I sometimes look at a basket of objectively bad stocks: a combination of small caps, no analyst coverage, no insider buying, no revenue growth, delays in recent SEC filings... Absolute dogs: stocks that are obvious shorts, and that can only go up in case of a short squeeze.
The idea that you could use someone else's sovereign bonds as a reserve asset is relatively recent - and looks likely to be consigned to the scrap heap.
Hey Russell, how are you thinking about how the entitlement spending wall in the US for Social Security and Medicare figures into your thesis? The SS trust fund is supposed to be depleted at the end of 2032, and Medicare is supposed to be depleted in 2033. SS and Medicare make up ~39% of US federal spending, and SS benefits increase each year with inflation. This turns into a political issue of whether benefits get cut at that point or if the deficit gets widened further. My bet is on the deficit rising further. In isolation, you would think that would either result in yields rising or USD depreciation. However, in relation to other OECD nations, the US actually spends less than the average on entitlements in terms of entitlement spending as a % of GDP. How are you thinking about these dynamics and how it all flows into your investment thesis?
I try and keep it simple - do I think either the Republicans or Democrats are willing to push austerity? No - the politics is just not there. So you need some sort of bond or currency crisis first before that happens.
I sometimes look at a basket of objectively bad stocks: a combination of small caps, no analyst coverage, no insider buying, no revenue growth, delays in recent SEC filings... Absolute dogs: stocks that are obvious shorts, and that can only go up in case of a short squeeze.
Over the summer, they went up all together.
Yes - when consensus longs got hammered, consensus shorts all got bought back to. Very common problem in hedge fund world
Central banks are dumping dollars and hoarding gold at the fastest pace in history.
The idea that you could use someone else's sovereign bonds as a reserve asset is relatively recent - and looks likely to be consigned to the scrap heap.
Hey Russell, how are you thinking about how the entitlement spending wall in the US for Social Security and Medicare figures into your thesis? The SS trust fund is supposed to be depleted at the end of 2032, and Medicare is supposed to be depleted in 2033. SS and Medicare make up ~39% of US federal spending, and SS benefits increase each year with inflation. This turns into a political issue of whether benefits get cut at that point or if the deficit gets widened further. My bet is on the deficit rising further. In isolation, you would think that would either result in yields rising or USD depreciation. However, in relation to other OECD nations, the US actually spends less than the average on entitlements in terms of entitlement spending as a % of GDP. How are you thinking about these dynamics and how it all flows into your investment thesis?
I try and keep it simple - do I think either the Republicans or Democrats are willing to push austerity? No - the politics is just not there. So you need some sort of bond or currency crisis first before that happens.
Makes sense. So would you say your investment framework for those two scenarios would be the following? -
Austerity - Disinflation, Yields down, Gold down, Equities weak
Fiscal Profligacy - Inflation elevated, Yields up, Gold up, Equities strong
Would be more nuance than that, of course, but would you say that's the general playbook?
Fiscal profligacy tends to be good for equities to begin with, until higher interest rates act as a drag...
The BTFD reflex is ingrained in us all now..
except in bonds