While you may well be correct in your views, I would be concerned relying on GLD numbers alone. Since the GFC we had meaningful proliferation of ETFs competing with GLD as well as other means of holding gold.
The other issue is - you’re looking at shares outstanding rather than value and while gold nearly doubled from its 2015 low, TLT nearly halved recently.
Rather than shares outstanding, it may be more instructive to look at the total value?
Thanks for the nice post. We do share the similar strategic view on the commodities and fixed income. From your perception, does the 10y tenor is the optimal part of the curve to short, or the shorter end is better for the price action impulse?
yes you could skip the beginning and listen from from minute 60 till the end.
Let me see if I can try to explain here as much as I can:
A strong dollar and high prices for everything have created a demand shift down.
What OPEC has done it it cuts Supply so it shifts the supply curve back down but every time that it cuts, the supply tilt a little bit it becomes a bit more elastic
Also China has been building into spr and also adds to that elasticity
So essentially you now have a situation where OPEC has cut three times and each time the forward curve has become a little bit more elastic and so demand has come down
Because we have this forward Supply elasticity it gives Emerging Markets like China and India time to substitute away from oil also the longer this forward Supply elasticity happens the more longer term demand becomes more elastic
They also see hard Landing down the road and and if that is true it'll it this will be the first hard Landing with oil prices not going substantially lower than here
They also discuss US oil rigs and US SPR and don't see that affecting that much the price of oil (as much as the oil bulls are projecting)
In this YouTube video, Michael Kao and Alexander Stahel discuss the relationship between the Chinese Yuan (CNY) and oil, highlighting the "Doom Loop" created by the devaluation of the CNY. They explain that China's lack of consumer support and reliance on export growth necessitates devaluing the CNY, which reduces demand for oil. To break this loop, China needs substantial stimulus and must contend with the inflation-fighting efforts of the US Federal Reserve and the European Central Bank.
Highlights
💰 The Chinese Yuan and oil are connected in a "Doom Loop" due to CNY devaluation and its impact on oil demand.
🇨🇳 China's lack of consumer support and dependence on exports necessitate devaluing the CNY.
📈 To break the loop, China requires significant stimulus and must navigate the inflation-fighting actions of the US Federal Reserve and the European Central Bank.
(courtesy of chatGPT, so useful for long youtube videos!)
Hi there. I had a watch. I think about commodities different. Whenever I think about any commodity - I tend to think about supply rather than demand... if supply is under control then commodities tend to do well.
Right now is tricky - because the spike after Russia invaded Ukraine led governments to grow supply (sell down SPR for example - use more coal). But I am not sure what corporates are doing. Exxon bought back shares - so my guess is supply is under control.
That's why I think commodities will be okay - supply seems under control
Russell, great charts - Thanks for sharing. Long bond yields have been rangebound for months in the face of high demand (per your chart showing TLT shares outstanding), but now, post debt ceiling suspension, a load of supply is coming to market. It looks like the dam might have broken...
I've been shocked that anyone would be accumulating 10Y UST at 3.5%, particularly when we *knew* of the looming supply that was coming to market as well as the currency weakness in CNY and JPY alongside >5% short duration USTs available. The inflows to TLT look irrational -- like lots of people are playing the rules of the past disinflationary regime.
Thank you Russell!
While you may well be correct in your views, I would be concerned relying on GLD numbers alone. Since the GFC we had meaningful proliferation of ETFs competing with GLD as well as other means of holding gold.
The other issue is - you’re looking at shares outstanding rather than value and while gold nearly doubled from its 2015 low, TLT nearly halved recently.
Rather than shares outstanding, it may be more instructive to look at the total value?
I prefer flows rather than values as I want to see how people react to.price movement.
Bllomberg has an index of all known gold.etf.holdings - very similar. Will add in next post
The world has changed for sure.
Central Banks pausing and resuming rate hikes in a short span differs from previous regimes.
Here in Aus, Albo & Co has lowered the tax rate for next FY. Inflationary pressures are here to stay.
What are your views on Rental caps being implemented around the world?
Thanks for the nice post. We do share the similar strategic view on the commodities and fixed income. From your perception, does the 10y tenor is the optimal part of the curve to short, or the shorter end is better for the price action impulse?
I like TLT as it has no pull to par - and the coupon of underlying bonds are low so very sensitive to changes in yield
yes you could skip the beginning and listen from from minute 60 till the end.
Let me see if I can try to explain here as much as I can:
A strong dollar and high prices for everything have created a demand shift down.
What OPEC has done it it cuts Supply so it shifts the supply curve back down but every time that it cuts, the supply tilt a little bit it becomes a bit more elastic
Also China has been building into spr and also adds to that elasticity
So essentially you now have a situation where OPEC has cut three times and each time the forward curve has become a little bit more elastic and so demand has come down
Because we have this forward Supply elasticity it gives Emerging Markets like China and India time to substitute away from oil also the longer this forward Supply elasticity happens the more longer term demand becomes more elastic
They also see hard Landing down the road and and if that is true it'll it this will be the first hard Landing with oil prices not going substantially lower than here
They also discuss US oil rigs and US SPR and don't see that affecting that much the price of oil (as much as the oil bulls are projecting)
Hi Russell, what are your thoughts about Michael Kao & Alexander Stahel advocating for oil to go to 50$ in the following video: https://www.youtube.com/watch?v=rwbMRdHs_tg
Very interesting interview. Would love your thoughts on it as it contradict your opinion on oil
It is an 80 minute video... could you give me a summary of their bearish view?
In this YouTube video, Michael Kao and Alexander Stahel discuss the relationship between the Chinese Yuan (CNY) and oil, highlighting the "Doom Loop" created by the devaluation of the CNY. They explain that China's lack of consumer support and reliance on export growth necessitates devaluing the CNY, which reduces demand for oil. To break this loop, China needs substantial stimulus and must contend with the inflation-fighting efforts of the US Federal Reserve and the European Central Bank.
Highlights
💰 The Chinese Yuan and oil are connected in a "Doom Loop" due to CNY devaluation and its impact on oil demand.
🇨🇳 China's lack of consumer support and dependence on exports necessitate devaluing the CNY.
📈 To break the loop, China requires significant stimulus and must navigate the inflation-fighting actions of the US Federal Reserve and the European Central Bank.
(courtesy of chatGPT, so useful for long youtube videos!)
Hi there. I had a watch. I think about commodities different. Whenever I think about any commodity - I tend to think about supply rather than demand... if supply is under control then commodities tend to do well.
Right now is tricky - because the spike after Russia invaded Ukraine led governments to grow supply (sell down SPR for example - use more coal). But I am not sure what corporates are doing. Exxon bought back shares - so my guess is supply is under control.
That's why I think commodities will be okay - supply seems under control
Maybe I should have left my short TLT on. Oh well.
Russell, great charts - Thanks for sharing. Long bond yields have been rangebound for months in the face of high demand (per your chart showing TLT shares outstanding), but now, post debt ceiling suspension, a load of supply is coming to market. It looks like the dam might have broken...
I've been shocked that anyone would be accumulating 10Y UST at 3.5%, particularly when we *knew* of the looming supply that was coming to market as well as the currency weakness in CNY and JPY alongside >5% short duration USTs available. The inflows to TLT look irrational -- like lots of people are playing the rules of the past disinflationary regime.