Bankruptcy Filings Hit All-Time Record
My friends at Quill Research highlighted in their Weekly Quill said as of data last Monday “US business Chapter 11 filings were up 141% y/o/y, which took out the prior record of 139% y/o/y set during the GFC.” Now many of these are due to the higher cost of capital that has exposed challenged business models rather than due to an economic downturn of note. Imagine if we now have an economic downturn that some rate cuts won’t fix, assuming we don’t go back to zero rates again. Again, the transition/withdrawal will be painful and will take time but big picture and long term it is a good thing.

Bottom line, is the Fed Put back and the Fed has learned no lessons from their 15 yr rate and balance sheet experiment or should we expect a sustained period of time of REAL positive interest rates and a smaller Fed balance sheet that lets more of the market work rather than the FOMC continually trying to play god over interest rates. I hope for the latter. 

With respect to Wednesday and what the FOMC and Jay Powell will say, it was only 10 days ago at the Spelman College fireside chat that Powell said “It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so.” I expect him to repeat these words and also put yourself in his shoes. He knows full well and via a tough lesson that his crystal ball doesn’t work, just like the rest of us so Powell mostly likely is approaching 2024 meeting by meeting, CPI/jobs print, print by print, while still not forgetting the lesson of the 1970’s. 

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