Really great piece. Seems like the next clash as you mention (like China) is Motivation v Micro and is probably best evidenced (for me) in Oil & Gas underinvestment over the last decade or so, but now the Motivation needs/wants more domestic production while the Micro incentives aren't there.
Russell, Im positioning for a sharp slowdown in growth/inflation based on leading indicators and an agressive FED tightening. I like short Oil, short Equities and long TLT here over next several months. Is it possible to see sharp reversions in TLT with these type flows and then a continuation of trend after next FED pivot?
My observation is that equities would love to see a bond rally and lower oil...
If my labour over capital thesis is correct - equities will do badly as well - so why not just short equities, and ignore the oil and bond trade? Given the way governments write cheques these days, its hard to get too bearish oil TBH...
I have been a fan of yours for a long while, and have been reading your pieces since 2014 or so. You are especially good at connecting unrelated themes and issues and then forming a conviction and acting on it. That said, I noticed that and you will probably agree, you are not specialist on any thing, not macro, not fundamentals, nthing, just a smart observer. Dont get it wrong, nothing wrong with that. I have seen your calls go haywire a few times and in each one, my observation was that, you overstayed your welcome as forces (fundamentals, macro, micro, what have you) were changing but you could not grasp them. And...you did not close the positions. In my humble opinion, in those circumstances, you need to either close the positions no matter what or have some in house expertise, which I doubt suits your style. Another weakness I noticed was focusing on niche weird markets and trying to rationalize your calls...i.e. Korean weird options, Japanese banks, etc. etc.. Hope this does not come across wrong. I do enjoy your ideas !
All valid observations - and since 2016 I was trying to resolve changing corelations by looking at various market factors (clearinghouses, korean autocallables etc). The reality was that I should have been looking at politics - which was a mistake, and I am not trying to correct - and get away from niche financial issues.
The way clearinghouses have operated this year - where the rules are changed depending on who exactly is in trouble showed me how naïve I was - I wont make that mistake again
I like re-shorting TLT here, but curious on what your views are in terms of the game theory being played behind the scenes here with regards to retirement accounts getting absolutely clobbered. I mean, at a certain point (given US midterms in Nov.) this is going to be a hot topic & I can't help but think they have to save bonds. Any signals you recommend to track that would indicate this is coming? I'm watching fwd. inflation exp. ($RINF + others), $XME price action, etc. for what it's worth
Its a good point, the Fed will come under real pressure to help out asset prices at some point... that why I suspect nominal returns will be flat - but real returns will be very poor.
I like CRB RIND and CRB FOOD as guides to when the Fed can support assets market again... both are dipping at the moment - but I suspect its a buy the dip moment in commodities...
Awesome, appreciate your insights. I don't think it's worth front-running the Fed, but the incentives are too obvious to ignore. Probably worth exploring in much more detail once something 'breaks' that turns out to be systemic. Question is, will it be something out of Crypto (Tether), EM credit, or something like Credit Suisse..
Really great piece. Seems like the next clash as you mention (like China) is Motivation v Micro and is probably best evidenced (for me) in Oil & Gas underinvestment over the last decade or so, but now the Motivation needs/wants more domestic production while the Micro incentives aren't there.
Russell, Im positioning for a sharp slowdown in growth/inflation based on leading indicators and an agressive FED tightening. I like short Oil, short Equities and long TLT here over next several months. Is it possible to see sharp reversions in TLT with these type flows and then a continuation of trend after next FED pivot?
My observation is that equities would love to see a bond rally and lower oil...
If my labour over capital thesis is correct - equities will do badly as well - so why not just short equities, and ignore the oil and bond trade? Given the way governments write cheques these days, its hard to get too bearish oil TBH...
I have been a fan of yours for a long while, and have been reading your pieces since 2014 or so. You are especially good at connecting unrelated themes and issues and then forming a conviction and acting on it. That said, I noticed that and you will probably agree, you are not specialist on any thing, not macro, not fundamentals, nthing, just a smart observer. Dont get it wrong, nothing wrong with that. I have seen your calls go haywire a few times and in each one, my observation was that, you overstayed your welcome as forces (fundamentals, macro, micro, what have you) were changing but you could not grasp them. And...you did not close the positions. In my humble opinion, in those circumstances, you need to either close the positions no matter what or have some in house expertise, which I doubt suits your style. Another weakness I noticed was focusing on niche weird markets and trying to rationalize your calls...i.e. Korean weird options, Japanese banks, etc. etc.. Hope this does not come across wrong. I do enjoy your ideas !
All valid observations - and since 2016 I was trying to resolve changing corelations by looking at various market factors (clearinghouses, korean autocallables etc). The reality was that I should have been looking at politics - which was a mistake, and I am not trying to correct - and get away from niche financial issues.
The way clearinghouses have operated this year - where the rules are changed depending on who exactly is in trouble showed me how naïve I was - I wont make that mistake again
I like re-shorting TLT here, but curious on what your views are in terms of the game theory being played behind the scenes here with regards to retirement accounts getting absolutely clobbered. I mean, at a certain point (given US midterms in Nov.) this is going to be a hot topic & I can't help but think they have to save bonds. Any signals you recommend to track that would indicate this is coming? I'm watching fwd. inflation exp. ($RINF + others), $XME price action, etc. for what it's worth
Its a good point, the Fed will come under real pressure to help out asset prices at some point... that why I suspect nominal returns will be flat - but real returns will be very poor.
I like CRB RIND and CRB FOOD as guides to when the Fed can support assets market again... both are dipping at the moment - but I suspect its a buy the dip moment in commodities...
Awesome, appreciate your insights. I don't think it's worth front-running the Fed, but the incentives are too obvious to ignore. Probably worth exploring in much more detail once something 'breaks' that turns out to be systemic. Question is, will it be something out of Crypto (Tether), EM credit, or something like Credit Suisse..