changegonnacome

On Ukraine....seems like Russia now has given up the strangle Ukraine economically strategy that would have been possible by land locking Ukraine from the Black Sea......and has reverted back to the demolition strategy....which is to send it back 20-30 years in time via destruction of infrastructure. Monstrous stuff.

Soundtrack for the animation makes it, scary stuff........reminder that nobody 'wins' any future war (between nuclear powers) in the atomic age......victory wont be ticker tape parades in Times Square.......it'll be finding out your loved ones weren't incinerated in the initial blast.....then hoping against hope in the ensuing years that various lumps and bumps aren't cancerous.

Taking opportunity to 'sell' volatility when I can and where it makes sense.......then short via puts US indexes (& some names) while holding disgustingly cheap high FCF yield consumer staple type things that are buying back shares right now or have irreplaceable hard assets enhanced by inflation at their core.... with a strong tilt towards Europe/UK where you know the recession/nuclear war is is already 'priced in' so sentiment can only kind of get better there & as a USD investor the currency at some point will be a tailwind............then short some consumer discretionary/economically sensitive to recession stocks & then companies where their FCF yield is flirting with the same yield that is going to be available from a humble high yield savings by year end. For example CIT bank is offering a 3% savings account today.....guessing this is gonna be 4% by year end. Folks will wake up soon and wonder what the hell they are doing holding equities with FCF yields in that neighborhood when FDIC alternatives exist. Then I really like market neutral stuff right now, merger arb, works outs - like the Twitter deal trade I had on. Need to do more work on this type of thing actually.

Thanks for sharing - had only seen clips. Nice to see Stan pretty consistent with how I think about things moving forward.....the inflation genie is out of the bottle......and its devilishly hard to put back in without serious economic pain.....and the 5yr/5yr forward @ 2.3% doesn't mean jack when various labor union's step into the room to do a pay deal

Yes totally get where your coming from.

The problem of course is the UK did sign an agreement that did just that.......for cheap political expediency & for the 'got Brexit done' headlines.............the UK signing agreements used to mean something.......the UK used to be a serious country.......but like a drunkard regretting his actions from the night before is trying desperately, through arcane legal maneuvering, to get out of a deal where the ink is barely dry. The EU disagrees vehemently that issues in the implementation rise to a level that would allow for the triggering of Article 16/NI Protocol, as you know, and so if the UK proceeds the EU will simply act unilaterally itself & impose tariff's......the economic consequences for the EU are minor, for the UK they are devastating....the potential trade war, has asymmetric outcomes for the parties involved...........so my point is this and why I use the word extreme......is that when an international counter-party was considered to be rational/dependable for decades as the UK was and then begins to act as the UK has the last five year.... its viewed as quite an extreme shift. I work in this space & the question on the tongues of international participants these last few years is overwhelming "what the hell is going on with the UK, they've lost their minds?". Its tough one for the politcal establishment in the UK I dont deny that.....in some ways the electorate/British population is engaged in a kind ideological civil war since 2016.....which leads to schizophrenic political political leaders who dont know what to do such that they can get elected later. We wont side track this thread further. I understand your arguments, parts have merit.....my wish for the UK is that the next PM is a move away from populists like Boris & Truss.....and return to pragmatists who dont campaign & rule in three word slogans like "take back control "get brexit done" etc etc....you seem rational and so I think we can both agree that the UK can and does deserve better than the last two PM's.

Accept?......there's no accepting anything.......thats the deal the UK, a sovereign nation, signed/accepted with the EU not in 1999 but on December 30th, 2020 which included a trade barrier clearly articulated and located in the Irish sea between N.Ireland & UK..nobody forced anybody to sign anything........if its unworkable, why did they sign it then? If its unacceptable, why was it accepted?*.......and this wasn't signed by some OTHER government or another party years ago as your post seem to suggest might be OK (it isnt of course, trade deals are effected under the principle that they have shelf life beyond the basic political calendar or at least developed nations act that way).....& anyway this deal was signed by THIS very same Tory government 21 months ago......and NI Protocol bill was aimed at dismantling that international trade agreement where the ink was barely dry. * answer this Tory party/government, hijacked post-Brexit by its extreme right wing....( FIVE prime minister in SIX years is quite a record & quite 'extreme' i would say for any Western developed G7/G20 nation).....meant that the one before last (Boris) signed a trade agreement at the end of 2020 with no intention of honoring it.....just so Boris could say he 'got Brexit done' as per his election slogan. This is not the way the UK used to do business and its quite sad...the UK has an incredible history and its contribution to democracy & the common law system is undeniable....to see its political leadership flounder like this is disappointing for the people of the UK and a loss to the international order.

Yeah the Northern Ireland issue is a really a left over from 2016.......where the UK could never quite square the circle around a 'hard' brexit & a Brexit that didnt cost billions and billions of pounds in lost trade/growth. In some ways Northern Ireland is the physical manifestation of the issue they had. They have never really reconciled that issue politically.......which is to say what did "Brexit" really mean....and what did people actually vote for in that famous referendum. It was too simplistic to put "IN" or "OUT" on the ballot box....but thats what they did. On Truss & Grey suits - Well it was the Tory faithful.....the paid up membership of the political party itself who voted her in six weeks ago, with no doubt the grey suits doing what they do to get the 'right' candidate but even an election involving a few 100,000's people can be unpredticable and you got Truss.....a Minister who had been nearly sacked in her last two Ministerial posts........the grey suits I refer too, are of course the senior shadowy figures i the Tory party who have no desire to sit on the front benches but are hugely influential (Sir graham Brady & the 1922 committee)......they told her to leave & she resigned this morning.....its a very curious system they have there.......with serious democratic deficits.

my bad i was throwing around hyperbole without any context. Have to say this was a good one whoever came up with this......needless to say the lettuce won https://www.nytimes.com/2022/10/19/world/europe/liz-truss-lettuce-stream.html

I was more focused, in my mind, on the Northern Ireland Protocol Bill that Truss drafted and was bringing through the commons.....which effectively reneged on the post-Brexit international trade agreement the UK government signed with the EU a few short months ago..........which also effectively would have been the opening shots of a trade war with the EU.....just the UK's largest trading partner, no biggie. It was this populist/extremist nonsense I was really referring but also cutting tax/increasing spending and blowing up your fiscal deficit at time of inflation wasnt too smart either. There is a time to cut taxes and it aint when the BoE is trying to tighten financial conditions.

Truss gone! Men in grey suits told her to go & she did.......UK but more correctly the Tory parties flirtation with extremist experimental politics might be over........I would expect a centrist Tory candidate to emerge.....a safe boring pair of hands or maybe not.

Was never interested in inflation, till they actually printed a shit load & sent it to people....the sheer scale caught my eye, even then I was like meh, lets see.....stay fully invested I've heard this inflation/money printing siren song before.........but then a little later inflation ACTUALLY showed up in the data......and then a little later it didn't seem to be magically going away by itself...& then I looked at the last periods of inflationary pressures and how equities did during that time & what was required from the authorities to fix it............and thats when my interest in inflation started.....I cant speak to people screaming into the abyss in the 2010's It seems, to an extent, its others that cant scrap old ideas from 2010's in the face of new information. It was so right, for so long to poo poo these money printing doomsayers...... its hard to pivot. The Hussman's etc were wrong, those who ridiculed them were EXACTLY right. Being early & wrong in markets is the exact same thing. Endowment effect around ideas is real though...it's hard to let them go especially if they've delivered great returns in the past. I remain ready to completely and utterly scrap my inflation/tightening cycle thesis for the US indexes at the first sign of sustained information to the contrary. Strong opinions, weakly held. Let's see.

I kind of reject the concept of over-owned/less owned as it pertains to financial assets. The yield has to get re-priced relative to alternatives such that people are willing to continue to hold them..... as alternatives themselves are getting re-priced via Fed funds.....everybody is re-shuffling their allocation & every financial asset is held by somebody at all times....so they can never be 'over-owned' per se....there is one bond, one owner at any one time...who sits on that bond & their expected return changes relative to what people will accept to continue to hold them, relative to other things that they potentially could be holding .....the base competitor black hole sucking in all around it, right now, is the humble savings account (and beside that QT).....its about relative allocation & flows across the risk curve.........cash>checking account>savings account>CDs>US-T's>Corp Bonds>HY>Equites>Alternatives>VC>Crytpo.....the sucking sound & re-ratings is flows from one to the other......its what happens when the Fed stops printing money and that money goes into & in this case out of financial assets.....QE to QT....while also raising the Fed funds the ultimate checking account alternative! Cash used to be trash.........but losing ~6% purchasing power......when everything is else losing 20% starts to get attractive on a relative basis and when risk appetite gets suppressed....its a kind of liquidity crunch driven by the uncertainty around terminal rates. Of course a stock picker can do better....but for the purposes of these types of discussions I think in indexes/ Q - What's the best performing broad asset class this year? A - Cash True - but also we may be entering one of those periods....where return of capital becomes more attractive than a return on capital.....bonds are certainly attractive with that filter applied.

But what this mean, for stocks, is that bonds are beginning to compete with stocks again for 'flows'......equites we're the only game in town for a long time, remember TINA (there is no alternative).........well alternatives are starting to emerge which will involve a not inconsequential amount of 'switching' of financial assets as TINA turns to TIA.

Its beyond obvious at this point.....that SPY earnings are going down the toilet into 23.....I dunno call me crazy to be so certain on something so macro but I find it hard to build a bull case AT ALL.....everybody kind of has a bullish bias and its right 99% of the time for big picture market stuff.....but its clear that inflation is sticky and stickier than people expected requiring higher for longer rates, requiring a restructuring of discount rates in the market and equity risk premia applied across asset classes.....I take this almost as a given in my mind.......we are grinding are way down to SPY ~3000.....with some unstructured market panic likely thrown in that could take us down lower for a time. But more importantly.......we are in the process of a kind of 'mega mean reversion' in US markets that is looking through this elevated period of COVID induced money printing inflation to the other side that will become clearer over time and will change long run expectations of fed funds, equity risk premia etc etc......what awaits us post this period of elevated inflation.....is not a trip back to the period 1980 - 2020........deja vu, all over again it isnt.......this was a period of peak globalization, falling interest rates/low inflation, ZIRP, abundant capital, cheap global labor pools coming 'online' (China/India/E.Europe), made in china everything........whats to come is the mirror opposite once this inflation bout is fixed we'll be in the post-COVID world...........de-globalization, higher structural inflation, higher interest rates, limited labor pools/demographics in the West, high demands for capital leading to a scarcity/higher prices for capital (near-shoring/greening of economy and all that capital intensity that entails)........its a very interesting environment to think about and what stocks/industries will do well inside of that.

Thanks will check em out

Any tickers in particular?….want to do some more digging myself

UK listed small caps with little to actually do with the UK in terms of revenues are very attractive….the pound is both a valuation tail wind if/when the currency Re-rates and it’s a tailwind for the business fundamentals if majority of currency earned is in FX and the cash gets deployed into buybacks in Sterling. The U-turn the Tory government did today Re:budget is quite something and in some ways to be commended…..the front benches of the Tory government might be filled with lunatics but the Tory men in ‘grey suits’ seem to be running the country now….these are pragmatic people.

Many pages back here we talked about this.......if you remember......its an under-appreciated reality..........that there exists a proportion of the population perhaps as much as 15%......who through pure genetic lottery are unable to navigate the modern economy in a way that would see them earn anything more than less than subsistence income levels. You can say its their fault.....in the same way you can say it's my fault for having blue eyes.

So much to unpack...squeezing complicated issues into headlines is always fun........conversely the headline could read: "Average American who's 401k gained $100k during stock market bubble caused by recklessly low interest rates & money printing, resulting in runaway inflation destroying the purchasing power of America's working poor, have lost $34k year to date" I can see both sides....others dont seem to be able too.....

Think you could be right longer term…..in the short-medium term however…..I expect the US to solve its inflation first & be cutting rates first….the DXY will then weaken into this. The way it works is USA gets to solve its inflation problem first, by exporting inflation, it is the global hegemon afterall, this is its “exorbitant privilege”. Once the US has ‘solved’ its inflation problem….the rest of the world will get to do the same…..the Euro/RoW currencies will strengthen vis-a-vis the dollar. If you’ve got the stomach & USD cash……Euro/EM is the place to play….you’ve got to pick your spots however.

I’m with you…..if you’ve got to hold USD assets…..what your advocating for seems very reasonable way to me to travel through this period with purchasing power somewhat protected. Sometimes you have only bad options…..trying to compound at 20% per annum in the next 24 months is possibly a game for the fool hardy…let them play, take your TIPS and emerge from your bear cave ready to play once inflation is dead and buried. You might be a little skinnier but you survived the winter

When earnings MULTIPLES are this high you dont need earnings to fall off a cliff to get dramatic moves in nominal stock prices........a few % will do the job.............it why shorter duration/low multiple stocks are going to do better (maybe still bad, but not as bad)

HSW

Totally agree….but not quite there yet I think….I expect things to get a little more absurd tbh….and VIX @ 40 is my sense of the numbers which would give the Fed pause…..SPY 3000 too Yeah if the Fed keeps it up……the answer is NO…… However as the calendar turns to 2023……the BLS non-farm payroll data is going to be very interesting in Q1…..2022 is a year when INFLATION occupied a large part of peoples minds, its really entered into the lexicon…..……the social security bump of 8.3% today, wow…..…has just created a benchmark wage increase in an economy that could have done with something more modest that showed a little more mettle, leadership and pragmatism……………..the middle managers of the world who’ve been told to go into performance review and comp discussion season with “4% on the table and 6% if they really push it”….started crying this morning at that social security pay increase news……..if the labor market stays this tight into the new year, productivity growth doesn’t magically double in Q4 & social security like pay bump gets transmitted into the US economy heading into the new year….….well you’ve got a real problem in Q1 inflation could actually start accelerating on you…….