Press Clips

Unpacking the June jobs report

https://www.marketplace.org/shows/marketplace-morning-report/more-signs-of-a-cooling-labor-market/#Unpacking-the-June-jobs-report…

Why are bond prices up right now? And what difference does it make?

By Mitchel Hartman

We’re in the midst of a bond market rally. In the last eight weeks — barring Monday, when the bond market retreated a bit — bond prices have been going up, as their yields — the annual interest rate they pay — have been going down….The Fed’s got interest-rate-setting meetings in July and September. But here’s the thing: It met just last week: At that meeting, “they changed their forecast,” said Joanna Gallegos. “They said for the end of the year, we anticipate only making one rate cut versus three.” Basically, said Karen Petrou, a managing partner at Federal Financial Analytics, the bond market is saying to the Fed: “We can hear you. We’re just not listening.” “Even though [Chair] Jay Powell said, ‘We’re going to keep rates about where they are for a while. We don’t think we’ve beaten inflation yet,’ the market is essentially saying, ‘We think you have, and you’re going to be cutting rates as soon as September,’” Petrou said. Based on that belief, investors bid up bond prices, sending the interest rate on the benchmark 10-year Treasury note lower. “Traders think the Fed is overcautious, and the Fed will be able to cut rates. Indeed, it may have to cut rates because the economy will be softening,” she said. But Petrou pointed out that so far, the Fed has confounded market expectations, keeping rates higher for …

Will Democrats stand by Gruenberg?

By Clair Williams

Lawmakers — mostly Republicans — let loose almost immediately after the release of an independent review of the Federal Deposit Insurance Corp.’s workplace culture, calling for the agency’s chairman, Martin Gruenberg, to resign. Those calls, while neither entirely new nor unexpected, were being made by lawmakers farther afield from the usual suspects on the House Financial Services Committee and Senate Banking Committee who are typically involved in financial policy issues….Those hearings could be critical to Gruenberg’s survival at the agency. So far, both the White House and his Democratic allies on Capitol Hill haven’t asked for his resignation, but that could change in the time between the release of the review and his testimony. Lawmakers are receiving closed-door briefings today on the results of the review, according to multiple committee sources familiar with the matter, which could affect lawmakers’ views. I think it’s going to depend on the hearings,” said Karen Petrou, managing partner at Federal Financial Analytics. “I really do.” While Republicans are unified in opposing Gruenberg’s continued time as chairman of the agency, Democrats have been more shaky, she said. They are in a tough position, Petrou said, because of Gruenberg’s importance to the Democratic banking policy agenda, “but on the other hand, if these were allegations about a Republican or a business person, they would be up in arms.”  “It’s going to be touch-and-go,” she said. “If the hearings go well and he holds his ground and …

What do bank earnings tell us about the economy?

By Mitchell Hartman

It’s the second week of April, which means spring is in the air and daffodils, cherry trees and lilacs are blooming. Here at Marketplace, it also means earnings season is starting. Corporate profit-and-loss reports for the January-to-March quarter kicked off in earnest Wednesday with Delta Air Lines, which did quite well. Revenue rose 6% and earnings per share nearly doubled from a year ago. ..“Banks really are bellwethers of the economy,” said Karen Petrou, managing partner at Federal Financial Analytics. “Biggest issues for the larger banks: interest rates, which we — at least, I — know are going to be higher for longer. And that helps to improve bank earnings.” That’s because the banks make more money on the interest they charge borrowers. But Petrou said there’s also a downside to interest rates staying high: credit losses. As consumers keep spending, their credit card balances are rising….“We know that the low-wage earners are having difficulty. What we’re looking for now: Has it crept up the wage scale, middle-income wage earners with late payments or delinquencies?” she said.

https://www.marketplace.org/2024/04/11/what-do-bank-earnings-tell-us-about-the-economy/…

When is strong hiring too strong?

Buy the People: Why everyone loves to hate the Fed

By Kyle Campbell

Click the link below to listen to Kyle Campbell’s podcast on economic  populism.  It’s a terrific survey of Fed history with authoritative insiders including Federal Financial Analytics‘ managing partner Karen Petrou, and then – my bit – an assessment of why recent monetary  policy has made so many Americans so angry and how that affects the political outlook , especially this November.

https://www.americanbanker.com/podcast/buy-the-people-why-everyone-loves-to-hate-the-fed…

By MICHAEL STRATFORD and ZACHARY WARMBRODT

First look: A bank merger rethink — MM has a preview of a provocative bank M&A talk that Federal Financial Analytics managing director Karen Petrou will give at a Kansas City Fed workshop today.

As banking agencies signal tougher scrutiny of proposed mergers, Petrou makes the case that regulators are failing to use tools they already have to address conflicts of interest, concentration and unfair competition ahead of M&A reviews.

“How much of this is necessary in merger review and how much could be accomplished by better prudential regulation along with vigilant supervision and meaningful enforcement?” she says in remarks prepared for her talk, which you can read here.

https://www.politico.com/newsletters/morning-money…

Why Is Trump’s Truth Social Worth Billions? Experts Have Theories

By Eric Cortellessa

On the cusp of a financial crisis, Donald Trump got help from an unlikely source: His struggling social media platform. Investors approved a plan on Friday to take Truth Social public, increasing his net worth by billions as he’s drowning in legal expenses and owes New York state half a billion dollars in a civil fraud case. The company will start trading on the ​​Nasdaq exchange on Tuesday. But the financial statements of Trump’s firm show scant evidence of a booming business worthy of the $4.7 to $5.6 billion market capitalization reported on Monday. Trump Media & Technology Group, which owns Truth Social, lost money last year, according to regulatory filings….It’s not the first time that markets have embraced social media companies at levels that appear to exceed their value, according to Karen Petrou, managing partner of Federal Financial Analytics. Other examples, she cites, include Uber and WeWork.“These kinds of valuations that seem insane are surprisingly common,” says Petrou, “They’re less common than they used to be when interest rates were low. All sorts of firms have been financed significantly, or capitalized through IPO, well above their estimated value. Some of them had no revenues for years. But the markets were chasing yield.”In other words: they were taking high risks they thought could lead to high rewards. That could also be the case with the lagging Truth Social, where shareholders are betting that a …