“this substack is moving from theoretical to practical”. Awesome! And glad you’ll still keep writing on some of the theory as per your reply to Antoine above.
With respect to where bond yields are headed, I think folks still need patience for the lag effects to kick in. The US 10 yr T has barely been over 4% consistently for even a few mos. It's been only a year that rates have been somewhat high. There is no way a world economy built from 2009-mid 2022 on ZERO rates can take a 4% 10 yr T for long, let alone a 5% 10 yr T. This is going to wreck the economy soon, slow inflation, and drive yields down. And this whole "new era of inflation" narrative will go up in smoke.
Remember, something in 2020 & 2021 happened that had never happened EVER in world history. in the USA people were told NOT to go to work for 2 years! They were sent large checks in the mail, unemployment checks were doubled for TWO YEARS, corporations got massive hand outs, people did not have to make mortgage, rent or student loan payments for two years. When you tell people to stay at home and not go out and create goods & services, but send people money to maintain demand, demand outstrips supply.
This iinflation surge is all going to be short lived beecause it is only because of the pandemic. Where many think this is some "new inflation era" due to many narratives out there. USA real GDP was 2.2% from 1870-2000. It's been 1.3% since 2000. How do we get this "secular cycle of higher rates" with much slower GDP growth and worse demographics coming???
Russel, Fantastic idea - I have followed your work for a long time, the good times and not the very good times. If you ever great a fund again, I would be the FIRST person to invest in it.
interesting idea - but might take time to unravel is proved correct (USD 3TR on the sidelines in PE...there are still fees to be earn there i guess) - your day one subs like me will most probably regret the old format of long term macro thinking which is what is missing in the research world. I would suggest you actually continue the same format/research AND add an additional option for the short PE trade.. what do u think ?
One question, can PE firms style drift into more inflationary assets like say buying oil and gas companies or high dividend payers and get out of technology to blunt the impact? Does the underlying leverage mean that won’t work?
Very difficult to understand politics. whilst it appears that capitalism is struggling and that Labour/workers have the upper hand suspect this is not what the Western Governments want. Queues of young people who cannot afford to buy a house and have to beg to find an ever increasing rental property does not make for happy campers. Agree that Real Estate will struggle with ever increasing rates and regulations and probably the robber barrons in the PE world , although in truth they have all banked vast amounts , it will be their clients who get cleaned out. IMO this is about your call on inflation. We need to get it back to circa 2 % rapido .
“this substack is moving from theoretical to practical”. Awesome! And glad you’ll still keep writing on some of the theory as per your reply to Antoine above.
With respect to where bond yields are headed, I think folks still need patience for the lag effects to kick in. The US 10 yr T has barely been over 4% consistently for even a few mos. It's been only a year that rates have been somewhat high. There is no way a world economy built from 2009-mid 2022 on ZERO rates can take a 4% 10 yr T for long, let alone a 5% 10 yr T. This is going to wreck the economy soon, slow inflation, and drive yields down. And this whole "new era of inflation" narrative will go up in smoke.
Remember, something in 2020 & 2021 happened that had never happened EVER in world history. in the USA people were told NOT to go to work for 2 years! They were sent large checks in the mail, unemployment checks were doubled for TWO YEARS, corporations got massive hand outs, people did not have to make mortgage, rent or student loan payments for two years. When you tell people to stay at home and not go out and create goods & services, but send people money to maintain demand, demand outstrips supply.
This iinflation surge is all going to be short lived beecause it is only because of the pandemic. Where many think this is some "new inflation era" due to many narratives out there. USA real GDP was 2.2% from 1870-2000. It's been 1.3% since 2000. How do we get this "secular cycle of higher rates" with much slower GDP growth and worse demographics coming???
Russel, Fantastic idea - I have followed your work for a long time, the good times and not the very good times. If you ever great a fund again, I would be the FIRST person to invest in it.
interesting idea - but might take time to unravel is proved correct (USD 3TR on the sidelines in PE...there are still fees to be earn there i guess) - your day one subs like me will most probably regret the old format of long term macro thinking which is what is missing in the research world. I would suggest you actually continue the same format/research AND add an additional option for the short PE trade.. what do u think ?
One question, can PE firms style drift into more inflationary assets like say buying oil and gas companies or high dividend payers and get out of technology to blunt the impact? Does the underlying leverage mean that won’t work?
Very difficult to understand politics. whilst it appears that capitalism is struggling and that Labour/workers have the upper hand suspect this is not what the Western Governments want. Queues of young people who cannot afford to buy a house and have to beg to find an ever increasing rental property does not make for happy campers. Agree that Real Estate will struggle with ever increasing rates and regulations and probably the robber barrons in the PE world , although in truth they have all banked vast amounts , it will be their clients who get cleaned out. IMO this is about your call on inflation. We need to get it back to circa 2 % rapido .
A shirt! tie next?
Think this theme is fascinating Russell and that you are really on to something here. Best of luck!!
KKR Sees ‘Constructive’ Private Equity Environment https://www.bloomberg.com/news/videos/2023-10-04/kkr-sees-constructuve-private-equity-environment-video
🤔🤔
The ginea pigs are thanking you...master.