changegonnacome

Good argument out there that due to Wall St.'s aversion for capex over time (see O&G) that lots industries that supply physical goods predominantly input goods acquiesced to shareholder demands & have systematically underinvested in capacity.......you know all the stats no new steel plants built in X years, refineries etc.

That would be more my style

Forget eggs - your best bet is that the 30yr treasury just today took a time machine back to levels not seen since 2011. Watch out for 30yr T levels last seen when Rhianna was singing about Umbrellas!

Let's see - from what I can see the July CPI is the last 'easy' print that was 'in the can' so to speak. Moving forward beginning with August CPI the rubber is hitting the road........headline progress will need to be matched by actual and underlying progress on supercore....the progress here, has been modest to say the least....but won't deny in the last couple of prints there has been some encouraging but very modest moves down these need to continue and in fact accelerate.

Yep there's no end to the tricks the CCP could do in an authoritarian state to drive spending....it will make 0% interest rates look quite quaint. They had the one child policy.....how about no money left in your checking account policy....that would definitely pack out the bars & restaurants at the end of month in Shanghai or whatever Tier 3 city really needs some life in it!

Excellent points you make re: their history.....will require extra coaxing to get them to spend. Kind of makes me think that the rest of the world might not be going back to ZIRP + printing...........but the Chinese might be.......was pretty nice time to own US stocks during the ZIRP years.....I wonder if we'll be saying the same thing in 10yrs time about Chinese equities.....0% on savings, stimulating demand via wealth effects......sounds very USA 2010's to me

HSW

Yep the Chinese tailwind might very easily turn into a headwind........and not just economically speaking!!!!!

Totally agree - the Chinese saver needs to be turned into a more US-like consumer and fairly quickly if they are going to soak up some of the excess manufacturing capacity they have. That Chinese savers effectively represented a very large purchaser of US treasuries is a very interesting dynamic......decoupling from China is both inflationary for the West in terms of the goods that we buy but encouraging/forcing the Chinese leadership to get their people to spend more and save less will, all things being equal, mean one less financier of OUR debt fueled consumption in the West.....yet another reason why perhaps we are never going back to ZIRP.

HSW

Can't remember where I read it or who said it - but there's something to effect that the market exists to embarrass as many people as possible....immaculate disinflation or the back to the races trade has sucked alot of folks.....and maybe its 'back to the meat grinder' as Grantham has called it...I think in the last few months we've taken every good piece of news on inflation and taken it to the inflation is done thesis extreme......been saying it for months.....but apart from the obvious & predictable headline CPI improvement the data I look at is disappointedly and stubbornly pointing to underlying persistent and hasnt budged an inch core ~3.5% inflation......the problem with ~3.5% inflation is that it is too subject to flare ups.....when folks ask why do central bankers shoot for 2%......the answer might be as piffy as - "they shoot for 2% such that they end up at 3%".......it hasnt always been so that central bankers failed to reach up to their 2% target.......the normal course of history for central bankers is that they've consistently failed to get inflation down to their target. I've a feeling we are entering a more normal period for this type of thing......just given the inflationary pressures around........makes it all the more important to get down to 2% for a number of quarters....such that inflation might actually might settle out at 3% over the next ten years.

HSW

The margin differential married to the revenue growth is/has been an unbeatable combo......its an engine for EPS growth. Then there's a whole argument about regulatory capture, antitrust......citizens united.....thats seen the large caps secure every break of the ball in the US tax code, M&A greenlights etc. It's been an unbelievable run.

BLS wage data today......totally inconsistent with 2% inflation......ChatGPT better start delivering some productivity gains pronto or else Short version - seems like further hikes are incoming......& the soft-landing/no landing dream is receding.....

Not suggesting you’re looking at some wholesale exit from equities…..but remember stock prices get set at the margins of supply and demand for that paper…….flows……even marginal flows (as a % of total US wealth) can matter…..TINA……turning to inverse-TINA……creates an interesting dynamic……rising bond yields are kind of screaming at equites that they may need to do offer a better ERP in the future if they want to keep bums on seats. Look at the 30yr….what a magical time to hold equites it has been….the longer duration the better…..i was very lucky to have this tailwind in the 2010’s to build the economic base I have. I’ll take some credit for suerpior decision making ….but no man is an island……and the wind at my back helped a lot especially when my decision making wasn’t so superior.

Yeah such a large cohort of retirees or close to retirees who’ve got to be looking at fixed income alternatives to equites….and figuring out the above math….totally get the superiority of equites over the long pull…..but certainly a certain age cohort (not the peeps on here) get to a point where they want a smooth ride, they wanna reduce the potential brain damage to return ratio of their financial life and are happy to give up a few points of performance. Current math points to very little points been given up! Like I said not the COBF crowd who wanna squeeze all the juice out of the returns orange….but this isn’t a normal gang of people…normal people wanna do what’s easy , with the lowest friction and risk…..the bond market is calling them.

Exactly…the rising piece is the most curious….the level of issuance recently and to come to fund the deficits and to fund the rising cost of servicing the deficit have a real negative feedback loop…..very interesting to see where the 10yr/30yr get too in this cycle

And those long bond yields just keep climbing and climbing…..

Bargain for sure......from a purely US strategic policy perspective

Yep I'm serious - when your foe is larger than you and has more artilery than you & has more men than you. You need to get unconventional in how you do things. So you've got to seriously consider gorilla tactics......put simply if a military victory cant be achieved.....and I think in the case of Ukraine v Russia its kind of clear Ukraine hasn't the means by which to 'win' traditionally.......you've got to attempt to raise the costs for the Russian people......taking a gorilla war (terrorist bombing campaign) to the streets of Moscow changes the asymmetry of the engagement.....not pretty, not nice........not advocating killing civilians......but 'military' targets in the heart of Russia need to be put on the table to increase the 'fear factor' for the Russian population such that it at least becomes politically expensive for the Putin regime.

https://www.wsj.com/articles/ukraines-lack-of-weaponry-and-training-risks-stalemate-in-fight-with-russia-f51ecf9

More here in the same vein:

One of the nations most knowledgeable securities judges in NY has just taken apart the Torres ruling in a separate case brought to him…..not sure Cointelegraph will be reporting on this.....and it solves the transaction by transaction howey test approach Torres took

Yep - the ECI had some good news recently on possible soft landing immaculate disinflation being achieved through wage moderation alone........which would take the easy inflation wins we've had.....and actually start to chip away at the underlying sticky inflation which I call made in america inflation......too early to tell This is a beautiful rally.......but let's be clear right now.........the market is "all in" on the soft landing narrative right now IMO........in that sense things feel overbought to me.......but forgetting 'feels' and 'vibes'.......the simple fact remains that the straight line progress on disinflation is running out of the easy 'wins' that were predictable, baked in the cake and helped drive the soft-landing narrative flows of the past few months with MoM 'good news'..........disappointments to this thesis....such as recently increasing energy costs for example or just simply flatlining HEADLINE and CORE inflation converging at or above 3% are what comes next...at which point the Fed will have to remind folks that the target is 2%.....and 3% is significantly above target still....better than 8% sure.....but 3-4% inflation is not what the world's reserve currency and shining city on a hill is meant to be delivering from its central bank Back half of the year will be interesting....maybe the FOMO rally continues (i hope it does...my portfolio is enjoying it as much as the next fellows)........but we've got some serious and possibly thesis destroying knocks coming for the softlanding folks......feels like a time to hedge and lock-in some of these nice gains for 2023....will be interesting to see what the folks who get marked for yearly performance do when they get back to their desks after labor day.

Ukraine's gorrilla warfare in Moscow is a total no brainer.....blowing up empty office building at 4am or whatever where no civilians get killed is a way to bring the war to Russia's doorstep and public mindset in a way that might drive Putin to the negotiating table As I've stated - I just dont see significant military 'wins' occurring on the Eastern front given the artillery and man power dynamics.......the good news coming out of the counter-offensive has been very very very limited.....the below has way more potential at driving some kind of Russian capitulation at the negotiating table that might be acceptable to Ukraine. They should terrorize Moscow with loud but harmless drones......and occasionally do something like the below.