Peter Boockvar

On to Thursday’s CPI, assuming we have a split Congress with only the degree in question but that will take some time unfortunately. I’ll leave the post-mortem political analysis to others but this market I believe has priced in for a while a divided government (regardless of whether the Republicans won both sides or only one) and hence little reaction.

Regardless of the split, there is a lot of money that the US government needs to raise in coming years on top of the almost $24 Trillion of marketable US Treasuries to finance all that spending. And this gets to the US Treasury market where we know the Fed is essentially selling, banks are buying less as are many foreigners. Make sure to read the WSJ article today, “Japan’s waning appetite for Treasury’s fuels anxiety on Wall Street,” //www.wsj.com/articles/japans-waning-appetite-for-treasurys-fuels-anxiety-on-wall-street-11667879544?mod=itp_wsj&ru=yahoo

What’s scary and incredible about the FTX/Binance drama is how quickly what was once thought as assets can evaporate in value as quickly as they do. There are a bunch of things that can survive on zero rates and QE and we’re learning still what can’t without them. This story has motion picture potential and I see Jonah Hill playing SBF. 

Here are a few notable conference call quotes from Disney (a stock we own) and Affirm that are macro relevant. 

Disney:

“We are making meaningful progress on the return of international visitors to our domestic parks, particularly at Walt Disney World, where the mix of international attendance in the fourth quarter was roughly in line with pre-pandemic levels. Looking toward fiscal 2023, while we continue to monitor our booking trends for any macroeconomic impacts, we are still seeing robust demand at our domestic parks and are anticipating a strong holiday season in Q1.” They are not assuming much of an economic slowdown from here and that is the risk with their guidance.  

Affirm:

“Delinquencies and net charge-offs remain at or below pre-pandemic levels.” The trajectory though is up for 30, 60 and 90 day delinquencies and that’s what investors are worried about today. “There’s plenty of stress on the consumer in the lower income brackets, lower credit quality.” And as savings are drawn down, more credit is being used. “Generally speaking, people are turning – not just going to look at credit cards, people are turning to more than they used to do that. I mean we’re not done in the higher income brackets spending through the pandemic stimulus, but they’re getting closer, probably sometime mid-next year is when we’ll see the exhaustion of those savings. But today, the lower income groups are already done and they’re trying to turn to various forms of debt.” 

With the average 30 yr mortgage rate rising 8 bps w/o/w to 7.14% after falling by 10 bps in the week before, refi’s dropped by 3.5% w/o/w and are lower by 87% y/o/y. Purchases rose 1.3% w/o/w after 6 weeks in a row of declines. They are lower though by 41% y/o/y. Where prices end up for homes is the only question right now. 

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