The S&P500 gained 1.3% (down 2.8% y-t-d), and the Dow rose 1.7% (down 6.4%). The Morgan Stanley Cyclicals jumped 3.3% (up 12.0%), and the Morgan Stanley Retail index added 1.1% (up 32.6%). The Utilities surged 4.7% (down 10.1%), and the Transports added 0.4% (down 10.9%). The Morgan Stanley Consumer index advanced 2.5% (down 2.3%). The S&P400 Mid-caps gained 1.6% (up 3.8%), and the small cap Russell 2000 rose 1.7% (down 2.5%). The Nasdaq100 increased 1.7% (up 15.3%), and the Morgan Stanley High Tech index added 0.3% (up 24.0%). The InteractiveWeek Internet index jumped 2.6% (up 34.2%), and the Semiconductors gained 1.8% (up 21.6%). The Biotechs rose 1.5%, reducing y-t-d declines to 3.1%. The Broker/Dealers dropped 1.5% (up 17.8%), and the Banks sank 7.0% (down 27.5%). With Bullion down $27, the HUI Gold index fell 3.0% (down 0.4%).
One-month Treasury bill rates ended the week at 5 bps, and three-month bills closed at 16 bps. Two-year government yields dropped 9.5 bps to 0.85%. Five year T-note yields rose 5.5 bps to 1.99%. Ten-year yields jumped 17 bps to 3.16%. The long-bond saw yields surge 20 bps to 4.08%. The implied yield on 3-month December ’09 Eurodollars sank 9.5 bps to 1.23%. Benchmark Fannie MBS yields increased 10 bps to 4.07%. The spread between benchmark MBS and 10-year T-notes narrowed 6 to 91 bps (near 5-year lows). Agency 10-yr debt spreads tightened 7.5 to 42 bps (low since last June). The 2-year dollar swap spread declined 3 to 58.75 bps; the 10-year dollar swap spread was little changed at 14.75 bps; and the 30-year swap spread was little changed at negative 36.25 bps. Corporate bond spreads tightened meaningfully. An index of investment grade bond spreads tightened 13 to a 4-month low 223 bps, and an index of junk spreads narrowed 44 to a 5-month low 1,055 bps.
Corporate issuance picked up this week. Investment grade issuers included Citigroup $7.0bn, Credit Suisse NY $2.25bn, Goldman Sachs $2.0bn, ITT $1.0bn, Potash $1.0bn, Diamond Offshore $500 million, Florida Gas Transmission $600 million, Northern Trust $500 million, Rockwell Collins $300 million, and GATX $300 million.
April 27 – Bloomberg (Paul Armstrong): "The three-month moving average for high-yield debt defaults is about 14%, according to Goldman Sachs Group Inc… The annualized default rate for March was an ‘eye-popping’ 19.4%, the bank said… ‘Equally eye-popping are recovery rates, where default losses for unsecured bonds continue to realize at levels below our forecast of 12.5%,’ Goldman analysts said…."
Junk issuers included Whirlpool $850 million, Ingles Markets $575 million, Starwood Hotels $500 million, and Jarden $300 million.
I saw no convert issuance this week.
U.K. 10-year gilt yields rose 7 bps to 3.55%, while German bund yields dipped 2 bps to 3.17%. The German DAX equities index gained 1.8% (down 0.9%). Japanese 10-year "JGB" yields were down 3 bps to 1.40%. The Nikkei 225 jumped 3.1% (up 1.3%). The emerging markets were mostly higher. Brazil’s benchmark dollar bond yields dropped 10 bps to 6.27%. Brazil’s Bovespa equities index added 1.1% (up 25.9% y-t-d). Flu fear hit the Mexican Bolsa for 3.0% (down 2.2% y-t-d). Mexico’s 10-year $ yields added one basis point to 6.12%. Russia’s RTS equities index was little changed (up 31.8%). India’s Sensex equities index increased 0.7% (up 18.2%). China’s Shanghai Exchange rose 1.2% (up 36.1%).
Freddie Mac 30-year fixed mortgage rates dipped 2 bps to 4.78% (down 128bps y-o-y). Fifteen-year fixed rates were unchanged at 4.48% (down 111bps y-o-y). One-year ARMs fell 5 bps to 4.77% (down 52bps y-o-y). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed jumbo rates up 12 bps to 6.40% (down 77bps y-o-y).
Federal Reserve Credit dropped $81.5bn last week to $2.088 TN. Fed Credit has dropped $159bn y-t-d, although it expanded $1.223 TN over the past 52 weeks (142%). Elsewhere, Fed Foreign Holdings of Treasury, Agency Debt this past week (ended 4/29) gained $3.1bn to a record $2.651 TN. "Custody holdings" have been expanding at a 16.3% rate y-t-d, and were up $387bn over the past year, or 17.1%.
Bank Credit sank $77.5bn to $9.631 TN (week of 4/22). Bank Credit was up $219bn year-over-year, or 2.3%. Bank Credit was down $282bn y-t-d (9.2% annualized). For the week, Securities Credit dropped $46.1bn. Loans & Leases fell $31.5bn to $7.004 TN (52-wk gain of $116bn, or 1.7%). C&I loans declined $10.2bn, with one-year growth reduced to 1.5%. Real Estate loans sank $12.8bn (up 4.4% y-o-y). Consumer loans declined $7.9bn, and Securities loans dipped $0.9bn. Other loans added $0.3bn.
M2 (narrow) "money" supply declined $4.4bn to $8.245 TN (week of 4/20). Narrow "money" has expanded at a 1.9% rate y-t-d and 8.1% over the past year. For the week, Currency was little changed, while Demand & Checkable Deposits declined $16.8bn. Savings Deposits jumped $21.9bn, while Small Denominated Deposits fell $5.7bn. Retail Money Funds slipped $3.6bn.
Total Money Market Fund assets (from Invest Co Inst) fell $8.0bn to $3.798 TN (low since week of 12/17). Money fund assets have declined $32bn y-t-d, or 2.6% annualized. The 52-wk expansion was reduced to $380bn, or 11.1%.
Total Commercial Paper outstanding sank$49.7bn this past week to $1.422 TN (low since 2001). CP has declined $259bn y-t-d (47% annualized) and $343bn over the past year (19.4%). Asset-backed CP dropped $25.8bn to $645bn, with a 52-wk drop of $125bn (16.3%).
More signs of liquidity returning to the ABS market. Year-to-date total US ABS issuance of $25.7bn (tallied by JPMorgan's Christopher Flanagan) is less than half of the $69.5bn from comparable 2008. U.S. CDO issuance of $20.9bn compares to last year's y-t-d $13.5bn.
International reserve assets (excluding gold) - as accumulated by Bloomberg’s Alex Tanzi – were little changed y-o-y at $6.665 TN. Reserves have declined $282bn over the past 28 weeks.
Global Credit Market Dislocation Watch:
May 1 – Bloomberg (Margaret Chadbourn): “Silverton Bank of Atlanta, a closely held commercial bank, was closed by a regulator, the 30th U.S. lender to fail this year amid the worst recession in half a century.”
April 29 – Bloomberg (Robert Schmidt and Rebecca Christie): "At least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said. While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said."
April 27 – Bloomberg (Alison Vekshin): "Federal Deposit Insurance Corp. Chairman Sheila Bair sought authority to close ‘systemically important’ financial firms, expanding powers her agency uses to wind down failing commercial banks. The new powers would let the FDIC take over an institution and shut it down, imposing the costs on investors and creditors rather than taxpayers who absorb losses when government protects companies deemed ‘too big to fail’…"
April 27 – Financial Times (Krishna Guha): "The ideal interest rate for the US economy in current conditions would be minus 5%, according to internal analysis prepared for the Federal Reserve’s last policy meeting. The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation. A central bank cannot cut interest rates below zero. However, the staff research suggests the Fed should maintain unconventional policies that provide stimulus roughly equivalent to an interest rate of minus 5%... They suggested that the Fed should expand its asset purchases by even more than the $1,150bn increase policymakers authorised at the last meeting…"
April 30 – Bloomberg (David M. Levitt and Simon Packard): "HSBC Holdings Plc’s planned sale of its London, New York and Paris offices may bring Europe’s biggest bank about 40% less than the properties would have fetched at the 2007 market peak…"
April 30 – Bloomberg (Abigail Moses): "Credit markets in the U.S. and Europe headed for their biggest monthly rally in a year… The cost of protecting corporate bonds from default is set to fall the most since the rescue of Bear Stearns Cos. boosted investor optimism in April last year, traders of credit-default swaps said."
May 1 – Bloomberg (Laura Cochrane): “Emerging-market governments and companies sold more bonds in April than at any time in the past two years… The $25.5 billion raised in April is the most since May 2007 and brings the total for 2009 to $55.7 billion, 72% more than in the same period last year…”
May 1 – Bloomberg (Cristina Alesci): “High-yield corporate bonds rallied the most since Michael Milken helped create a market for the securities in the 1980s. Junk bonds returned 11% in April, the best performance since at least 1987, according to Merrill Lynch… Investors injected $1.79 billion into U.S. high-yield bond funds in the four weeks ended April 29, according to AMG…”
April 30 – Bloomberg (Laura Cochrane, Garth Theunissen and Michael Patterson): "Emerging-market stocks are poised for their best month in 20 years… The MSCI Emerging Market Index surged 17%, the steepest gain since April 1989…"
Government Finance Bubble Watch:
April 29 – Bloomberg (Rebecca Christie): "The Treasury plans to sell a record $71 billion in long-term debt next week and also will add more 30-year bond sales to its auction calendar, as part of efforts to finance the record U.S. budget deficit."
April 27 – Bloomberg (Jeremy R. Cooke): "The federally subsidized Build America Bonds program may grow to $100 billion in annual sales and pose risks to state and local governments’ credit quality and refinancing practices, Municipal Market Advisors said. Issuers led by California in the past two weeks have sold more than $7.5 billion of taxable debt eligible for the 35% federal cash rebate on their interest costs… The success of the bonds may drive increased borrowing, burdening issuers with long-term debt that isn’t paid down on a yearly basis and can’t be refinanced as economically as traditional municipal deals, the… firm said…"
April 30 – Bloomberg (Hugo Miller and Alexandre Deslongchamps): “Canadian governments will contribute $2.42 billion to a $10.5 billion fund to help Chrysler LLC operate under bankruptcy protection, Canadian officials said…”April 30 – Financial Times (Raphael Minder): "The Asian Development Bank plans to pump an extra $3bn into economies struggling to respond to the financial crisis and boost its project lending by $10bn over the next two years. The ADB’s lending boost comes after shareholders approved a trebling of its capital base, from $55bn to $165bn."
May 1 – Bloomberg (Gabrielle Coppola): “Federal guarantees by 13 countries on more than $400 billion of financial company bonds are punishing the AAA-rated World Bank Group with record borrowing costs… The… World Bank, founded in 1944 to rebuild economies after World War II, sold $6 billion of three-year notes… to yield 30 bps more than the benchmark… The… spread was the widest for a dollar-denominated bond offering by the supranational lender…”
April 30 – Bloomberg (Kyunghee Park): “South Korea plans to provide 11.5 trillion won ($8.8 billion) of shipping finance this year to help shipowners pay for existing contracts and place new orders.”
April 27 – Bloomberg (Ian Guider): "Ireland’s government is preparing to buy 90 billion euros ($119 billion) of property loans in a bid to stave off nationalizing its biggest lenders. It may still end up with majority control of the country’s banks."
May 1 – Bloomberg (Cherian Thomas): “India’s Communists plan to spend an additional 10 percent of gross domestic product to protect the economy from the global recession if an alliance they support is voted to power.”
The dollar index dipped 0.2% this week to 84.55 (up 4.0% y-t-d). For the week on the upside, the South Korean won increased 4.7%, the South African rand 3.6%, the Taiwanese dollar 2.4%, the Canadian dollar 2.0%, the British pound 1.6%, the Australian dollar 1.1%, and the Swedish krona 1.0%. On the downside, the Mexican peso declined 3.2%, the Japanese yen 2.2%, and the New Zealand dollar 0.4%.
Gold ended the week down 3.0% to $886 (up 0.5% y-t-d). Silver dropped 3.7% to $12.47 (up 10.4% y-t-d). June Crude gained $1.25 to $52.80 (up 18.4% y-t-d). June Gasoline jumped 4.3% (up 42% y-t-d), and June Natural Gas rallied 4.0% (down 37% y-t-d). Copper gained 3.3% (up 50% y-t-d). July Wheat rose 4.9% (down 7% y-t-d), while July Corn surged 7.3% to a 16-wk high (up 1.7% y-t-d). The CRB index jumped 2.8% (down 0.2% y-t-d). The Goldman Sachs Commodities Index (GSCI) gained 2.8% (up 8.6% y-t-d).
China Reflation Watch:
April 30 – Bloomberg (Philip Lagerkranser): "Just when the world is beginning to appreciate China’s biggest banks… some analysts say it’s too good to be true. While Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd., three of the world’s four largest banks by market value, led an increase in lending focused on investments in railways, roads and ports, similar state-directed loans caused bad debts to snowball in the 1990s. The resulting rescue cost $650 billion and took 10 years. ‘We suspect some of the banks may have compromised their risk-management and risk-aversion attitude to meet targets and government expectations,’ said Wen Chunling…analyst at Fitch… Chinese banks tripled first-quarter lending to $670 billion as part of a government stimulus package designed to help the economy recover from its slowest growth in almost a decade."
April 29 – Bloomberg (John Liu): "New debt sales in China’s interbank bond market rose 6.8% from a year earlier in the first quarter and trading increased 33%... Sales last month jumped 54% from February to 251.4 billion yuan ($36.8 billion), taking the total issuance in the first three months to 500.85 billion yuan, the People’s Bank of China said."
May 1 – Bloomberg (Kevin Hamlin and Hanny Wan): “China’s manufacturing expanded for a second month as government stimulus spending stoked a fledgling recovery… The Purchasing Manager’s Index rose to… 53.5 in April from 52.4 in March…”
April 30 – Bloomberg (Bei Hu): “China Zhongwang Holdings Ltd. raised HK$9.8 billion ($1.26 billion) as it priced the world’s largest initial public offering in nine months…”
Latin America Watch:
May 1 – Bloomberg (Valerie Rota): “Mexico’s economy probably shrank 7% in the first quarter from a year earlier as exports plunged, the Finance Ministry said.”
Central Banker Watch:
April 30 – Bloomberg (Scott Lanman): “The size of the Federal Reserve’s balance sheet fell the most in seven years as companies renewed less of the 90-day debt that was taken on by the central bank and other borrowing declined. Commercial paper held by the Fed fell to $179.4 billion as of yesterday from $240.4 billion…”
Real Estate Bubble Watch:
April 27 – Bloomberg (Kathleen M. Howley): "A record 19.1 million homes stood unoccupied in the first quarter… The number of vacant homes, including foreclosures, properties for sale and vacation properties, jumped from 18.6 million a year earlier… Households that own their own residence declined for the third straight quarter to 67.3%."
MBS/ABS/CDO/CP/Money Funds and Derivatives Watch:
April 29 – Bloomberg (Zoe Schneeweiss): "OeBB-Holding AG, Austria’s state-owned railroad company, reported a record 966 million-euro ($1.3 billion) loss after writing down the value of derivatives that went awry… the company wrote down the entire 613 million-euro notional value of synthetic collateralized debt obligations."
Unbalanced Global Economy Watch:
April 29 – Bloomberg (Jana Randow): "European banks expect to tighten credit standards less aggressively in the second quarter, the European Central Bank said. The ECB cited the results of a bank lending survey…"
April 29 – Bloomberg (Gabi Thesing): "Loans to households and companies in Europe grew at the slowest pace in March since records began in 1991… Loans to the private sector rose 3.2% from a year earlier… M3 money-supply growth…slowed to 5.1 from 5.8% in February."
April 29 – Bloomberg (Ian Guider): "Ireland’s economy may shrink almost 12% in the three years through 2010, the biggest decline of any industrialized country since the Great Depression of the 1930s, the country’s Economic & Social Research Institute said. Gross domestic product may decline 8.3% this year…"
April 30 – Bloomberg (Colm Heatley): "Irish lending grew at the slowest pace in 15 years in March as banks tightened credit standards and demand for loans from companies and consumers decreased. Private sector credit grew 2.3% in March from a year earlier…"
April 29 – AFP: "Ireland’s unemployment rate surged to 11.4% in April, the highest level since August 1996…"
April 29 – Bloomberg (Emma Ross-Thomas): "Spain’s economy shrank in the first quarter by the most since at least 1970… The economy contracted 1.8% in the first three months compared with a 1 percent contraction in the fourth quarter…"
Bursting Bubble Economy Watch:
April 30 – Bloomberg (Mason Levinson): "The New York Yankees reduced season-ticket prices for some premium seats by up to 50%, offering refunds and free tickets to others who had already purchased seats… The 2009 price adjustments are effective immediately for a few hundred seats at the $1.5 billion Yankee Stadium… Some seats that were originally priced at $2,500 were cut to $1,250, and others priced at $1,000 will now be $650."
New York Watch:
May 1 – Bloomberg (Henry Goldman): “New York City Mayor Michael Bloomberg intends to cut 13,500 jobs and increase the sales tax to bring the total levy to more than 8.625%, said a person familiar with the plan.”
April 27 – Bloomberg (Martin Z. Braun): "The budget deficit of New York’s Metropolitan Transportation Authority has grown to $621 million as a slowing economy reduces ridership and commuters may face more fare increases and service cuts, officials said. The MTA… projects ridership to decline 7.2% this year…"
May 1 – Bloomberg (Jeremy R. Cooke): “Municipal bonds posted their biggest April gains in two decades as the advent of federally subsidized taxable offerings from state and local governments reduced new tax-exempt debt issues by about 29% from last year.”
April 27 – Bloomberg (Bei Hu): "Asian investments in hedge funds may have declined by 40% over the 18 months to mid-2009, said an official of Bank of New York Mellon Corp… The value of institutional and wealthy individual holdings in hedge funds will fall to $206 billion by June from $344 billion in December 2007, said Andrew Gordon, the bank’s… executive vice president of financial markets and treasury services."
April 27 – Bloomberg (Bei Hu and Tomoko Yamazaki): "Almost 20% of Asia-Pacific hedge funds closed in the 15 months to March… according to… AsiaHedge magazine."
Crude Liquidity Watch:
April 28 – Bloomberg (Arif Sharif and Camilla Hall): "Dubai house prices tumbled 41% in the first quarter from December after banks reduced lending and speculators left the market because of the global financial crisis, Colliers International said. Home prices in the Persian Gulf business hub have almost halved since their peak in August 2008…"
The Greatest Cost:
An astute analyst posed the following question yesterday: “The current debate is centered on whether the Fed can take back the liquidity in time in order to prevent inflation. Suppose it can. Suppose they execute this perfectly. But if the Fed is able to flood the system with the liquidity (thus reducing the severity of the downturn) and take it back before it causes inflation, it seems there is a free lunch. We get something for nothing. So, assuming a perfectly executed game plan by the Fed, is there a cost? Do they keep rates low for a time, only to raise them a lot a year down the road – is that the cost? Or is there another cost?”
I’m short on time today, so I’ll attempt a brief response.
First of all, while it often appears otherwise, finance provides no free lunch. The mispricing of Credit and misperceptions of risk in the marketplace have deleterious effects, although their true impact may remain unexposed for years. Indeed, the more immediate (and always seductive) consequences of loosened financial conditions tend to be reduced risk premiums, higher asset prices, and a boost to economic “output”. Conventional analysis of monetary policymaking still focuses on “inflation” and “deflation” risks. I would strongly argue that our contemporary world has already validated the analysis that acute financial and economic fragility are major costs associated with market pricing distortions.
When the Federal Reserve collapsed interest rates following the bursting of the technology Bubble, the results seemed constructive. Stock and real estate prices inflated; a robust economic recovery ensued. There was at the time some recognition of the potential for real estate excesses. But this was seen as such a small price to pay in the fight against the scourge of deflation. It was not until 2007 that the nature of the true costs of a massive “reflation” began to come to light.
Many would today argue that it was simply a case of the Fed’s failure to take the punchbowl away in time. Such analysis misses a key facet of Bubble dynamics. Once the Mortgage Finance Bubble gained a foothold there was absolutely no way policymakers were going to be willing to risk bursting such a consequential Bubble.
I see ample support for my view that Bubble dynamics have taken root throughout government finance. This unprecedented inflation includes Federal Reserve Credit, Treasury borrowings, Agency debt, GSE MBS guarantees, FHA and FDIC insurance, massive pension and healthcare obligations, the myriad new market support programs, etc. This Government Finance Bubble is domestic as well as global. Amazingly, the scope of the unfolding Bubble dwarfs even the Mortgage Finance Bubble. And, importantly, it is reasonable to presume that the Federal Reserve will find itself in the familiar position of being trapped by the risk of bursting a historic Bubble.
So I see the probabilities as very low that the Fed will reverse course and impose tightened liquidity conditions upon the marketplace. Actually, reflationary pressures may force the Fed to increase its Treasury holdings in an effort to maintain artificially low interest rates. At the same time, I don’t see higher inflation as the greatest cost associated with this predicament. Much greater risk lies with the acute systemic fragility that I believe is inherent to major Bubbles. Similar to mortgage finance 2002-2007, the marketplace is significantly mispricing the cost - and failing to recognize the risks - of a massive inflation of government finance. And while every Bubble has its own dynamics and nuances, the unfolding Government Finance Bubble has even more precarious Ponzi Finance dynamics than the Mortgage Bubble.
The markets are on tract to accommodate two Trillion or so of Treasury issuance this year. This incredible amount of debt creation is in the range I would expect necessary to temporarily stabilize the U.S. (“services”) Bubble Economy. Importantly, this amount of new finance both plugs financial holes and works to stabilize inflated income levels. From yesterday’s income data, one can see that Personal Income was up 0.3% y-o-y to $12.04 TN. And while 0.3% is very meager growth, without massive government fiscal and monetary expansion (inflation) the economy would have suffered a destabilizing income contraction. Keep in mind that personal income has inflated 65% since 1998 and 33% from 2003.
I’ll try to explain my belief that dangerous Ponzi Finance Dynamics are in play with the current course of policymaking. First, I view panicked policymakers as seeing no alternative than to try to sustain the current (deeply maladjusted) economic structure. A more natural course of economic adjustment – from finance and consumption-driven Bubble Economy to a more balanced system – was going to be much too painful to endure. So a massive government inflation was commenced in desperation - with the grandiose objective of revitalizing securities markets, housing prices, and the overall U.S. economy. I just don’t see how this reflation goes much beyond stoking a susceptible artificial recovery.
First and foremost, with government finance now completely dominating the Credit system, I can’t even begin to contemplate how this process might nurture an effective allocation of financial and real resources. Indeed, I see today’s manifestations of Credit Bubble Dynamics as an extension of similar mispricing, misperceptions, and over-issuance that led to last autumn’s near financial collapse.
Admittedly, the massive extension of government Credit and obligations works wonders in stabilizing a devastatingly impaired system. Inflationism is always seductive; Trillions worth is absurdly seductive. Yet this extra layer of debt does little to affect change to the underlying economic structure. Actually, a strong case can be made that it only delays and sidetracks the necessary adjustment process. And, importantly, this enormous additional layer of system debt exacerbates system vulnerability.
At the end of the day, a system is made or lost on the soundness of its underlying economic structure. I posit that a sound economic structure is reliant upon only moderate Credit growth and risk intermediation. Our system requires massive Credit expansion and intensive risk intermediation. I would also posit that there are no benefits – only escalating costs – to throwing massive Credit inflation upon an unhealthy economic structure. And, returning to Ponzi Dynamics, one of the major costs to such inflationism is a massive expansion of non-productive Credit – obligations that are created without a corresponding increase in real economic wealth producing capacity. The debt can only be serviced by the creation of more debt obligations.
The danger is that markets too easily and for too long accommodate massive Credit expansion during the boom. Federal Reserve policies are fundamental to this dynamic. But at some point and out of the Fed’s control, as Wall Street learned, greed inevitably turns to fear and a reversal of speculative flows marks the onset of the bust. And it’s the massive inflation of non-productive Credit that ensures the unavoidable crisis of confidence. Can the underlying economic structure service the mounting debt load or, instead, is it the massively inflating debt load that is sustaining a vulnerable economy? And it is in this vein that I fear the Government Finance Bubble is on track to destroy the Creditworthiness of the entire economy. And this Ponzi Dynamic is The Greatest Cost to what I fear is a continuation of unsound policymaking.