changegonnacome

TWTR

Very interesting thanks for sharing listened to a good chunk and will catch the rest later.......some very consistent themes re: the structural higher inflation/interest rates bias inherent in re-shoring an industrial base back to the United States from overseas......the last 40 years marked as it was by Globalization meant the demand for capital in the West was quite low.....when you offshore the capital intensive industrial activities of economy switching out for capital LIGHT services businesses (Google/FB erc. ) the demand for capital falls and as such you then have structurally lower interest rates (the price of money) simply because the supply of capital exceeded the demand for capital the last 40 years- we can see this in the falling real interest rate going in a straight line from the 1980's bottoming as it did last year in 2021. The time period perfectly aligns with the 40 years of globalization and the DE-industrialization of the United States. What we are likely seeing over the coming decade (s) is the re-industrialization of the United States (chips act, federal EV credits requiring batteries being made in the USA).......as well the greening of the grid, switching to renewables.....the demand for capital in this period will be much higher than the preceding 40 years and one would expect that higher demand will lead to higher price for money (interest rates). The only counterbalance in my opinion will be the baby boomers who en-masse are retiring now & switching out of equities into cash/bond-like investments, this is an avalanche of savings & they will help absorb a-lot of this incremental demand for capital investment.

Kind of feel like the Zuck just needs to sit tight and keep HIS nose clean for a while - TikTok is one, maybe two more spy/teenage suicides away from getting turfed out of the USA with the EU following big daddys lead. Maybe it getting sold again to MSFT or Oracle could happen but if ChiMerica relations deteriorate further a straight up ban could be politically expedient for everybody in DC & the K street army. META would rally 50% that morning. Zuckerburg might be rascal but he's OUR rascal & whats worse than Mark Zuckerburg?......a Chinese Mark Zuckerburg you cant see, who drinks tea with Xi and you cant beat the shit out of him/her on TV at a Congressional committee.

Exactly right @Gregmal well said - I've held MSGE from $115 all the way down to $51 and everywhere in between.....as I know you have ......& thats WHILE holding the bearish view I have......why.....(1) cause I could be wrong (the future is unknowable) (2) I know what the rational private market value/replacement cost for MSGE's assets are.....the price the market decides to throw at me today is incorrect relative to reality. I also know from the past that dislocations & reversions back to 'fair value' happen in lumpy, unpredictable and rapid moves up. If you are not holding MSGE for example on days when these rapid moves up happen well you've opened the door to huge amount of psychological pain & opportunities to do (or as is often the case NOT do) stupid things.......ending up the poorer for it. I remain a fully invested bear with a slight tilt to my world view where if I'm wrong I miss out on a few 100bps of performance.

Usual endings everybody remembers for the last 40 years we’re in the context of a low inflationary environments where ‘the cost’ to the Fed/economy to ease financial conditions at the first sign of trouble was effectively ZERO. It was an asymmetric trade and one they took each and every time without fail. The Fed put! This time really is different (empirically & quantifiably different) the Fed put trade is not so asymmetric it has cost considerations - let’s see if we get a different result maybe not. The difference I see versus say the 70’s is the quantum of sovereign (and to some extent corporate debt) around makes it so, all things being equal, rates rises are likely to be more impactful in reducing aggregate demand and moderating inflation & returning price stability than they were back then.

I hear you

The market rally in the last couple of weeks & SPY off only 14% from its ATH means the Fed has more work to do to introduce what it is even starting to refer to as the 'slack required to bring price stability".....there is no slack in the United States domestic economy right now (forget supply chains/China/plastic spoons/semiconductors/oil this is a sideshow to the main show which is a domestically overheating economy & monetary inflation).............financial conditions are not tight in the US (I can borrow five year fixed rate money at 2.95% with inflation running at 9%, thats accommodative by a-lot) so conditions are not tight enough to reduce aggregate demand to bring it into equilibrium but in truth moderating inflation requires a period where aggregate demand dips below supply......this is just not happening as seen in the job seekers/openings data & wage increase data recently published and certainly not by enough to reduce domestic inflation problem.......lots of other economy's around the globe have variable interest rate mortgage markets......the transmission of tighter financial conditions through rates rises flows through almost immediately to households in those countries via higher mortgage payments.....in the United States the central bank has a more difficult and circuitous route it needs to take to reduce aggregate demand and thats via messaging & asset prices i.e. ADP 401k/Vanguard/Schwaeb/Fidelity account balances......everybody loved it on the way up and it worked beautifully to stimulate demand and pulled the US out from under the mess of the GFC and a global pandemic (while making it the best performing market globally for the last decade) but don't be surprised when the transmission mechanism of asset prices are used by the exact same institution in the opposite direction when it needs to do the opposite. Your kind of unconnected from reality and a fish who doesn't realize it's in water if your not seeing that. So maybe a few percentage points on the Fed funds rate & SPY 14% off its ATH's will be enough but it doesn't fell like enough to me. My bet is Jay Powell is kicking himself for the neutral rate comment he made (I think by accident) and bemoaning the markets interpretation with all this Powell pivot nonsense floating around which rallied SPY, QQQ AND the god damn 10yr......his loose comments effectively loosened financial conditions FFS and I don't think that was/is/should be the plan right now to get inflation under control.

About five years

No I wasn't - not a good idea to short bubbles in full flight/full mania mode and where the central bank has everybodys back flooding the system with liquidity........now were in much different territory i think its clear to me now with inflation where it is, with Fed moving against it actively, what has to be done from a liquidity/FED point of view....so my thesis is simple were in a bear market....with rallys that will rip your face off (like this one right now) but the overall trend is down.....because it has to be....inflation @ 9%, too much money printed...signs of an overheating domestic economy everywhere you look especially in the jobs market.....weakening consumer feeling the inflation squeeze, consumer confidence ebbing away, literal recession GDP prints from the FED and definitive sign IMO in Q2 results of companies desperately trying to make the quarter (eg. Apple China iphone sales, unheard off)...... alot did make the numbers, some didnt but you cant reach forever and get away with it....ad spend being the variable canary cost where this Q the non-core ad budgets for SNAP, Twitter, Pintrest got cut.......Google/FB held up....but what companies gonna do next quarter?......big rallys up like this are bonkers IMO. Now I'm not short 100%.....but to be clear I'm net long very long and mainly outside of US markets cause i think the beta sucks in the US and its very hard to swim against the beta......but I make more money when stuff goes up, I love when stuff goes up....the moderate shorts I have on now (some deep OTM calls, some straight shorts) just let me be a little bit more leveraged elsewhere.....best case for US markets right now is sideway for the next 18-24 months with high vol while inflation gets fixed. Inflation adjusted ATH's for the SPY & QQQ are a fantasy so I've sold some calls at those levels. Deep OTM calls on shitcos is one way to play this. They triple/quadruple I'll lose some money sure but the rest of the portolfio should be doing just fine in that world then too. I'm not "all in" on my bear call.....I'm fully invested bear with what I consider some smart hedges.

Anyway put my money where mouth was today…..and have shorted a bunch of Covid bubble crap (Tesla et al) that have rallied the hardest into this Powell pivot nonsense fairytale everyone’s telling themselves……they’re wrong and Bill & Larry & me are right . Powell will be back in September dropping the hammer on more chunky rates rises. The Covid bubble isn’t dead it was just asleep and until I see AMC/GameStop stopping rallying to nonsense we aren’t even near a bottom yet, not even close. Bonus points - now with Fed fund rates you get nice little interest rate carry on your short book.

Last I checked Larry hasn’t got any levered interest rate options and no book to talk……and is agreeing with Bill (& me)….they must be in cahoots Larry to be far to him called bullshit on transitory louder and way before anyone else.

yep totally agree on this approach - reduces ur ass getting handed to you risk!

Yep as I've said before record margins, record profits are centered around 2021, we will be look back nostalgically in a few months/years .........earnings recession is up next. Got the feeling from reading quite a few Q2 reports.....that companies were able to 'make the numbers' this quarter but really by doing short term stuff like reducing direct marketing spend and all those malarkey levers one can pull half way through the quarter when the CFO shits his pants and sends people looking for money down the back of the couch..........one can do that once, Q3 lets see.

Got ya - yeah if its base effects from 2021 bs they start aggressively rolling off in the next few months....and i've always agreed with that idea that the headline inflation rate now has supply chain problems + the outrageous demand for physical goods when peeps were locked up in their homes 'baked in'.....supply chains are sorting themselves out and nobody wants bullshit Made in China stuff anymore cause hopefully they are out having dinner at Tao & going to shows at MSGE .....so you know that side is gonna moderate 1000000% and already has......its the USA domestic demand exceeding the supply of domestically produced goods & services (but mainly services) where I see the inflation issue as being non-transitory. Gonna be very interesting to watch it play out. It WILL moderate in the coming months but this is will be a head fake revealing the stubborn belly fat of monetary inflation underneath. Let's see. Its amazingly interesting to watch & try to figure out. P.S: as I type this I'm struck by all the noise mainly from the GOP side about the problems at the 'southern border'.......Yeah i like totally agree the problem down there is that there is NOT enough people coming across the border.............of course who are descent, smart & hard working but two lunatic parties cant figure out an immigration system to suck up the best and brightest and the most industrious from you know like the other 7.5 billion people who live on planet Earth and who'd move here tomorrow to take up an oppurtunity. Bonkers and shameful on the Dems and GOP & a lost opportunity, forget this bullshit inflation reduction bill....that would change the maths tomorrow. PPS: For all the talk of on-shoring/safe shoring thats supposed to happen in the West...nobody has been quite able to explain to me how literally millions and millions of jobs/factories are gonna come back to countries with shrinking populations (Europe) and horrible demographic trends that are already in most cases operating today at full employment. Now that, if it comes to pass, will be inflationary

I do realize but "parts" of the country aren't really driving the national macro numbers in an economy the size of the USA...sure small effect but this not the issue & then most importantly of all how do you explain my little ice-cream problem yesterday . I see inflation everywhere especially when it comes to calories

Ok were back open dont think anyone can lean on that idea anymore. Went to go to my favourite ice-cream place in Manhattan yesterday.......closed.....sign said sorry cant get staff had to close today if u know anyone please text xxx-xxx-xxx.....this in Manhattan! We go occasionally up to the Hudson Valley & small towns up there. Half of them closed, half the time because of staffing problems. This what an over-heating economy with inflationary pressures looks like. Classic Milton Friedmanism - too much money chasing too few goods and services. My little ice-cream problem today is a service problem (not a supply chain problem created and to be blamed on China or shipping ports or semi-conductors or just-in-time manufacturing). Look around lots of domestic led service supply problems (that are driving inflation) that are 100% indigenous to the US economy & a symptom of a monetary inflation problem. Time will tell......but you know Greg at what point I wonder do you pivot?.....you've said 6 months, 12 months above....but you were saying that if a remember correctly a few months ago......the thesis cant keep moving out a few months..........like in six months if Core PCE ex food energy is still running at late 3.x/4%+ do you step back and say OK there's an issue here, that stuff should be rolling off in the YoY data. Respectively wondering what YOUR dis-confirming data might be on the trillion dollar inflation question cause right now I think what your saying is that month-over-month inflation has reverted to normal...and what were seeing now is a kind of base effect from 21 and locksdown/supply chain stuff? Got that about right? and genuinely interested in what your watching out for data wise because I remain as you know someone with a strong opinion on this but an opinion that is loosely held (as the saying goes & as i think anyone making pompus macro calls should be). I remain a pretty much fully invested bear.....so I hope your 100% right and I'm a complete idiot.....because I'll make more money that way.

How so, exactly? He may have interest rate hedges that would go further in the money if rates went higher (as he is advocating for clearly)............but look at his fund those interest rate swaps pale in size & scope to his long book of equities which most definitely WONT benefit on a mark to market basis in the short term if the discount rate goes higher. If your argument is that he would like to see financial chaos so he can swoop in with his dry powder sure maybe but his math checks out. Today I called First Republic Bank.........inflation might not be 9% right this second but lets call it 5% between internet friends......First Republic will give me a fixed rate loan for a sizable amount of money @ 2.95%........how the hell is that not accommodative? Explain that to me. Thats a negative 1.05% real interest rate on borrowed money if inflation persists at 5% during the terms of the loan. They are paying me to take the money. It feels very accommodative to me so much so that I'll be taking them up on the offer and be FUELING inflation by adding my spending into the economy in a couple of weeks time

Yeah my idea of neutral is exactly what Billy boy explains below - FED is still being highly accommodative:

You cant make it up........this Vogue thing might do more to dis-unite European leaders than Russia dialling back gas supplies. Vogue Photo Shoot for the Zelenskys . Its like something from Wag the Dog if anyone remembers that movie.

I think he must have mis-spoke..........any amateur central banker will tell you the overnight rate needs to be within about 0.5% of the Core PCE inflation rate to be considered broadly neutral.........we are not even closento that...

Must have a read - this is my base case.......making new mistakes is OK, making old mistakes is for losers. Jay doesnt want to be a loser.......of course if inflation just goes away later this year as some suspect we'll never find out.....but if it doesn't I dont think they'll be found wanting

Listened to the statement and Q&A.........heard the same steadfastness in his underlying tone......inflation has to be brought back to 2%, price stability across the economy is the "bedrock" for prosperity.......... The most important question was asked half way through the Q&A....the journalist asked what was the greater crime/mistake - "to do too little, cause pain while missing taking inflation down to 2% (i.e. stagflation) or do too much and put the economy into a deeper recession than would have, with perfect information, been required to get back to 2%".........his answer was very very very strongly titled to the former being the more serious error.....& that inflation " just had to be taken care off" end of story type thing. Think what were seeing is a relief rally - that 75bps or 100bps rises aren't locked in at every meeting from now until year end....classic market extrapolating out everything to infinity from last couple of FOMC's......but when did 50bps become a Powell pivot? If the GDP data tomorrow shows no recession I think expectations for September FOMC are going to rise very quickly to a 0.5% rise as the base case. Couple of more hot Core PCE prints and it could be 75bps expectations all over again.

Absolutely nothing....................except wages & the price of money

Dont think anyone, including me, can close the case on this one yet. The truth will only be revealed when "supply chain problems" drop out of the lexicon & earnings call transcripts. I hold the possibility that you are 100% correct on inflations root causes & I'm completely wrong. Not sure, you should be so sure

You know my position - a technical recession does not get us back to 'normal'....unless you consider normal inflation running at ~4%+ & 60% of workers in your economy loosing purchasing power in real terms. The FED as I say does not consider the above normal and thats what matters.