Global Macro Update Archive

The cost of college has risen so high that more than half of Americans no longer think a college education is “worth it.”

The release of ChatGPT late last year triggered a firestorm of debate about both the promise and dystopian risks of artificial intelligence (AI). Some have labeled it the Great AI Freak Out of 2023.

Any sense of normal will remain elusive until we address what Bruce describes as “addictions.”

We are finally hearing a resolution may be in sight for the debt ceiling, though I suspect this will drag out to Monday or even Tuesday. Why waste a good crisis, after all?

Do the days and weeks seem shorter to you lately? Maybe that’s an unkind feature of getting older. I have so much more I want to learn and understand, and not enough time to process it all. 

A stress test is exactly that: a test. It is a mix of assumptions about adverse events and their theoretical outcomes. Ironically, the Fed released its 2023 bank stress test scenarios just weeks before the latest banking crisis erupted.

The last major recession began in 2007. Since then, central banks have done everything in their power to avoid such an event. But then, inflation.

Up until February, you would have done well to be overweight banks. “Banks do well in a rising interest rate environment” was the simple thesis. And that’s true if the banks have competent risk management.

My guest this week, Barry Habib of MBS Highway, breaks down in detail where SVB got it wrong and how mortgage-backed securities worked against the bank.

“Dr. Ed” has been in the markets for over 40 years. He was an economist at the Federal Reserve Bank of New York before becoming chief economist at EF Hutton and then a chief investment strategist at Prudential Equity Group and Deutsche Bank’s US equity division.

In this week’s Global Macro Update discussion, Sam Rines notes that the government no longer sets the minimum wage. Walmart does. When Walmart moved its nationwide minimum hiring rate to $14/hour, nearly all other employers had to follow suit.

What does a new normal look like? That’s the topic I covered with Bruce Mehlman in this week’s Global Macro Update interview (link at the bottom of this letter).