Some family housekeeping before we get started today. Our very own Manny Faces, engineer extraordinaire and Hip-Hop educator, has released his TedX talk “Hip Hop’s Problem-Solving Framework” so make sure to give it a view, a like and a share!
It’s a significant moment for the U.S. economy. And I’ll get there in a moment. But it’s important to address the story that is once again dominating the headlines. A PSA dropped this week by survivors of Jeffrey Epstein’s sex trafficking ring to push lawmakers to finally do the right thing and release the case files related to prior inquiries. It’s a reminder that there’s more to this story than Marjorie Taylor Greene and her spat with Trump.
Mike Little Johnson and the White House appear to be out of cards to withhold the release of the documents, as it appears the House has the ability to make them all public. This release would be in addition to a trove of emails that has tongues wagging about who “Bubba” is, that Larry Summers sought dating advice from Epstein and how everyone has always hated Donald Trump. Lost in the salacious details is the victims themselves who are rightfully putting their stories back in the spotlight. The definition of courage.
From a political perspective, cracks are beginning to show in MAGA world. There’s a growing sense that this may prove to be Trump’s achilles heel, though I’ll believe it when I see it. I’m the socioeconomics guy, not the legal guy so I have no idea whether there is a legal path forward to prosecute the sitting president considering he has full immunity from the Supreme Court and was able to run for the presidency as a felon.
But there is renewed energy on the Democratic side of things, a sense that Trump is feeling cornered and increasingly isolated from GOP legislators. We’ll see. Like I said, I’m unclear as to what the legal ramifications are from more evidence that Donald Trump is a scumbag who rapes underage girls because he appears to have total immunity. But if it’s paired with a precipitous decline in the markets and a cataclysmic holiday season I can imagine a few Republicans breaking from Trump for their own self interests.
This is an incredibly cynical thing to say, of course. But it has to be said. If we were in economic boom times and everyone was feeling good, they could produce the infamous “pee tape” and have video evidence of him engaging in sexual acts with underage girls and the GOP would look the other way.
If the coming weeks and months are as bad as I think they’re going to be then a few brave and heroic GOP legislators might finally start pushing back on the president’s agenda. And since he governs with the slimmest of majorities in Congress, Trump may indeed be entering a premature lame duck presidency.
In terms of what’s ahead, we have two interesting announcements this week that will drive market sentiment. Nvidia and Walmart are both releasing earnings. It’s unclear how much longer Nvidia can keep creatively accounting for the circular AI investment flow and the market isn’t sure whether an increase in Walmart revenues is a good or a bad sign for the economy. These releases will grab all the headlines but below the proverbial fold there are much bigger stories breaking. For example, as we talk about in the Chart of the Week, there was an emergency session called by the New York Fed chair to address the continuing liquidity crisis in the overnight repo markets. An emergency meeting is pretty bad on its face. The fact that they tried to keep it a secret is another matter entirely.
So we have Democrats frothing over the idea that Trump might finally take a PR hit that even MAGA cares about…Fed officials trying to paper over a liquidity crisis…An earnings season that the whole financial world is on pins and needles over…And an angry and broke America about to head into the holidays with empty pockets and a whole lot of anger at the Thanksgiving dinner table. Spidey senses are tingling…
Other things I’m obsessing over…
Talk about committing to the bit. Current Affairs editor and founder Nathan Robinson had his readers/viewers a bit confused when he read from his latest book The Silencing of Me. This is top level trolling of conservatives.
H. Jon Benjamin (Bob’s Burgers) calling into the Majority Report is always perfect. Calling as a Cuomo phone banker is just priceless.
Mrs. Max and I finished The Diplomat and yes we’re obsessed.
-Max
Killer Left Take of the Week
KLTW goes to F.D. Signifier. This is the definition of “think piece.” F.D. Signifier is a Black Marxist educator who has become one of the more influential figures in modern Black thought. If you loved Sinners for all the white guilt reasons many of us did, you’re all good. But the narrative goes far deeper than most white people can appreciate. F.D.’s breakdown is almost as long as the movie itself but is required viewing (IMO) for anyone interested in learning and appreciating the perils of creating commercial Black art in America.
Max and 99 had a lot of catching up to do so they did an extended Show Notes to address listener feedback, shout out the slew of new members (thank you!) and catch up on headlines. Tangents abound but it was good to be back in the studio chopping it up and hashing it out.
Yes, I’m returning again to the arcane Federal Reserve Repo market because it continues to signal liquidity distress in the overnight funding markets. The Secured Overnight Financing Rate (SOFR), which is a composite of actual rates banks pay to settle transactions, is still pushing the upper bounds of the Federal Funds rate. In other words, counterparty risk exists somewhere in the market and the Fed has to keep stepping in to maintain rate levels instead of the market.
This is why the Fed has been so reluctant to make any big moves. They know there’s a problem but they can’t fully identify where it’s coming from and the extent of it. This is something we’ve been following for months but has yet to creep into the mainstream market analysis narrative. That might all change.
A piece in the Financial Times on Friday has caused a bit of a stir as it revealed, “New York Federal Reserve president John Williams convened a meeting with Wall Street dealers this week over a key short-term lending facility, underscoring officials’ concerns about strains in US money markets. The hastily arranged meeting, which has not been previously reported, took place on the sidelines of the Fed’s annual Treasury market conference on Wednesday, according to three people familiar with the matter.”
Where we go from here is starting to feel pretty obvious. The Fed is more than likely going to have to start printing money again to get ahead of a major break in the plumbing of the system. UBS recently announced it was winding down two subprime hedge funds that had exposure to the First Brands bankruptcy. While not unexpected that there would be fallout, it’s further evidence that when something breaks there’s always more exposure than just the primary bankruptcy.
The big focus will be on the regional banking sector in the coming months now that the Fed appears to be waffling on any further rate cuts. Recall that most of the consumer debt vehicles (auto loans, student debt, mortgages, credit cards) have little to do with the Fed Funds rate. But the one sector that is heavily influenced by this rate is commercial real estate. We’re in the prime window for commercial real estate 5-year balloon payments that were negotiated in the wake of the COVID crisis. So commercial property owners are anxious to see rates come down as quickly as possible. If they don’t get the relief they’re looking for then we could start to see cascading defaults on these mortgages which would have a real effect on the industry and an even larger impact on sentiment.
Headlines
There Has To Be a Better Way
Distributing SNAP benefits is a messy affair. The government shutdown highlighted the vulnerabilities of both the population that receives them and the system that distributes them. The better way, of course, is to have an economy that doesn’t force people into food security. But at a minimum, we need to find a better way to streamline benefits because the USDA is increasingly at odds with the states it partners with and this probably won’t be the last shutdown of Trump’s second term.
From the article:
“Before the shutdown ended, SNAP benefits were, to put it mildly, all over the place. A large minority of states had issued November benefits to all of their recipients. A handful of states had issued partial benefits, and now need to send out the remaining funds. Some states didn’t issue benefits at all, and will need to send them all out as soon as possible, which could overwhelm the already tenuous system.”
DHS Secretary Kristi Noem once got into hot water for hiring a friend’s ad agency to do work for her as governor. She’s no longer concerned about optics in the Trump administration since everything illegal is now legal, left is right, and right is…well, further right.
From the article:
“This is not the first time that the Strategy Group has gotten public money through a Noem contract. As governor of South Dakota in 2023, her administration set off a scandal by hiring the Ohio-based company to do a different ad campaign, paying it $8.5 million in state funds. While the state said the contract was done by the book, a former Noem administration official told ProPublica that Noem quietly intervened to ensure the Strategy Group got the deal.”
Fifty years. That’s how long some of the conservative efforts to unmake this democracy have been in full swing. In the media. Think tanks. D.C. The courtroom. Conservatives see something they despise and then chip away at its foundation bit by bit until it comes crashing down. Regulations. Taxes. Rights. Democracy. This is one of the first left flank attacks that I’ve seen in a long time and it’s coming out of the most unlikely place.
From the article:
“It’s notable that Montana’s amendment doesn’t aim to overturn the Citizens United ruling. If passed, it would merely render the ruling ineffective within Montana because businesses operating in the state would have to abide by its definition of corporations. This makes it immune to national legal challenges and the whims of a Supreme Court that’s even more conservative than its 2010 iteration. ‘This isn’t a regulation,’ said Mangan, ‘it’s a different way of looking at transparency under First Amendment grounds.’”
“In the wake of Zohran Mamdani’s historic election in New York City, Jon is joined by Lina Khan, former Chair of the Federal Trade Commission and newly appointed co-chair of the mayor-elect’s transition team. Together, they discuss what tools the government has — both federally and locally — to advance policies that benefit consumers, examine how corporate interests are prioritized at the expense of a competitive market, and consider what it will take to build an economy that delivers for working people.”
“This book provides a historical analysis of the origins of totalitarianism, exploring the political and social conditions that led to the rise of Nazi and Stalinist regimes. Arendt examines the roots of totalitarianism in imperialism, racism, and the desire for power and control. Her insights into the nature of modern politics and the conditions that make tyranny possible are still relevant today. This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it.”
“Working Families Party really gets it. My son-in-law & daughter walk with them in NYC. Socialist with messaging 100% focused on issues directly affecting the working class and poor.”
In nine months, Katie Wilson went from a relative political unknown to winning the Seattle mayoral race in yet another sign that the working class is fed up.
“This progressive grassroots political party fights for workers over bosses and people over the powerful. It strives for an America which realizes the promise of freedom and equity for all.”
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