The Blubber

Per Bloomberg

Hugh Hendry, the founder of Eclectica Macro, went on Bloomberg to share his opinions regarding regional banks. He was asked how bad he thought it would get and responded with his fears of what could happen.

Before his explanation, he directly answered the query, saying "real bad" before explaining what it would look like.

He explained that the Treasury and the Fed might actually restrict certain US citizen rights when it comes to withdrawing money from the US banking sector. One reason highlighted was capital flight from the US banking system.

Hendry also shared how in 1934, the Federal Reserve Act allowed it to confiscate gold from US citizens. The Electrica Macro founder talked about a potential "gate" around withdrawals and gave another example, likening it to how a hedge fund operates.

He noted that when someone with money in a hedge fund wants to take it out, these hedge funds place a "gate," which meant users would still have to call the financial institutions. Hendry shared how for huge hedge funds, it could even take two years before someone could take their money out.

Elon Musk also commented on the news, here's what he said:

Musk: "They’ve created a massive gap between money market account (Treasury Bill) interest rates at ~4.5% and bank account interest rates at <1%. That’s a massive incentive to move money out of bank accounts!"

Recently, Powell finally admitted that a "mild recession" was possible. This came after the Fed increased rates by 25 BPS.

Powell also noted that it was possible to avoid a recession and that no decisions were made regarding a "pause." The Fed chair also said that he had a "few regrets."

It was also recently discovered that 722 banks had unrealized losses over 50% of their capital. It was also noted that 31 of those banks were at a point of "negative tangible equity," meaning they couldn't use the Federal Home Loan Banks to borrow money.

See flow at unusualwhales.com/flow.

Other News:

• "It's possible we'll have what I hope will be a mild recession," Powell said

Resources:

Bloomberg