Enjoy those last few days of summer. 2 days to Bills Season.

Countdown to the Bills Season Opener








Some good macro commentary from Moody's


  • Fed’s purchase of MBS do not appear to be dramatically impacting markets. (2)
      • MBS spreads versus 10 year treasury are 156bps versus pre-covid average of ~170bps.
        • I was actually surprised by this- I thought the impact would have been larger but I guess yields have declined too which makes the spreads seem tighter than they are.
      • As the Fed tapers it should not hurt the housing market. Housing also has plenty of demographic trends behind it.
  • HY spreads are widening for several reasons (2-3)
    • They were probably way too tight to begin with
    • Delta variant and stock-market volatility
    • Weakening oil prices
  • Delta variant (4)
    • Harming consumer and business trends but not as bad as COVID in the early days of 2020.
      • A strong job market is probably helping consumer sentiment stay high.
  • Inflation
    • Yes, it’s hot right now but on a 2-year stack it’s running at 3% a year. Hot. But not that bad.
      • I like this approach as it helps smooth the impact of COVID on the data.
  • China’s Growth (13)
    • Slowing growth due to flareups of COVID-19 and some tough consumption numbers.
    • Moody’s seems to believe that this weakness is transitory for China.

Why China Will Not Invade Taiwan


  • China is dealing with its own military industrial complex and the bureaucratic inertia that comes with it.
  • Taiwan is a convenient theatre for China to display nationalism without an actual war.
  • Integrating Taiwan will not be peaceful and will therefore result in a war. In a war, the risks to China are too high to justify the potential rewards of integrating Taiwan.

Valuation: A Case Study

Despite the equivalent market caps, one of these companies generated $5 bil in net income last year. The other company generated $4 billion in sales.
Guess which one is in my personal account. (Hint: It’s the one that owns the world’s largest cargo airline.)

The Story of Cantor Fitzgerald on 9/11

On September 10th, 2001, Cantor Fitzgerald had 960 employees on the top 5 floors of the WTC. On September 11th 658 of these employees perished in the attacks. Cantor lost almost twice as many as FDNY. The sheer scale of losing 2/3 of the employees in a single day is hard to fathom.

Howard Lutnick (who is still CEO) has a terrible reputation as a greedy cut-throat Wall Street banker. That morning, he was taking his son to the first day of kindergarten and survived. In the initial chaos, the primary job of the remaining Cantor employees simply became figuring out who was still alive. Amazingly, in this chaos, Cantor’s systems were up and running within 48 hours but the firm was losing over $1 mil/day. An emergency loan form JP Morgan helped Cantor continue as a going entity.

In the weeks after, Cantor was one of the first companies that made the controversial decision to halt the salaries of the missing employees. The press exploded and people went right back to hating Howard Lutnick.

Plenty of people had opinions about why Cantor didn’t do one thing or the other to help the families but I think this misses a key point. On September 12th, there effectively was no Cantor Fitzgerald. Completely winding down the firm was a real option. You can’t support a firm with just 1/3 of the employees working.

Instead, Cantor set up a fund to benefit the families. It included 25% of firm profits for 5 years (which ended up totaling $180 mil) and all healthcare coverage for 10 years.


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