美联储未能及时识别并解决这些问题,反而加剧了经济下行压力。 此外,关税政策也对经济造成了负面影响,特别是对小型企业而言,他们无力承担不断上涨的进口成本。企业难以将成本转嫁给消费者,导致利润率下降,甚至破产。 住房市场降温,住房成本下降,这本应缓解通货膨胀压力,但美联储似乎对此反应迟钝。同时,10年期国债收益率的波动以及美元与黄金的走势都反映出市场对经济前景的极度不确定性。 美联储的货币政策滞后于经济现实,即使采取行动,也可能收效甚微。他们面临着两难境地:如果出手相救,会被认为是屈服于政治压力;如果不采取行动,经济下行压力将进一步加大。 信贷市场中,非存款金融机构的贷款增长迅速,这预示着潜在的风险。一旦出现流动性短缺,市场波动将加剧,美联储将面临更大的压力。 黄金市场也反映出全球经济的不确定性。各国央行增持黄金,这表明他们对未来经济走势缺乏信心。 总而言之,当前的经济困境是长期存在的结构性问题造成的,美联储的政策失误加剧了这一困境。美国需要更强有力的领导和更有效的经济政策,才能应对当前的挑战。

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Welcome to the Risk Reversal Podcast. This is by special request because, folks, you've been asking for her. I reached out to her, and despite her busy schedule, Danielle DiMartino Booth, the CEO and Chief Strategist at QI Research, is here with us.

is joining us. You will see Danielle on all the different news programs now, even more mainstream, obviously, as Fed policy has taken hold and sort of captured the imagination. But she is, in my opinion, as well-versed as anybody in the country to speak about what's going on. Danielle, how are you? I'm doing great today. How are you? Thanks for having me.

Are you kidding me? This is a treat for me as well. So you wrote a book that everybody should read. The name of the book is Fed Up, and then it has all the little words that go after titles in today's books. But right now it appears this administration is sort of fed up with Jerome Powell. So let's start there. What is your sense of what's going on? What is sort of this grandstanding in your opinion? So I'm disappointed to say that I think that there is grandstanding on the part of the Fed.

right now and I wouldn't normally be in that camp. But look, okay, so we've only had like a tenth of companies report so far. But when 65% are missing on the top line,

That doesn't have anything to do with Liberation Day. That preceded Liberation Day because top line, you can't fudge. You can try and like throw the baby out with the bathwater and fudge your bottom line. One time this and currency translation that you cannot fudge your top line. And 65 percent of companies missing on the top line, beginning with financials, tells you that the economy was already suffering a heart attack.

Before this whole trade war thing, that's why I'm saying the Fed is playing politics here because it's their job to respond to stress in the economy. And they're stressing the economy when revenues are missing.

Fair. And I think that's a point well taken. If there is a pushback and it comes in the form of inflation, which you might submit it's working towards their goal, my pushback would be, I mean, it's as sticky as we've seen probably since the early 1970s. So there's obviously still some concern that

If in fact they were to move again, you know, they're just sort of going to reenact what Arthur Burns went through 1972, 73, 74. I wish it was that easy, but it's not. Look, less than 50% of all apartments were leased within the first three months of coming out of the construction pipeline in the fourth quarter. The census data series on this is extremely lagged, but just remember less than less than half. Okay. Okay.

And that tells you what we found out last week, the Cleveland Fed's new rent tenant index, which Powell had the sense to refer to in December. He said, the market is new leases. And why am I harping on this? Because we have shelter, not disinflation. We have shelter deflation as the biggest input to CPI ever.

I understand that there are fears of sticky inflation, but on planet Earth, the largest input to inflation is falling. And I'm in Dallas, Texas, which is one of these ground zero housing markets where, you know, every Airbnb jock who thought he was going to be a millionaire overnight, they're like dumping their properties. It's kind of a you know what show.

on the shelter side of inflation. And did I just mention that revenues missed? This is a reflection of fear of sticky inflation, fear of what tariffs could do to inflation, and the slap in the face of purchasing power being decimated and companies not capable of passing along their crippling rising input costs. I'm not in denial of that.

Right. Tariffs will work and they will work to the detriment of a small little boutique that I was in in Birmingham, Michigan, this weekend that went out, just went belly up a few weeks ago. They're like, we're small. We're not going to be able to fight higher prices coming from France. France is our main country where we buy products and we're just going to go out strong and call it a day.

Rising input costs are a reality. The inability to pass along rising input costs is called the mother of all margin squeezes. And that's what we're dealing with. It's not that I deny that tariffs cause inflation. I deny that tariffs can cause inflation for end users. And that is every CEO and CFO's worst nightmare.

All right, so here we are. So, you know, you think, well, it's going to be interesting to see now. So if and I know you know this, but if Jerome Powell were to cut now, there'll be people that say he acquiesced, he bent to the will of the administration. You submit that they probably should have done it already regardless. But.

Let's play it out a little bit here. And he does, in fact, cut rates 25 or maybe even 50 basis points. I think that would be a little bit dramatic. But we saw this in September. And this is sort of where the rubber hits the road. Tenure yields in September, I know you know this, were either side of 3.6%. They spent the next few months

making their way up to about 4.8% before pulling back again to 3.8% on a tremendous growth scare, only to be sitting here earlier in the week to be trading either side of 43544. So what's going on with the 10-year yield? Because as you also know, the bond market was melting down early last week. Yep. And you're going to continue to see this. Investors don't know what to do.

They are selling dollars. They're selling bonds. They're buying gold. I mean, what you're seeing in markets, by the way, the dollar and the 10-year yield should not be moving in the opposite direction here.

What you're seeing here is mass confusion. What you're seeing is correlations. What you're seeing is a generation ago, we didn't have triple levered ETFs that were being funded in the shadows. We had margin loans, margin loans or margin. You want to lever up your equity portfolio? Take out a margin loan. Today, you can do that in a variety of different ways.

So you're seeing it manifest in a variety of different ways. But let's go back to your example of we're going to pause in July and then go big in September of last year. Why'd they do that? They did that because the actual data came out and said, you're way behind.

Look, you've been around. My hair's dyed, but it's your color. OK, you've been around since Ben Herzon invented GDP modeling at Macra Economic Advisors before it was bought out twice. And now then Ben sits at S&P Global. But he's still got those badass GDP model on planet Earth because he invented the damn thing. Right. Going into this week, it was at

Flat as a pancake. You're taking it down from 0.4% to 0.0% for Q1, right? Why am I getting this detail? First quarter GDP is going to be reported on April the 30th.

If Ben's at 0.0 before realtors brokerage commissions come out in new and existing home sales, before durable goods hits, and oh wait, on the 29th, before the trade deficit hits, which is going to make the orange man in the White House even angrier. All of this comes out with Ben starting at a point of 0.0. So what do you do if you're...

Jerome Powell going into blackout, FOMC blackout, this Friday, and GDP for the first quarter prints negative. After these subsequent reports that I'm describing to you come out and take Ben Herzog from 0.0 into something with a negative sign in front of it. Forget the Atlanta Fed GDP. Mickey Mouse could have created that model. But what if you're at a negative GDP on

On April the 30th, when GDP is reported in blackout, what if April nonfarm payrolls actually reflect federal layoffs, which they didn't, right? Because Musk was shrewd enough to make sure that March payrolls started at the federal level after the survey week cut off.

So last payrolls report was nice and benign. This one won't be so much reported May 2nd, very early on in the month, again, prior to May 7th FOMC. So what if you wake up on May the 6th on day one of the FOMC meeting and you have egg on your face, the color of my blouse and your name's Jay Powell. What are you calling Nick? Hey, Nick, I got some problems with QN GDP. I've got an even bigger problem with April payrolls.

Again, it's not the Fed's job to game play what's happening in the White House. It's the Fed's job to pay attention to what's happening on the ground in the U.S. economy, which was slowing prior to Liberation Day.

So let's play this out a little bit again. Let's say the Fed does act in kind and they listen to Danielle, which, by the way, they probably should have all along, because I'm sure there have been places along the way where you've been pulling your hair out as well, as I have. Have they gotten to a point now where regardless of what they do, they might be pushing against something that they can't really fix right now? I guess my point is, are the wheels in motion such that really any action they take at this point may prove to be somewhat fruitless?

Look, yes. Are they pushing on a string at this point? They are. What's made it more difficult to be in this particular position is that if they do come riding to the rescue of the real economy, which, by the way, is their J.O.B., it's going to look like they're kowtowing to Trump. It's going to make it even worse. They're in between a rock and a hard place. Even 50 basis points on May the 7th isn't going to make a whole hell of a lot of difference when you have a bankruptcy cycle that's running at the fastest pace since 2010 as of Q1 2020.

2025. And that's what S&P Global reported last week. It's that bankruptcies are running at the fastest pace to all of this. All of these are pre-existing conditions. And yet Jay Powell is making it look like a pissing match with Trump. That. No, it's none of this is good, by the way. And again, I mean, I do think they find it. And by the way, they put themselves between that rock and a hard place, quite frankly. So if people are looking for sympathy from me, they're not going to get it.

With that said, what's going on with the back end of the curve? Because you're talking about a slowdown, which we all see. I mean, I see the 90-day delinquency rates at the highest levels we've seen probably in 13 or 14 years. I mean, all the signs are there of a slowing economy. Yet yields continue to trade higher. Is it just as simple the lack of confidence as what's going on in the United States? Or is there something more nefarious at play?

I wouldn't say nefarious, but I would say there's something less visible at play. Every week, the Fed releases a report on what's going on with banks, balance sheets, lending, what have you.

And, you know, all loans net of and I don't mean to be getting in the weeds, but it's kind of important here. Non-depository financial institution lending is of about 22 percent year over year. That's a big number when all of the rest of lending throughout the banking system is about flat, up about one and a half percent year over year. But what the hell are loans to NDFIs up 22 percent year over year?

Well, this is the Jamie Diamonds of the world and the biggest banks lending to the non-banks, lending to levered ETFs, lending to private equity, lending to private credit. And that lending is still continuing to go up until there's a little bit of a liquidity vacuum, which we've seen really, really recently. When there's a liquidity vacuum,

Nothing trades the way it's supposed to, including the long end of the curve. Liquidity vacuums are completely unpredictable in how they manifest. And that is one of the biggest problems that we're seeing right now. It's that we have a ton of lending into the non-banks, the shadow banks, the basis trade markets.

You've got God knows what's happening in Beijing and they're angry. Are the Japanese the actual ones who are selling? Because the latest data suggests it ain't the Chinese. So we don't know what we can't see, but we do know that when markets begin to throw up and I'm sorry, but up or down 3% on the S&Ps, not normal on any given trading day, you can hit illiquidity pockets. And when that happens,

The Fed's in an even tighter spot because in addition to minimizing inflation and maximizing employment, and if I hear Jay Powell say one more time, the labor market's strong, it's so- I agree with you there. People lose their jobs. So insulting. But in addition to the dual mandate that the Fed has, they are always the lender of last resort. And that's why a few Fridays ago, until-

The Financial Times broke with a headline that said, OK, Susan Collins, who is she? What? Boston Fed? What? Somebody in public affairs at the Federal Reserve Board mid-afternoon a couple Fridays ago said, all right, say it. We will inject liquidity if need be. But you know what? That's our job.

And that's what we're seeing illiquidity begin to pop up here and there. Maybe last time it was not QE, you know, the not QE with the repo market blowing up. It's never going to look the same, but the Fed's always going to have to provide liquidity when you have it dry up overnight. And again, you remember that Friday afternoon, it wasn't until the Financial Times headline hit, it finally said the Fed could come in.

The 10-year had kissed 450 that day. It collapsed back down, but only on the verbal assurance that the Fed would ride in with liquidity if need be.

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What is the gold market telling you? Because now it's four years of record buying from central banks. And some phrase that I've used, and I'm sure you've thought it long before I used it, but

I believe that central banks have all along been hedging their ineptitude and they're doing it vis-a-vis the gold market, which seemingly now everybody is talking about. I mean, it's not as much as prognosticating the next move in gold as much as it is what the gold market is seemingly telling us. The gold market is telling us that there is an, not that there is uncertainty, but that there is a full wholesale absence of any certainty.

And that's gold's job, by the way. That is the duty of gold. And when there is an absolute absence of certainty, that means that when the two biggest economies in the world are engaged in a very public economic cold war, the next step is hot war. I'm not saying that's going to happen. I'm not. I'm just saying that that is the next step. We have Germany, Germany,

blowing out its infrastructure. And we have countries that are talking about building up defense spending, by the way, because they have to, but that haven't in generations, plural.

And gold is the ultimate hiding place when there is a full absence of certainty. And central banks are smart to have been building up their gold stores in this kind of an environment, because even though Jay Powell will tell you swap lines are open, we're all talking amongst one another, the lack of coordination between central banks is also pretty apparent.

Because you can't figure out what motivations are. And by the way, our allies aren't our allies anymore. And Jay Powell's in a pissing match with Donald Trump in the middle of some pretty serious economic disruption. Tough to find our way out of this right now. And to your point, I mean, the market is finding itself

basically clamoring for the gold market. And, you know, it's interesting that president Trump put out a tweet and I'm paraphrasing to a certain extent, but he, or those who control the gold, uh, control the narrative or hold all the cards or something like that, which is,

To me, it's a bit of a warning sign in terms of, you know, repatriation of gold and all these different countries talking about wanting their gold back. There's a reason why we've seen these headlines. But, you know, that story is going to continue to play itself out. One thing we've seen some cracks, but, you know, not nearly to the extent that I've thought we would by now.

finds its way, the credit market, which we've seen some tremors, and the municipal bond market, which for a day at least last week had a bit of an issue. So why do you think the credit market is held in there until recently as well as it has? Well, so the last time there was a, what did Mr. Diamond say, a kerfuffle?

we didn't have more than a trillion dollars in fixed income exchange traded funds. It just wasn't a thing. So in 2008, 2009, when there was disruption in the markets, you would see credit spreads blow out immediately. But this time, there's well north of a trillion dollars in fixed income ETFs, HYG, LQD. So what have we seen these last few years? We've seen the most liquid names in those trade upon redemptions and inflows.

What you're not seeing, and this is something that you're also, by the way, not seeing in private equity, you're not seeing the absolute toxic garbage that only trades by appointment.

And if you cut deep enough into leveraged loan, junk, redemptions, and if things get bad enough that public pensions keep saying, here's the Heisman, not interested in your next private equity fund, go shopping with retail investors. Try and sell that garbage to them to get your liquidity. If we keep seeing that, we're going to start seeing actual trades based on the less liquid names.

And God help us when we see that, because then you'll see big moves. I mean, they popped out today with a $4 billion junk deal. Let's see if they can get it priced. But leveraged loan issuance, and this is Jay Powell's boogeyman, it's not spread, it's issuance. And if issuance comes to a halt, that's when all bets are off.

So one place we have seen dislocation, I'm choosing that word, is currency markets. And not just developing nation currencies. I mean, we're talking about moves in dollar-yen, dollar-euro, dollar-Swiss, you name it. Some of these moves have been unprecedented. I mean, is that just sort of a continuation of the theme of the global uncertainty and the market is just trying to readjust itself?

And through the bond market, obviously, but obviously through the currency markets too. So, you know, I heard a British portfolio manager, an institutional client a few days ago say, I don't really think I need analysis anymore. Everything I do is predicated on selling the dollar. That's all I'm doing. All I'm doing is finding out different ways to express sell the dollar. And I found that that was a really interesting

interesting comment to be made given, you know, like European banks aren't that much better than ours. They never did have to really, you know, find religion and clean off all the bad loans off their balance sheet after the crisis. And yet, if the entire world is trying to express how to dump the dollar, then you're in a really binary place.

And that's, again, I go back to this word liquidity. That's why we're seeing illiquidity pockets pop up here and there. And by the way, you're in the soup if the $7 trillion a day volume FX market is this bumpy.

It's the deepest and most liquid and most traded and highest volume market on planet Earth, 86% of which is in dollars. 86% of FX transactions are in greenbacks. Now, listen, again, you're preaching to the choir, and it's something I've been talking about for a while. I don't think people fully realize that.

what's going on. But I also think that when you're sitting on now close to $38 trillion in debt, one of the ways you get yourself out of it is to devalue your currency. So maybe there's a method to this madness all along. I mean, maybe that is the end game is to weaken the currency. As much as administrations like to talk about a strong dollar policy, quite frankly, it's one thing to have a strong dollar policy when you hold the cards.

It's something entirely different when you don't. And with $38 trillion in debt sitting on top of a, let's just call it a $28 trillion economy, and I'm probably being somewhat liberal, you got a problem. You have a huge problem. And if there was a more thoughtful, singular architect to make happen what you're describing, I think his last name's Besant, we might be seeing this play out differently.

But, you know, look, I'm a huge Longhorn football fan, and I've long told people that every single school should have $1 billion booster. When you have 10, it's really hard to set up good football policy because you've got too many cooks in the kitchen. You just need one billionaire. You know, you just need one T. Boone Pickens at Oklahoma State. I'm going to start with my metaphor. I'm just saying we need...

stronger, more singular leadership right now instead of one person who gives us hope and a bunch of bobbleheads. Look, with deference to Kevin Hassett, it was flat out irresponsible to come out and say there's a raging fire inside the theater. We might figure out how to fire Powell. Look, 85 senators, 85 senators reconfirmed this man.

You do not want mutiny in the U.S. Congress in the middle of all this. So you have to have cooler heads at very high ranked positions in the United States right now saying we have caused so much disruption. Maybe we should try and, you know, go from DEFCON 1. Take it down a bit.

Well, that's why I think, again, getting back to how we started, and we'll end it this way, I guess, is I think the least of our problems is what Jerome Powell is going to do. Again, cuts 25, cuts 50. I mean, that's all fine. But to me, Danielle, and you can push back on this if you'd like. I mean, the wheels have been set in motion long ago. There was an inevitability to all this. And there's a reason why when that Buffett indicator in terms of his metric went to 210%,

and why a Warren Buffett stashed $335 billion of cash, he obviously saw something coming. And again, using that term, the genie's out of the bottle. So you want to cut? As they say, have at it. I just don't know what it's going to do at this point.

And to your point, you know, the same talking heads who were like, the Fed's going to hike in 2025. They were the first ones out of the gate to say QE. And I'm like, wait a minute, wait a minute, wait a minute. QE starts with zero interest rates. You've gone from saying the Fed is going to hike rates in 2025 to saying overnight we're at the zero bound and launching quantitative easing. I mean, come on, people.

And that's the thing. If you go to a situation where the discussion segues from this polite little conversation about what's going to keep core PCE elevated, you know, let's talk about eggs and auto insurance rates to QE. QE. It's a quantum leap.

It is a quantum leap. And that's why it won't matter if the Fed's super late to the game, if we're sitting here discussing 25 or 50 basis points or May or June FOMCs.

Well, that's why everybody should read your book because you were well ahead of this many, it's literally many, many years ago. And you talked about, and you can correct me if I'm wrong, but the fed are specifically our federal reserve, but I mean, central banks globally really just mucking up the works. And, and I will say that amongst the many villains of the 21st century, and there's a laundry list, you know, I think central bankers are going to find themselves on top of it, given everything that's going on. Uh,

Alan Greenspan and his successors have a very long legacy to live down. We will leave it at that, Danielle. You are the best. I want to thank you for joining us. Our folks asked for you. You got her, Danielle DiMartino Booth. You can find her on all the different business networks on a pretty regular basis. You're the best. Thank you, Danielle. Thanks for having me. Appreciate it.