Barry Speaks! Fed Disdain; Recession & Low Rates Coming; Housing Will Be Fine

The Fed Offers To Mow My Lawn!

The oddest thing happened to me yesterday, as four Federal Reserve Bank Presidents came to my home and offered to mow my lawn in an effort “to get in touch with the people.”

I was caught off guard, but I thought, “What do I have to lose,” and said, “Sure, the mower’s in the garage.”

After an hour though, I did not hear anything, so I walked back to my garage to find all four Presidents staring at my water heater, and one of them said: “Is this the mower?”

I was shocked but friendly still, because you don’t want to upset the Fed, and I very nicely showed them my actual mower and how to work it.

Two of the Presidents were then unable to push the mower, one refused to get his $1,500 loafers dirty, and the fourth seemed utterly incompetent, but I let him mow anyway.

He then took out my entire flower bed, ran over my cat, and pushed the mower through my living room window.

Overcome by glass, flower petals, and cat fur – I was furious!

I ran outside and yelled: “What the hell are you idiots doing?”

And one of the Presidents responded with: “What do you mean? We are doing a great job!”

I then screamed, “Why would you say that?!” And all four Presidents said – “Because we all told each other we are!”

At this point, I was so suspicious of any of their abilities that I demanded to see their resumes.

And sure enough, none of them had any skills or work experience outside of the Fed – so I fired them all!

They then insisted that I thank them because if they had not mowed my lawn, I would be broke.

When I confusedly asked why, they insisted that I not question them because they are PhD-experts and the fact that I was not broke was proof that they saved me!

They then jumped back in their Gulfstream and flew back to Washington, and left me to clean up the mess…

Barry Habib Comes Out From Behind Paywall!

I tout Barry Habib often in my blogs because the man has been immersed in all things mortgages for decades now and because his predictions prove to be so accurate, so often.

Unfortunately though, I am never able to share his videos because they are always behind his MBS Highway paywall (which is well-justified I might add because he pours enormous resources into his content).

So, I was delighted to see a long interview with Barry recently that was not behind a paywall, and I am going to both share it (HERE) and discuss it because some of his comments were so insightful. I highly recommend watching the video and sharing it with clients, but I am going to summarize some of his points below.

Disdain For The Fed

This was my favorite point of Barry’s because his disdain for the Fed is very similar to that of my other favorite macro expert, Jeff Snider of Eurodollar University and Alhambra Partners. And – that was the point of my story at the beginning of this blog. 😊

Barry points out how NONE of the 12 Regional Fed Presidents have any actual private sector experience, with the exception of a few stints at McKinsey. They are all academic and/or Fed “lifers” who have never “had a paper route” or “even run a lemonade stand.” They have zero real-world skills and live in complete echo chambers and bubbles, according to Habib, Snider, and many other Fed watchers.

Habib gives examples of Fed incompetence too, by citing all the comments the Fed Presidents made as recently as last year about how “inflation is not a problem,” and about there being “no rate increases on the horizon.” I like to remind people too of how former Fed Chair, Bernanke, told the world that the housing market was just fine right before the entire housing market melted down. Habib finally reminds us that several Fed members have engaged in ridiculously corrupt insider trading.

Inflation Will Peak In October

Habib reminds us that it is inflation that is driving higher rates, but that it will peak in October and start to fall for two reasons: (1) today’s higher rates are destroying demand across the board (I again suggest watching the video for his full explanation); and (2) supply chains will be untangled and working by then, eliminating shortages (the same theory Mr. Snider has).

Recession All But Certain Now

Habib’s other point is that a recession is all but certain whenever unemployment falls below 4% and inflation (CPI) moves over 5% (where we are now). He points out again how higher rates foster demand destruction, which also will lead to a recession.

Less Inflation And Recession = Lower Rates

This was Habib’s final and primary point: hang in there because lower rates are coming – for sure – as a result of less inflation and the Fed’s reaction to the coming inevitable recession.

Habib also reminds us that housing does fine during most recessions when inventory is not stacked up (like it was in 2008).