The Higher Standard

Goldman Sachs is preparing for its third round of layoffs since September as Wall Street firms adjust to a slump in deals activity. The company is expected to trim fewer than 250 jobs in the coming weeks. Goldman Sachs, led by CEO David Solomon, was among the first major Wall Street firms to trim jobs in September, cutting a few hundred positions. It then slashed more jobs in January, releasing about 3,200 employees. Morgan Stanley announced about 3,000 job cuts this month, and JPMorgan Chase cut about 500 jobs. However, Goldman is more tied to the ups and downs of Wall Street than its rivals. Its combined 16% drop in first-quarter trading and advisory revenue contributed to a disappointing start to the year.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a report from Refinitiv's FedWatch, indicating that U.S. rate futures on Wednesday priced in a pause in interest rate hikes by the Federal Reserve at next month's monetary policy meeting, a massive turnaround from indications of a 25 basis-point increase earlier in the session.Chris and Saied look at a report from payroll processing firm ADP, showing that the U.S. labor market posted another month of surprising strength in May as companies added jobs at a pace well above expectations.They also offer some thoughts on the tumble the stock market took on Wednesday, as the Dow Jones Industrial Average fell 0.4%, or 150 points, by 3:15 p.m. ET, while the S&P 500 and the tech-heavy Nasdaq slid 0.5% apiece.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:The concept of market capitalization.Why inversion typically precedes a recessionary economy.Why the data is showing that employment is headed in the wrong direction.And so much more...Resources:"Dow falls 130 points after FDIC reveals record plunge in bank deposits" (Forbes via Instagram) "US rate futures expect Fed pause in June in sharp turnaround from earlier" (Reuters)"Goldman Sachs is cutting jobs again amid Wall Street deals slump" (CNBC)"Job openings show surprise increase in April" (Yahoo! Finance)"Private payrolls rose by 278,000 in May, well ahead of expectations, ADP says" (CNBC)"Pending home sales unchanged in April, down 20% year-over-year" (CNBC)"Market Capitalization: What It Is and Why It Matters" (NerdWallet)"State Farm Halts Home-Insurance Sales in California" (The Wall Street Journal)"Apple Customers Say It’s Hard to Get Money Out of Goldman Sachs Savings Accounts" (The Wall Street Journal)"Downtown LA's office distress shows the pain coming for cities" (Bloomberg)

U.S. consumer spending increased more than expected in April, boosting the economy's growth prospects for the second quarter, and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month. The growth picture was further brightened by other data from the Commerce Department on Friday showing a surprise rebound last month in orders of manufactured non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss the debate among Fed officials, centered on concerns over inflation not cooling fast enough and the labor market’s persistent strength. Chris and Saied look at the increase in real GDP, which reflected increases in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment.They also offer some thoughts on a jump in consumer spending of 0.8% last month after gaining 0.1% in March. Economists had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, would rise 0.4%.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:The difference between Gross DOmestic Income (GDI) and Gross Domestic Product (GDP).Why the National Bureau of Economic Research has not declared a recession.Why the additional stress placed on all corporations and profitability will be very visible in July.And so much more..."Gross Domestic Income GDI Suggests US Is In Recession Right Now" (Zero Hedge)"Strong US consumer spending, inflation readings put Fed in tough spot" (Reuters)"Fed officials debated need for rate hike at last meeting, minutes show" (CNN)"A Housing Bust Comes for Thousands of Small-Time Investors" (The Wall Street Journal)

Deposit runs have led to the collapse of three U.S. banks this year, but another concern is building on the horizon. According to JPMorgan Chase CEO Jamie Dimon, commercial real estate is the area most likely to cause problems for lenders. U.S. banks have experienced historically low loan defaults over the last few years due to low interest rates and the flood of stimulus money unleashed during the Covid-19 pandemic. However, the Federal Reserve has hiked rates to fight inflation, which has changed the landscape. Commercial buildings in some markets, including tech-centric San Francisco, may take a hit as remote workers are reluctant to return to offices.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss an academic paper from economist Olivier Blanchard and former Federal Reserve Chair Ben Bernanke, who guided the central bank and the U.S. economy through the Great Recession, in which they argue that central bankers still have work to do to bring down inflation.Chris and Saied look at news that San Francisco has the largest sublease market of any U.S. metropolitan area, with 7.2% of its overall office inventory available for sublease, having doubled that figure since late 2019.They also offer some thoughts on the rise of asset managers, private equity funds and insurers, as the regional banking crisis supercharges the expansion of these non-bank lenders into areas such as providing consumer car loans and mortgages, or financing the construction of buildings.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why the debt ceiling 'crisis' is a non-event.Private equity and how it differs from real estate syndicators.Special Purpose Acquisition Companies (SPACs): a new way to take companies public.And so much more...Resources:"Here's how much emergency savings you need amid economic uncertainty, according to financial advisors" (CNBC via Instagram)"Fed Chair Powell says rates may not have to rise as much as expected to curb inflation" (CNBC)"Jamie Dimon warns souring commercial real estate loans could threaten some banks" (CNBC)"Analysis: Private equity steps up lending as U.S. banks pull back" (Reuters)"Former Fed Chair Ben Bernanke says there’s more work ahead to control inflation" (CNBC)"What's the right emergency fund amount?" (Vanguard)"These Companies Are Trying To Shed Massive Amounts of San Francisco Office Space" (SF Standard)"The Majority of U.S. Businesses Have Fewer Than Five Employees" (Census.gov)"PacWest to Sell $2.6 Billion Real Estate Loans at Discount" (Bloomberg)"Fed Rate Increases Hit Small Businesses the Hardest" (The Wall Street Journal)"Regional Banks Rallied Last Week. Traders Continued to Short the Sector" (Bloomberg)"Fed Official Is Open to Forgoing June Rate Hike" (The Wall Street Journal)

Federal Reserve Bank of Cleveland President Loretta Mester has said that she does not think the U.S. central bank is at a point yet where it can hold interest rates steady for a period of time, given how stubborn inflation is. Federal Reserve Chair Jerome Powell has signaled the central bank may pause further rate hikes as it assesses the impact of its past tightening, as well as the effect of recent bank sector stress on lending and credit.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss news that JPMorgan sees treasuries as the best hedge against a slowdown, and sees the possibility of 10-year rates falling below 2.5% in the event of a deep recession. The 10-year Treasury rate was trading around 3.53% on Wednesday, after rising as high as 4.09% earlier in the year.Chris and Saied look at comments from Atlanta Federal Reserve Bank President Raphael Bostic, who said that, if he were voting on monetary policy today, he would vote to hold interest rates steady, but added there is still a lot of data to come before the Fed's meeting in June.They also offer some thoughts on Elon Musk's assertions that he doesn’t care if his inflammatory tweets scare away potential Tesla buyers or Twitter advertisers.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why most people believe that a recession is inevitable at this point.Why, despite the fanfare in the media, we're not yet in a credit tightening cycle.The importance of looking at the actual data, not the intentions.Why Atlanta Fed President Raphael Bostic says he would not cut rates unless inflation fell farther than to mid to high 3%.And so much more...Resources:"Default Fears Rattle Main Street Investors" (The Wall Street Journal)"JPMorgan Asset Says Markets Are Right to Bet on US Rate Cuts" (Bloomberg)"Home Prices Posted Largest Annual Drop in More Than 11 Years in April" (The Wall Street Journal)"Fed's Mester says not yet at point where it can 'hold' rates" (Reuters)"Fed's Bostic: if vote on policy were today, would vote to hold steady" (Reuters)"Elon Musk: ‘I’ll say what I want, and if the consequence of that is losing money, so be it’" (CNBC)

According to a report from the Commerce Department, retail sales increased but fell short of expectations. The advanced sales report showed an increase of 0.4%, below the Dow Jones estimate for 0.8%. Excluding auto-related figures, sales increased 0.4%, which was in line with expectations. As the numbers are not adjusted for inflation, the headline increase equaled the 0.4% monthly rise in the consumer price index. On an annual basis, sales were up just 1.6%, well below the 4.9% CPI pace.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss news that stock in Home Depot tumbled more than 5%, or $13 a share, in premarket trading, which was worth about 100 points on the Dow Jones Industrial Average. Once trading opened, the stock recovered some of its gains, and was recently down about 1.5%, still big enough to shave about 30 points off the Dow.Chris and Saied look at a Census Bureau survey, showing that more Americans struggle to meet expenses now than in the immediate aftermath of the Covid-19 pandemic, when millions lost their means of employment. About 38.5% of American adults — or 89.1 million people — faced difficulty in paying for usual home expenses between April 26 and May 8. That’s up from 34.4% a year ago and 26.7% during the same period in 2021.They also offer some thoughts on the passing of Chicago real estate magnate Sam Zell, who earned a multibillion-dollar fortune and a reputation as “the grave dancer” for his ability to revive moribund properties.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why retail sales rose 0.4% in April, and why this is indicative of bad things to come.The concept of a real estate trust.A University of Michigan report showing that consumer sentiment is at an all-time low.Why Home Depot is warning of annual sales drop for the first time since 2009.And so much more...Resources:"Home Depot just forecast weak consumer demand — here’s what that could mean for the rest of the economy" (CNBC)"Almost 90 million American adults struggle to make ends meet, Census says" (Bloomberg Business)"Retail sales rose 0.4% in April, less than expected as consumers struggle with inflation" (CNBC)"Americans Curb Spending on Home Improvements" (The Wall Street Journal)"Home Improvement Goes on Hiatus" (The Wall Street Journal)"Experts Predict Home Improvement Spending to Decline by 2024" (M Report)

Total consumer debt hit a fresh new high in the first quarter of 2023, pushing past $17 trillion even amid a sharp pullback in home borrowing. According to a report from the New York Federal Reserve, the total for borrowing across all categories hit $17.05 trillion, an increase of nearly $150 billion, or 0.9% during the January-to-March period. That took total indebtedness up about $2.9 trillion from the pre-Covid period ending in 2019.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss news that famed short-seller Michael Burry and his hedge fund, Scion Asset Management, snapped up 150,000 shares of First Republic prior to its purchase by JP Morgan, worth about $2 million at the end of the first quarter.Chris and Saied look at A Gallup poll indicating that 36% of US adults say they have a “great deal” or a “fair amount” of confidence that the Federal Reserve chairman would do or recommend the right thing for the economy, a precipitous drop which is now at or below his predecessors’ as the central bank wages its war against inflation.⁣They also offer some thoughts on recently-released Federal Reserve data, showing that deposits at U.S. banks climbed to $17.16 trillion in the week ended May 3, up about $67 billion, ticking up from the lowest level in nearly two years while bank lending was little changed at a record level.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why inflaton in Argentina has sped up to 109% as currency weakens before the election.The three steps to a Federal Reserve pivot.Why Warren Buffett and Michael Burry are doubling down in the banking sector.Why the FOMC needs to see inflation going down on a fast enough trend.And so much more...Resources:"With $1B in back rent due, LA landlords struggle to survive" (The RealDeal via Instagram)"Consumer debt passes $17 trillion for the first time" (CNBC via Instagram)"Michael Burry loaded up on bank stocks during the banking crisis" (Bloomberg Business via Instagram)"Paul Tudor Jones says the Fed is done raising rates, stocks to finish the year higher" (CNBC via Instagram)"Confidence in Jerome Powell has plunged to a record low" (Bloomberg Business via Instagram)"What happens when the prophecy of the blockchain fails?" (Bloomberg Business via Instagram)"U.S. bank deposits rise in early May, lending little changed at record high" (Reuters)"US real estate investors are losing money on roughly 1 in 7 homes they sell — among the worst since 2016. And they're most likely to take a hit in these 5 cities" (Moneywise)"A problem for the housing market: People won’t quit their cheap mortgages" (The Washington Post)"US Households Show Signs of Stress as New Delinquencies Rise" (Bloomberg)"Argentina to Hike Rates in Bid to Stem Inflation Crisis" (Bloomberg)

The number of Americans filing new claims for unemployment benefits have jumped to a 1-1/2-year high, pointing to cracks in the labor market as demand slows, potentially giving the Federal Reserve room to halt further interest rate increases next month. With demand cooling, inflation pressures are subsiding. Data from the Labor Department indicates that producer prices rebounded modestly in April, leading to the smallest annual increase in wholesale inflation in more than two years.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a Labor Department report showing that the consumer price index (CPI), which measures the cost of a broad swath of goods and services, increased 0.4% for the month, in line with the Dow Jones estimate.Chris and Saied look at comments from JPMorgan Chase CEO Jamie Dimon that markets will be gripped by panic as the U.S. approaches a possible default on its sovereign debt, calling the default "potentially catastrophic" for the country.They also offer some thoughts on a statement by New York Federal Reserve President John Williams, who cautioned that interest rate increases will take a while to work their way through the economy before inflation returns to an acceptable level.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why services inflation is really consumer discretionary spending more than anything else.Why housing prices are excluded from the Labor Department’s CPI report.The odds of a Fed rate cut this year.Why the Fed's 'stress tests' for banks failed.And so much more...Resources:"Jamie Dimon warns panic will overtake markets as US approaches debt default" (CNBC via Instagram)"The family behind First Citizen's Bank is $1 billion richwer since SVB" (Bloomberg Business via Instagram)"AirBnB stock craters - founders lose $4 billion in one day" (Forbes via Instagram)"Inflation rate eases to 4.9% in April, less than expectations" (CNBC)"Wholesale prices rose just 0.2% in April, less than estimate as inflation pressures ease" (CNBC)"Fed’s John Williams says rates could be increased if inflation doesn’t come down" (CNBC)"Worries linger about financial stability following bank rescue, Fed report shows" (CNBC)"US weekly jobless claims hit 1-1/2-year high; inflation subsiding" (Reuters)"Brits are being offered no-deposit 100% mortgage loans for the first time since 2008" (CNBC)"We May Be Getting Used to High Inflation, and That’s Bad News" (The Wall Street Journal)"Icahn, Under Federal Investigation, Blasts Short Seller" (The Wall Street Journal)"Inflation Eased in April but Remains Stubbornly High" (The Wall Street Journal)"Can Inflation Fall Fast Enough for the Fed?" (The Wall Street Journal)"How the Fed’s stress tests failed to stop a banking crisis" (Fortune)"Monthly Mortgage Payments Could Surge 22% If US Defaults" (Bloomberg)

The Pandemic Housing Boom saw a flood of institutional homebuying. Low interest rates, easy access to capital, soaring rents, and skyrocketing home values were just too good a deal for Wall Street types like Blackstone and iBuyer players like Opendoor Technologies to pass on. However, it seems that institutional homebuyers are pulling back. According to an analysis conducted by John Burns Research and Consulting, institutional investors — those owning over 1,000 homes — bought 90% fewer homes in January and February than they did in the first two months of 2022. Invitation Homes, the largest owner of U.S. single-family rental homes recently became a net seller. In the first quarter of 2023, Invitation Homes bought 194 homes while it sold off 297.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss the reasons that banks are going to choose to be strategic in the deployment of capital, partially because they want to keep as much of their balance sheets as possible, in case of a run on deposits, and partially because any loan they make today is going to be underwater if the Federal Reserve continues to increase rates.Chris and Saied look at news that shares of San Francisco-based PacWest Bancorp plunged after investors learned the regional bank was considering a sale. Despite thet fact that the bank has said it had not experienced a high number of customer withdrawals, the news still stoked fears of a potential surge in withdrawals among regional banks.They also offer some thoughts on the results of a survey from the National Federation of Independent Businesses (NFIB), a lobbying organization that represents small business owners nationwide, which shows that small business earnings rose to the highest levels in at least 45 years last month.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why the market is not concerned with interest rate increases.Why the US dollar needs to be the world's currency.Why the debt ceiling is going to have to be raised well before June 1.Why, in 2011, the debt ceiling crisis led to an S&P downgrade of US sovereign debt.And so much more...Resources:Wall Street is running away from the housing market. But why?Powell’s Bet Against Recession Looks Good — Minus the Credit Crunch and a DC StandoffFed report shows banks worried about conditions ahead, with focus on slowing economy and deposit outflowsOutlook for household spending slumped in April, New York Fed survey showsCorporate Stock Buybacks Help Keep Market AfloatWhat are the advantages of being the Nation that has the Reserve CurrencyThe Kardashev Scale - Type I, II, III, IV & V CivilizationJob growth totals 253,000 in April, beating expectations even as the U.S. economy slows

Employment openings pulled back further in March, hitting a nearly two-year low in a sign that the ultra-tight U.S. job market is loosening and possibly putting less pressure on inflation, according to a report by the Labor Department. The department’s Job Openings and Labor Turnover Survey showed that job vacancies totaled 9.59 million for the month, down from 9.97 million in February and below the FactSet estimate for 9.64 million. At the same time, layoffs and discharges jumped by 248,000 to just over 1.8 million, taking the rate as a share of the workforce up to 1.2% from 1%.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss a report from payroll processing firm ADP that states that private payrolls rose by 296,000 for April, above the downwardly revised 142,000 the previous month and well ahead of the estimate for 133,000.Chris and Saied look at Fed Chair Jerome Powell's recent press conference, in which he said that, "The run on Silicon Valley Bank was out of keeping with the speed of runs through history. And that now needs to be reflected in some way in regulation and in supervision.”They also offer some thoughts on the recent increase in the Fed's target range for its benchmark interest rate by 0.25%, while leaving its options open on future rate hikes.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why the entire regional bank sector is taking a significant pounding.Why the market doesn't believe a lot of what Fed Chair Jerome Powell is saying.The reason why so many knowledgeable people on the news and in social media seem to have no idea how banking works.The role of digital banking, providing depositors with quick access to their funds that they can move immediately.And so much more...Resources:"Dow tumbles more than 300 points as banking sector worries reignite before Fed rate decision" (CNBC)"Job openings fell more than expected in March to lowest level in nearly two years" (CNBC)"Private payrolls surged by 296,000 in April, much higher than expected, ADP says" (CNBC)"Fed recap: Here are Chair Powell’s market-moving comments after the latest rate hike" (CNBC)"Federal Reserve pushes interest rates above 5% for first time since 2007" (Yahoo! Finance)"Exclusive: US officials assessing possible 'manipulation' on banking shares" (Reuters)"Apple reportedly attracted $1 billion in deposits into its new high-yield savings account in just 4 days" (BusinessInsider)"As JPMorgan Scoops Up First Republic, Are Banks Facing Their ‘Minsky Moment?'" (Payments.com)"US job openings fall to a nearly 2-year low of 9.6 million. Fewer people are quitting too" (MarketWatch)"For Banks Under Stress, There’s a Federal Backstop That Provides Help Without Stigma" (Bloomberg)"Regional Bank Stocks Close at Lowest Level Since 2020" (Wall Street Journal)"What a Fed Debate 17 Years Ago Reveals About Its Rate Deliberations Now" (Wall Street Journal)

Regulators have seized First Republic Bank and sold its assets to JPMorgan Chase & Co in a deal to resolve the largest U.S. bank failure since the 2008 financial crisis and draw a line under a lingering banking turmoil. First Republic was among regional U.S. lenders most battered by a crisis in confidence in the banking sector in March, when depositors fled en masse from smaller banks to giants like JPMorgan as they panicked over the collapse of two other mid-sized U.S. banks.In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the economy as a whole.They discuss comments from JPMorgan Chase CEO Jamie Dimon, who said that the crisis that led to the downfall of three regional U.S. banks in recent weeks is largely over after the resolution of First Republic.Chris and Saied look at a warning from billionaire investor Charlie Munger, vice Chairman of Berkshire Hathaway, who sees trouble ahead for the U.S. financial system because American banks are "full of... bad loans" due to falling property prices in the country in a situation that seems very similar to what caused the banking crisis in 2008.They also offer some thoughts on recently-released economic data showing that inflation rose again in March, despite a year’s worth of interest rate increases. This is data that the Federal Reserve watches very closely.Join Chris and Saied for this fascinating and informative conversation.Enjoy!What You’ll Learn in this Show:Why you can’t compare the large global banks to regional community banks.Why the Federal Deposit Insurance Corporation (FDIC) will share losses with JP Morgan on First Republic loans.What other banks are doing to prepare for a possible rate hike.Why banks are not doing loans right now.And so much more...Resources:"Australia’s central bank hikes rates by 25 basis points; Asia-Pacific markets mixed" (CNBC)"Jamie Dimon says ‘this part of the crisis is over’ after JPMorgan Chase buys First Republic" (CNBC)"Key inflation gauge for the Fed rose 0.3% in March as expected" (CNBC)"Charlie Munger says the U.S. commercial property market is in trouble: FT report" (CNBC)"Big banks including JPMorgan Chase, Bank of America asked for final bids on First Republic" (CNBC)"The U.S. could hit the debt ceiling by June 1, much sooner than expected, Yellen warns" (CNBC)"Charlie Munger Sounds The Alarm on Issue That Could Bring Down the U.S. Economy" (TheStreet)"Warren Buffett might help rescue the banks again - but he'll probably make less money this time around" (Markets Insider)"Renting is still far less expensive in Dallas-Fort Worth than in other metros" (The Dallas Morning News)"Regulators seize First Republic Bank, sell assets to JPMorgan" (Reuters)"Ranked: The U.S. Banks With the Most Uninsured Deposits" (Visual Capitalist)"A Tax Loophole Makes EV Leasing a No-Brainer in the US" (Bloomberg)"First Republic Bank Is Seized, Sold to JPMorgan in Second-Largest U.S. Bank Failure" (The Wall Street Journal)"The Building Boom Is Prolonging Market Pain" (The Wall Street Journal)"Why First Republic Bank Collapsed" (The Wall Street Journal)