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An Unedifying Sight
It turns out it's not only 2020's then-newbie crypto traders that have become very much addicted to a zero cost of capital. All over Twitter right now you can find folks that ought to know better - your Bill Ackmans, your Goldmans - clamoring for a return to the ZIRP paradigm or some variant thereof. This is rather surprising, since you would - genuinely - think that financial sophisticates could outpace the general investing populace whether base rates be zero or +15% or anywhere in between. It is likely however that investments made prior to say Q1 2022 were executed at such a high in-cost that the underlying assets cannot grow in fundamental value fast enough to satisfy the IRR requirements of those now agitating for a Fed pause or cut. Your regular Master of the Universe down the street also, it seems, could use a little help from the Fed. Help that was much hoped-for, but not forthcoming, during all of 2022.
And so by complete coincidence has come about a set of circumstances that has forced the Fed's hand. At this point the notion of no change in pace in rate hikes is completely off the table. +75bps would be a wrecking ball, +50bps a major dent in risk asset prices, +25bps likely already priced in to the market, and +0bps a bullfest of not-seen-for-a-couple-years proportions. Between the #BankingCrisis - a Twitter psychodrama played out IRL - and inflation - the Fed is caught between a rock and a hard place.
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