To The Moon

There were some big movers early in 2026, but overall, the market has been pretty quiet. This week, earnings season starts, so it’s likely we’ll get more fireworks soon.

Let’s just go through a few examples of how consequences could be far from what the original intent is.

Capping Credit Card Rates at 10%

Intent

• Lower interest rates for those who struggle most to pay their bills.

Unintended Consequence

• Credit won’t be offered to those same borrowers in the first place.

  • They’ll then spend less overall because they don’t have access to funds.

  • Note: Maybe this will be a good thing long-term?!?

• Cash back and points rewards will be worse for lower-risk borrowers.

• More people will use BNPL and payday loans.

Banks (not the credit card companies) determine who gets a card, what their limits are, what the rate is, what rewards look like, etc. They’re likely to close up that credit profile to some borrowers if the profit from credit card balances take a hit.

High interest rates pay for all of the benefits you and I may get from using a given card. That will disappear. That wasn’t the intent, but it’s likely to be a consequence.

Note: Maybe that’s good for blockchain payments?!?

Buying Mortgage Securities, Capping Rent, etc

Intent

• Lower housing/borrowing/rent costs for residents.

Unintended Consequence

• Less housing supply is built.

• Lenders pull back, rates rise, and loans become harder to get.

• Housing prices go up.

Almost every attempt to manipulate the existing housing market has backfired. The only path to lower costs is more building.

The President Pushes the Fed to Lower Rates

Intent

• Lower rates to grow the economy.

Unintended Consequence

• Bond investors (who control long-term rates) see more risk of inflation and a recession, which leads to higher rates.

• Confidence in the free market falters, and rates rise because of higher perceived risk.

This isn’t an example of unintended consequences that I made up. Look at the direction of the Fed Funds rate (the short-term rate the Fed sets) since mid-2023. There have been 6 rate cuts for a total of 1.75%.

Now look at the 10-Year yield, which is the benchmark used for everything from corporate loans to mortgages, over the same timeframe.

Not only are rates not falling, depending on the time frame you look at, they’re rising.

What happens if the Fed cuts rates to 1%, as the president has asked for?

I would wager that 10-year and mortgage rates won’t fall and may actually go up.

This is why the Fed had independence in the first place.

This one is especially interesting to me because CEOs like Anthony Noto at $SoFi Technologies Inc.(SOFI)$ have been much more bullish on the economy and lending because of falling rates. But rates aren’t falling on the long end of the curve, and the economic boon he expects may not come as a result.

I’m not going to open the immigration can of worms, but you can imagine how shrinking the workforce and lowering available low-cost labor could impact home construction, food prices, and even GDP growth. Maybe that’s good for the economy. Maybe it’s not. But the consequences for the economy and the job market may be very different than the intention.

I wanted to write this today as a word of caution.

I see a lot of certain prognostications like, “Because of X, Y will happen.” In all of the examples I cited above, we have no idea what the real impact is going to be long-term.

You may agree or disagree with any one of these policies, and your reasoning may be sound. But there are always unintended consequences.

Often, unintended consequences are more impactful — sometimes in the opposite direction of the intent — than the action itself.

I like to make the case against a decision or policy I may like. That helps balance my opinions and forces me to keep an open mind.

But being aware that the outcome may be different from what you thought is a good start.

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