It's true, the market is quite sanguine about the issues, at least to my reading. I guess if this evening's deadline is not adjusted and we do seek to destroy their infrastructure, that may change things for a little while.
I think this view is a reasonable one and indeed you may be proved correct...but what this argument needs to ensure it does (and I am not sure it does it quiet so clearly .. said respectively good sir 🙏) is being clear as to what one defines as "a problem".
Do you mean no recession, do you mean equities won't sell off more than X%, do you mean inflation won't increase beyond Y% etc.
As you would know some Asian countries are already undertaking fuel rationing so someone their would say it is a problem. Moreover, it is clear inflation will rise but to what extent remains unclear at this point...and thus hard to say what the extent, if any, there will be on demand destruction and ultimately growth.
As always you provide a well crafted and interesting thought piece but in making these types of arguments I would just claim in this particular case given the nature of the argument that it's important to make it super clear what is the threshold and nature of "a problem" and then its easier to judge the argument against that.
If its simply that a recession is not guaranteed then you well could be "right" but to be laissez faire as to the situation without such pinpoint clarity makes the argument a little murky.
Thus, would be interested in your thoughts as to how you precisely define "a problem".
I think higher inflation is a given - and higher interest rates as well. But a recession and credit crisis seems very unlikely to me - would require governments to enact austerity - which I see as unlikely.
That was exactly my read on the situation. Inflation, higher rates, more expensive capital, but not enough to crunch credit and cause a recession in DMs . My trading thesis from that was that the AI CAPEX machine working out of the US would be fine even in the „long war“ scenario, meaning little chance of a real bear market even then. Went 12m-forward long on the usual suspects (memory, computation, hyperscalers) and it was indeed looking decent even before the ceasefire.
Makes sense...so effectively your argument can be stated as...higher inflation and higher interest rates are likely from the Iranian conflict but a broader economic recession and credit crisis appear unlikely. So when you say "it's not a big problem" that is really what you mean.
Fwiw, I have followed you for sometime and I believe that your thought framework is rather interesting and often quite on point ... you have said that you like to engage in discussions re feedback on your pieces ... if I may offer one suggestion with the highest level of respect for your work and said with humility from my side ... often it takes a some work to understand what it is that your trying to say ... perhaps consider framing to key concept up front in a very clear narrative (like to paragraph above in this message re how you define "problem" and why you don't believe there will be one) and then flesh out the details.
Last year when you were in New York and you found alot of push back to your higher interest rate view and moving into a world of labour preference ... whilst I wasn't in the meetings ... having been in such meetings I would guess that your smarter then most of the people you meet with but you have not brought the people in the meeting along with you intellectually.
Anyway .. appreciate the reply and I honestly offer this in the hope that you gain even wider coverage via having your ideas more clearly and easily disseminated.🙏
Appreciate that and I had suspected this has been an issue you encountered for most of your career. The irony, I would claim, is that of all challenges a capital manager faces (and as you know there are many especially when trying to grow a capital base) that the one you describe here is at least manageable.
Why ... because if you are able to lay out the actual trade construction as well as the idea behind the trade ... as long as the trade works, even if few understand it initially, returns speak volumes as you well know.
If you are able to demonstrate that your trade ideas consistently work over time, capital will flow even if few understand it as they will be attracted to the returns. However, over time your ideas will gain favour and even if challenging for most to understand, greater attempts will be made to understand them given the return track record.
For month and after month one didn't "need to understand" your thesis on where the world was heading to simply observe that long gold, short treasuries worked. But the longer it was working it behoved anyone to actually understand why you were pushing that trade. Fully understanding a trade helps in many ways not least of which is risk management around the trade, not being spooked out of it but also potentially finding extra alpha via associated trades that stem from the original.
In my view you have a unique voice and I appreciate all your thought pieces. Writing can certainly help to clarify anyone's thought process but I do suspect that HOW you convey your trade ideas could be structured in a slightly different way that may not only aid others in understanding but perhaps further clarify your own thinking and potentially uncover previously missed elements.
You are clearly highly intelligent but sometimes the most intelligent approach is to convey trades and ideas that is tailored for absolute clarity as opposed to putting into words what is running around in one's head if that makes sense.
My comments are offered with this in mind and I wouldn't comment if I didn't think you had much value to contribute.
You have been generous with responding and I have taken much of your time so won't go on further now ... I look forward to hearing your insights moving fwd 🙏
Let’s see on the weekend. You are probably correct but the risks are Trump is cornered and does some stupid. The market is very much underpricing this risk. Am sure everyone hopes for a compromise.
Not a black swan anymore - more grey. There are two stages of a crisis - one when you are in trouble and don't know it (Asia overly reliant on ME supply - but doing nothing about it) and second when you are in trouble and know it (restarting coal generation, diversifying). Markets only really move when you go from stage one to two.
It's true, the market is quite sanguine about the issues, at least to my reading. I guess if this evening's deadline is not adjusted and we do seek to destroy their infrastructure, that may change things for a little while.
Israel probably won't stop, so... We'll see.
I think this view is a reasonable one and indeed you may be proved correct...but what this argument needs to ensure it does (and I am not sure it does it quiet so clearly .. said respectively good sir 🙏) is being clear as to what one defines as "a problem".
Do you mean no recession, do you mean equities won't sell off more than X%, do you mean inflation won't increase beyond Y% etc.
As you would know some Asian countries are already undertaking fuel rationing so someone their would say it is a problem. Moreover, it is clear inflation will rise but to what extent remains unclear at this point...and thus hard to say what the extent, if any, there will be on demand destruction and ultimately growth.
As always you provide a well crafted and interesting thought piece but in making these types of arguments I would just claim in this particular case given the nature of the argument that it's important to make it super clear what is the threshold and nature of "a problem" and then its easier to judge the argument against that.
If its simply that a recession is not guaranteed then you well could be "right" but to be laissez faire as to the situation without such pinpoint clarity makes the argument a little murky.
Thus, would be interested in your thoughts as to how you precisely define "a problem".
Thanks for all your interesting thought pieces 🙏
I think higher inflation is a given - and higher interest rates as well. But a recession and credit crisis seems very unlikely to me - would require governments to enact austerity - which I see as unlikely.
That was exactly my read on the situation. Inflation, higher rates, more expensive capital, but not enough to crunch credit and cause a recession in DMs . My trading thesis from that was that the AI CAPEX machine working out of the US would be fine even in the „long war“ scenario, meaning little chance of a real bear market even then. Went 12m-forward long on the usual suspects (memory, computation, hyperscalers) and it was indeed looking decent even before the ceasefire.
Makes sense...so effectively your argument can be stated as...higher inflation and higher interest rates are likely from the Iranian conflict but a broader economic recession and credit crisis appear unlikely. So when you say "it's not a big problem" that is really what you mean.
Fwiw, I have followed you for sometime and I believe that your thought framework is rather interesting and often quite on point ... you have said that you like to engage in discussions re feedback on your pieces ... if I may offer one suggestion with the highest level of respect for your work and said with humility from my side ... often it takes a some work to understand what it is that your trying to say ... perhaps consider framing to key concept up front in a very clear narrative (like to paragraph above in this message re how you define "problem" and why you don't believe there will be one) and then flesh out the details.
Last year when you were in New York and you found alot of push back to your higher interest rate view and moving into a world of labour preference ... whilst I wasn't in the meetings ... having been in such meetings I would guess that your smarter then most of the people you meet with but you have not brought the people in the meeting along with you intellectually.
Anyway .. appreciate the reply and I honestly offer this in the hope that you gain even wider coverage via having your ideas more clearly and easily disseminated.🙏
Typically by the time everyone understands what I am trying to say, the trade is gone....
Appreciate that and I had suspected this has been an issue you encountered for most of your career. The irony, I would claim, is that of all challenges a capital manager faces (and as you know there are many especially when trying to grow a capital base) that the one you describe here is at least manageable.
Why ... because if you are able to lay out the actual trade construction as well as the idea behind the trade ... as long as the trade works, even if few understand it initially, returns speak volumes as you well know.
If you are able to demonstrate that your trade ideas consistently work over time, capital will flow even if few understand it as they will be attracted to the returns. However, over time your ideas will gain favour and even if challenging for most to understand, greater attempts will be made to understand them given the return track record.
For month and after month one didn't "need to understand" your thesis on where the world was heading to simply observe that long gold, short treasuries worked. But the longer it was working it behoved anyone to actually understand why you were pushing that trade. Fully understanding a trade helps in many ways not least of which is risk management around the trade, not being spooked out of it but also potentially finding extra alpha via associated trades that stem from the original.
In my view you have a unique voice and I appreciate all your thought pieces. Writing can certainly help to clarify anyone's thought process but I do suspect that HOW you convey your trade ideas could be structured in a slightly different way that may not only aid others in understanding but perhaps further clarify your own thinking and potentially uncover previously missed elements.
You are clearly highly intelligent but sometimes the most intelligent approach is to convey trades and ideas that is tailored for absolute clarity as opposed to putting into words what is running around in one's head if that makes sense.
My comments are offered with this in mind and I wouldn't comment if I didn't think you had much value to contribute.
You have been generous with responding and I have taken much of your time so won't go on further now ... I look forward to hearing your insights moving fwd 🙏
Let’s see on the weekend. You are probably correct but the risks are Trump is cornered and does some stupid. The market is very much underpricing this risk. Am sure everyone hopes for a compromise.
My best guess is that carries on for a while and markets juat stop caring at some point
It’s already happening
Especially for AI related names
Not a black swan anymore - more grey. There are two stages of a crisis - one when you are in trouble and don't know it (Asia overly reliant on ME supply - but doing nothing about it) and second when you are in trouble and know it (restarting coal generation, diversifying). Markets only really move when you go from stage one to two.