Stephanie Pomboy on SVB failure: "this is all totally predictable"

This is all totally predictable.  When you force the banks to hold nothing but Treasuries and agencies and you ratchet up interest rates at the fastest pace in history, and drive sharp losses in those same "risk-free" assets, you're going to create some dislocations.  And I think probably what happened is that the fact that nothing untoward had occurred over the last 12 months imbued their confidence that "hey, maybe everything's going to be just fine."

~ Stephanie Pomboy, interview on Fox Business, 5:25 mark, March 11, 2023

 

Stephanie Pomboy on the myth of strong corporate balance sheets

I don't think the excesses on the credit side are on the consumer balance sheet so much as they are the corporate side which was the prime credit taker during this free money bonanza.  Bloomberg just reported that in January large corporate bankruptcy filings were the largest since 2010.  So you're already starting to see things turn, and as I suggested with this idea that it was an interest rate shock, that hit, when it happens... is going to be much more profound than the markets presently expect.  They're looking for sort of a gradual and modest deterioration in credit conditions and I think we'll see something far more severe and that it will play out much more rapidly.  The interest rate hit doesn't happen until you have to pay higher interest rates, obviously, so if you have an adjustable rate mortgage and they take mortgage rates to 7% at the peak, that didn't affect you at all if you didn't have a reset.  It only affects you when the time comes to reset.  And the same is true, obviously, on the corporate side.  On that score, there are several myths around the strength of corporate balance sheets, but an important one is that companies shrewdly took the opportunity to lock in the incredibly low borrowing costs that we saw during the pandemic/stimulus bonanza for as long as they possibly could...  The fact is, they may have borrowed long, but they borrowed a ton short.  And we know that because there's a trillion dollars in corporate debt here in the U.S. that has to roll this year and then there's another trillion that has to next year and there's another trillion in 2025.  So there's going to be no relief from this impact of higher interest rates in the foreseeable horizon.  The only thing, I guess, that could stave off a significant wave of corporate delinquencies would be for the Fed to swiftly pivot and cut rates back down to where they were.

~ Stephanie Pomboy, "Don't Be Fooled: A Hard Landing Lies Ahead For The Economy (And Markets)," Wealthion, 7:45 mark, January 31, 2023

Stephanie Pomboy on stimulus and inflation

It seems clear that, if there is a slowdown in demand and spending, they're just going to use it as a rationale to do another round of stimulus...  The inflation is going to be a rationale for more stimulus which will fuel more inflation. 

~ Stephanie Pomboy, conversation with John Hathaway and Bill Strong, 23:45 mark

Stephanie Pomboy on the coming pension crisis

The pension funding problem will be the next crisis.  We are looking at a $4 trillion pension deficit across the public and private sectors in the U.S., after nine years of rampant asset inflation.  That's a stunning statistic.  If the market corrects even 15%, and stays there, it will bore massive holes in pensions.  New Jersey, Illinois, state after state, are figuring out how to close this gap.

~ Stephanie Pomboy, founder, MacroMavens, "How the Fed Will Trigger the Next Crash," Barron's, March 24, 2018

Stephanie Pomboy is bullish on fiscal stimulus under Trump

We can finally get back to the business of real economic growth - real men building real things.  It all sounds fabulous.  And it will be - if and when it happens.

~ Stephanie Pomboy, MacroMavens, January 7, 2017
(as quoted by Kopin Tan in the Jan. 9th issue of Barron's)

Stephanie Pomboy on how the TARP is encouraging the banks to drag their feet on deleveraging

Proving our long-standing conviction that the only thing more certain than death and taxes is that policymakers will always succeed in making a bad situation worse, Hank’s big TARP tease has put the banking sector 2 months behind its nonbank peers in the process of balance sheet repair. While hedge funds and other nonbank financial institutions have been frantically selling assets and taking down leverage, the banks have sat tight. The promise that the toxic paper boring holes in their balance sheets would shortly be expunged had mooted the need to sell. To wit, bank holdings of MBS hit a new record high last week.

The upshot is that while hedge fund deleveraging is nearly complete, as implied by the massive reduction in total spec positions in any number of markets (like currencies), banks haven’t even begun.

~ Stephanie Pomboy, "Send in the Clowns," MacroMavens, November 20, 2008