Surrounded by peak insanity, I've been forced to look more closely at the macro picture. If things were not bad enough already with a $2 trillion budget deficit, $1 trillion in annual interest payments, and MONUMENTAL malinvestment in science fiction and cat videos that is effectively propping up both the stock market and an economy teetering on recession, I just stumbled upon this. We apparently have $5 trillion in municipal bond fraud to deal with. “2008 will look like a walk in Central Park compared to what’s coming," says Texas property developer, Mitch Vexler. "Many districts are borrowing new money just to pay interest on old debt—classic Ponzi dynamics."
After years of investigation, Vexler estimates that $23 trillion in property overvaluation by Central Appraisal Districts nationwide has been spun into school district bond fraud to the tune of $5.1 trillion, from which in 2024 alone they stole $450 billion, he claims. "So if you say in Godley, TX that the (average) value of the property is $160K, well, isn't it interesting that the outstanding compound cumulative interest plus the bond fraud, give or take, is about $120K per house! This is beyond a 'second mortgage'. They have violated every law under the debt-to-income ratio. They have violated USPAP. The software that's being used at these Central Appraisal Districts is just straight up fraud."
Vexler claims to have irrefutable proof, mountains of data, and is currently lobbying the DOJ, FBI, and SEC to take action before it compounds any further. At least the state of Texas, which is at the heart of Vexler's probe, has taken notice. Last month, Attorney General Ken Paxton launched a statewide investigation of nearly 1,000 Texas cities "to ensure municipal transparency and stop illegal tax increases."
itmtrading.com
They just never learn, do they. I figured 2008 was the end of the line. Time to take our medicine. But the Fed somehow managed to synthesize prosperity for another 15 years, exponentially. At this point, the Fed can drop the fed funds rate all they want-- 175 basis points so far and long term rates have not budged. Clearly that lever is broken. Meanwhile, Trump is bailing water. Trying to remove the Fed chairman before midterms. Then 50-year mortgages lol. Homes would still be unaffordable! And you would die before it's paid off at double the price. Two weeks ago he ordered Fannie and Freddie to purchase $200 billion in mortgage bonds. As I expected, the 30-year mortgage rate has bounced right back.
Remember the Repo Crisis of late 2019? When the overnight lending rate spiked from the Fed Fund-ish 2% to 10%? This is 24-hour lending to institutions who need to balance their daily books and settle transactions. Well, it's getting kinda funky in there again. More spikes, more stress. These rates are set by the market, not the Fed. Back then, it was conveniently washed away by Covid and the multi-trillion dollar injections of liquidity. As a matter of fact, the Fed had already restarted QE in 2019 as an emergency response. "Quantitative Easing" is the Fed purchasing massive amounts of U.S. Treasuries and Mortgage Backed Securities to flood the markets with cash. Looks like they're being forced in that direction again as liquidity is drying up, although for some reason they're saying it is "not QE." Maybe they realize that this lever is broken as well.
After 15 egregious years of counterfeiting, how much more can the Fed actually do now that inflation has finally surfaced in the real world? Until recently, inflation had only shown up in the fake world of stocks, bonds, real estate, cryptocurrencies. Of course, that's not inflation, they all think. It's wealth! Now that Trump has effectively pissed off the rest of the world, how appealing are Treasuries going to be at lower rates? That is, assuming the Fed can sneak its new "not QE" past a savvy bond market without stoking inflation expectations. Fun fact: Cayman Island based hedge funds are now the #1 biggest foreign holders of U.S. Treasures. This is due largely to a highly leveraged arbitrage game known as the "basis trade." Hedge funds borrow billions from the repo market to buy Treasuries, meanwhile selling futures to scalp tiny fractions of a penny from the price difference. From 2022-2024, Cayman hedge funds absorbed 37% of net issuance of Treasuries. What could go wrong?
Regarding the stock market, OpenAI, who is at the epicenter of everything, who is losing billions of dollars every quarter with no real business plan, needs to come up with $1.4 trillion in the next few years to fulfill agreements that have grossly inflated the stock price of every circle jerking company involved. What they all fail to disclose is that LLMs are inherently flawed, limited in application, and will never recoup the hundreds of billions of dollars being dumped into "infrastructure", even as they sell the fantasy of AGI which experts agree is at least ten years away, if ever, in order to build data centers that nobody wants. A much hyped, $1 Trillion IPO is the only thing that might save this company for a little while longer.
Not that anyone is paying attention, but OpenAI is saying they have no plans to go public. No surprise, really. Even if they manage to drain every last drop of liquidity remaining in the financial system, they would have to open their books for all to see. I would love to see the analysts' reaction to that S-1. This has WeWork written all over it. Ultimately, the IP will be acquired on the cheap by Microsoft or someone else. This has to be the endgame for the big players who are rigging the casino at whatever cost. Pick up the pieces. Pick up the chips. They might be worth something one day. Sam Altman of course will parachute with another cool billion.
Regarding the housing market, I highly recommend these videos and anything else from Melody Wright. She originally worked at a firm that soon became embroiled in the 2008 Financial Crisis. Today she is witnessing some kind of encore presentation. She tracks 85 cities in the U.S., travels frequently for an intimate view, and seems to have every corner of the industry covered quite impressively.
youtu.be
youtu.be
Interesting side note: Melody says that strangely, she is not seeing any new permits for data centers anywhere lol. Regarding private lending, aka shadow banking, which I haven't even addressed but is once again raising concerns-- e.g. taking on $136B of inherently risky Consumer Debt in 2025 vs. $10B in 2024-- Melody says they always think they're the smartest guy in the room. "They're about to get crucified," she says, adding "which is probably why we're seeing so much stress in the repo market as well." On a related note, I'm hearing grumblings about the insurance industry being a potential Black Swan event due to PE firms (private equity) essentially taking over the sector. Fun fact: In 2024 alone, insurance companies and PE sponsors moved $130 billion in life and annuity assets to offshore entities (like Bermuda), bringing the offshore total to $1.1trillion. |
