Pain
February 23, 2022
–Starting with a couple of tweets, the first by Anneka Treon (finance commentator of some sort):
“We have never placed this much attention on green energy, yet oil is almost $100/barrel. What am I missing?”
One of the comments, “Replace ‘yet’ with ‘so’ “
–Another tweet from PekalaLaw. “Yikes! The 670,000 sq ft Nordstrom building on Chicago’s Mag Mile was valued at $515 million in 2008. Macerich REIT just sold their 50% stake for $21 million. Mortgage is $375 million.”
An outcome from COVID. But is it more due to a shift to internet shopping or the looting / crime wave that has shuttered many Mag Mile retailers?
–The main news yesterday was, of course, Russia’s advance in Ukraine. Biden responded with a stern implementation of sanctions, and then immediately said he would try to limit the impact on the cost-of-living for US consumers. Lofty policy pronouncements without any pain; it’s the American Way. Of course, the suspension of NordStream 2 may carry some challenges for europe, which circles back to tweet number 1.
–In rates, the conclusion appears to be that inflation will worsen, hastening the need for a front-loaded response from the Fed. The curve flattened to new lows, with 2/10 treasury spread just under 39 bps, down over 8 on the day, and red/gold euro$ pack spread at negative 12.375, down 7.625 on the day. EDM2/EDM3 one-year calendar closed at 102.5, while EDM3/EDM4 closed negative 10.5. There’s your ‘pain trade’, action by the Fed now will lead to a much slower economy next year. Fed semi-annual testimony slated for March 2 and 3.
–Several references yesterday to SPX closing 10% from the peak posted at the start of the year. Of course, in January interday prices were lower, and the Nasdaq Comp is down 17%. Recall that market cap to GDP was a record 200% at the start of the year; this is a very real evaporation of perceived wealth that won’t be replaced through gov’t largesse. Losses ultimately have to be recognized, like Macerich in tweet number 2.
