It's again for Dechert's CrunchedCredit Annual Golden Awards of Turkey. In a year made more extraordinary by the extraordinary performance of the US economy, idiocy, stupidity, perspicacity and stupidity tended to be obscured by the good economic machine. At the other end of the spectrum, the continuous high volume of indignation on almost everything, both from left and right (and I'm sure the medium would do their part here if there were someone in the house) makes it more difficult to find out truly memorable and rewarded, but it is our job to try. As we said in the past, it would be very difficult if the world behaved in a predictable, rational, Newtonian way, but fortunately it is not.
So, before we can all dedicate ourselves to food and wine and reach the Zen-like state of consciousness that can only be achieved through Buddhism, dinner in Turkey, a chapter of Ulysses or living in Malibu, we should take a moment to to honor the profound silent and silly. That said, here is our list for 2018:
The Yelling Fire in the Theater award it goes to … practically all of our elected representatives. Stop screaming, do you want to please? When everyone is outraged at anything from the fact that a presidential candidate has the blood of the Native American 1/1024 if this President has behaved badly in the past (is this news?), It becomes increasingly difficult to discern what really matters. When everything is an emergency, nothing is.
Imitation is the most sincere form of flattery prize it goes into … Italy, having elected a strange form of left-right / north-south government, is doing what one would expect from such a political platypus … to be inconsistent. It can not be a good thing, no matter how you look at it. But last month, under pressure from Brussels for its potential outgoing budget for next year, Deputy Prime Minister Giuseppe Conte announced that Italy was simply following in Trump's footsteps of America and spent his way and cut taxes from his current difficulties. Also, did he usefully suggest that all other Europeans should applaud his genius (another very stable genius?) Because they would undoubtedly follow in the footsteps of Italy soon enough. First of all, let's start by noting that invoking Donald Trump to convince European aristocrats to do something is probably not a tactical brilliance, but as we observed a few weeks earlier, someone needs to give these people a quick lecture on basic economic theory. Hello Italy! Do not check your monetary policy. What could work for the owner of the world reserve currency (although this concept upsets both the allies and the adversaries, remains true), will not work for Italy. If this is not already a turkey, it is certainly a turkey egg.
The Hope as a Strategy Award it goes to … the US Federal Reserve, which seems to remain without evidence of what will happen when it begins to significantly dissolve its budget. The Fed's budget had been in the trillion-dollar range for decades before 2008 and has been in the $ 4.5 trillion range in the last six or seven years. The Fed apparatchiki started last year to go back and this effort is accelerating. The already high quality liquid assets in the banking system are declining in an unplanned way. While this effort to shrink the budget when the sun is out seems a little diner, we all know it really, it's not true, that this is the equivalent of jumping off the high table and wondering if the pool is full of water. The Fed is not telling us to keep our hats, or tell us to strap or lumbar or tie them. In fact, they are saying, "Do not worry!" Now, we are not blaming them for not knowing what will happen when this is done, because no one has ever done it before, but we show a little humility! Markets will not go out of your mind if the money supply contracts quickly? The money supply is a fun and complicated thing. M3, a measure, has not been monitored by the Fed since 2006, because apparently it was … boring. Maybe we should just stop looking at the money supply and send those annoying M1 and M2 to the garbage can of statistical irrelevance where M3 resides. If we do not look, we will not get angry. What we do not know will not damage us? We hope only for the best. Hey, this is a strategy.
The Orange Swan Award. A winner of the award repeated to the public for having elected Donald Trump as our president while half of the country (or surroundings) thinks it is terrifying and half of the country thinks it is the generation of hell (Satan strongly denied this). We are still trying to understand what it means, and certainly the 2018 elections have not made it much clearer, but in reality it can not be a good thing if half of the country hates and despises the other half for their opinions on this guy. This provides religion and global warming with a race for their money as things that can not be discussed in a polite company. We'll be back soon to talk about the Kardashians, the weather and the sad state of the New York Football Giants.
These prostitutes should drink more responsibility it goes to … the continuous effort of the Treasury to adjust the Volcker Rule. First of all, we're not kidding about the prize here. Recently, the US government has actually spent $ 2.6 million last year to encourage sobriety among prostitutes. I promise we will not invent these things, but I, too, an angry critic of the many inanities of our government, are impressed. Here's one closer to home: the government recently rejected a proposal to "fix" Volcker. The Treasury gave this a shot last summer and the industry threw everything on it, as it actually worsened the problem. This is a solution looking for a problem. The investments in markets and fund investments by the banks had nothing to do with the Great Recession. Stop that. Stop wasting my money. Imagine the cost! Legions of bureaucrats, meetings, free lunches, donuts and endless donuts, study groups, impact statements, expert testimony, argh! I am singularly incapable of discerning a strong connection between the wholesome prostitutes and the strategic interest of America, but it is probably my sorry lack of acumen. If our government says it's important, it's bound to be, right?
The Here Be Dragons Award – Part II go to … the Brexiteers. The old adage of the law never asks a question that you do not know the answer to. While the arrogance of governments and their apparatchiki is world-famous and a constant, it would be nice to think that more people had at least one thought on the exact path in which this stinking camel would pass through the eye of a needle before voting to leave. Brexit seems to be in a place now where there is not a good result. The British government will self-immolate regardless of whether they have a stopgap Brexit plan or a hard Brexit plan. Note to my colleagues in London, if this works badly, you might consider the alternative pleasures of Dublin or Paris, but as we have noted before, everyone speaks French there. Honest! Likewise, regardless of where it comes out, there will remain a problem of massive division and disturbance throughout Europe, where many seem to clink with a flash in the eye and enjoy the whole disorder of the Brexit in a sense schadenfreude. Who loves Perfidious Albion, and indeed there may be some political gain to have here. Is not it sad? Hey, but good news for us. The Brexit is scheduled for Friday, March 29, 2019 at 11.00 pm, London time, for six in the afternoon, and perfectly programmed for evening news.
As we said in a recent comment, if the United Kingdom did not really love all this pan-European kumbaya, all you had to do was wait a little bit. This thing is melting anyway.
The self-inflicted wound award goes to … the Financial Account Standards Board (FASB) (certainly a boxing bag often visited of ours). My hypothesis is that you did not know, but apparently during the period of the Russian Empire, it was very common that potential disobedients were injured to avoid being enrolled. It was so common that it had a name. It was called "abstinence" (which seems like a strange choice of words and has nothing, as far as I know, to do with the sober prostitutes.) The trick with abstinence was to make sure you would shoot at your feet, not your head. they would be effective evasion strategies, but the latter would certainly limit the enjoyment of the celebratory dinner.Our version of the self-inflicted wound is a little less terrible but still significant.FASB is continuing to push the so-called rule of loss expectations of current credit that becomes effective in 2020 and that still requires banks to change their policies Incredibly, this provision would require a lender, when making a loan, to immediately book a loss.This is certainly counterintuitive, but while I'm sure the self-appointed accounting advisor could say that my mind is not thin enough to understand why this or it is important, but sometimes, something is counterintuitive because it is simply stupid. I always thought that the whole purpose of the loan was to make money and not lose it. Apparently, the FASB has concluded that our evil lenders actually know that their loans are shit from the start and make them anyway. We will show them. First of all, we will have to go through this program of communist self-criticism, admitting a serious error in our judgment and therefore we will actually have to reserve the losses. It's hard to make a profit at a loss, no? This will increase the cost of the loan. If you need to cover a front-end loss that may never happen, someone has to pay for it. Guess who? This will damage the formation of capital, there are no doubts. Furthermore, we will have this huge new system of disclosure and reporting that will cost a fortune. Just what we need, more new and better bureaucratic obligations. Call HR and order another half a dozen compliance officers. Practice saying "No". Hey, I have an even better idea; we only try not to lend to lenders, so we will not have any losses. Congratulations, FASB!
The prize "These are really beautiful tulips" go to … Bitcoin! Ok, ok, it's a bit unfair to compare Bitcoin to the notorious Tulip collapse of 1637. Maybe. And let's face it, the jury is out. It is difficult to ignore the resemblance, is it not true: highly speculative resources, massive price increases and … next crash? And so what is this "mining" thing? Even if I'm not sure what it is and because this activity has some relation to the amount of Bitcoin in circulation, I know it well: at this moment Bitcoin mining represents 1% of the world's energy consumption. One percent! So, while Bitcoin's market capitalization is not yet big enough to have a global effect, its energy consumption is safe. It currently costs twice as much as "my" Bitcoin rather than extracting the same value as copper, gold or platinum. By the end of the year, Bitcoin's energy consumption could rise to 7.7 GW. Do you really want to put that number in perspective? Doc Brown only needed 1.21 GW to go back to the future. So congratulations Bitcoin, in a few years you could be the first financial instrument both to bring down the financial system and the global energy network.
The Big Brother Award it goes to … the multiple social media for their increasingly Orwellian work that violates the data of millions of users and creates a truly disturbing age of gathering information through technology. And the rest of us are participating in this award to help Silicon Valley boys and girls build their machine from Machiavellian Dues that creates a new level of surveillance that Big Brother 1.0 (1984) has never been able to achieve. By packaging social media as a tool for friends and a perfect way to spy on everything, it was enabled. Unfortunately we bought it. Apparently being able to share experiences of meetings, recipes and reactions to wonderful sunrises is worth the price. It is extremely difficult to punish these pirates of privacy, and all we can hope for is to implement an antipathy button, so at least we can put some dislike on their initial pages. This will show them.
The award "Nah, we're good, thanks!" it goes to … the Federal Reserve, FDIC and OCC. In May, Congress intervened and cleaned up the disorder left by regulators in an attempt to reform the HVCRE (remember HVADC? Yes, it's not a good memory) passing economic growth, the control of the law and the law on protection of consumers (EGRRCPA … erg- PAH?). Finally, with HVCRE ADC, we have an idea of how the rules apply and how to follow them. Thus, the Federal Reserve, the FDIC and the OCC (probably left out of all) issued a statement in July and then a regulatory notice signaling their willingness to provide "clarification" to the new HVCRE ADC regime. . Clarification? Did you buy it? We are here by the government and are here to help you?
Dimes to dollars, this is a regulatory rollback. Even if regulators do not want to get worse, they will. They can not help themselves. Even if they say the same thing that says the statute, they will use different words and then we will unleash the lawyers. We will pass this new piece of normative clarity, thanks. How about trying HVCRE ADC and going around the block a couple of times before you start playing with it? The public is invited to submit comments to the regulatory authorities on their proposed regulation until 27 November 2018. Feel free to send to the regulatory authorities a note that says "Nah, we're good!"