Other natural resources, important minerals, ag related stuff, farmland, defense, cyber security, energy security, building domestic production capacity, deglobalization, to name a few. Even if the Ukraine conflict ends fairly quickly, these concerns of security and national self sufficiency will remain and be trends for the next few years. Right now, those themes may be in a corrective mode that will have to run its course but I don't see them going away. Countries like Brazil, Mexico and especially Canada have held up very well over the last few months.
https://www.bridgewater.com/researc...te-from-our-cios-transitioning-to-stagflation Bridgewater is betting on stagflation and I tend to agree. I'm bullish Gold, Bitcoin/Ethereum
I started to scale in a portion of my cash reserves (that were getting 5% at IB) into 10y Treasury notes. My thinking is that: -A recession in the next 2 years is like a 30-40% chance -Rick Santelli was on CNBC talking about how rates might go to 13%, which gives me contrarian indicator vibes -If the new normal of inflation is 3%, 4.65% is a pretty good yield to get on savings. And I get to lock that in for 10 years -Headlines about how high rates were are all over the place, even Cramer is live tweeting the "capital destruction in bonds" -5% is nice, but guaranteed 4.65% for 10 years is better I put a 1/3 position and plan to scale in if bond prices continue to fall, this is not a "macro bet" as much as is a "savings" bet, I want to protect myself from future cuts and/or ZIRP I would love to hear the opinion of other macro thinkers
My current view is that yields are months, if not weeks away from cycle highs. I'm planning to go in heavy on T-bonds once the top is in, and play for a return to the 2.5% area. I see a lot of edge in that trade since you're getting paid nearly 5% to wait, even if the big decline in rates doesn't happen for a couple of years. It's basically an RTM trade betting that this time is not different. However... the big macro question of the moment is whether USD inflation is headed back to the 2010s pattern (which many argue is driven at bottom by aging demographics) or if it will re-accelerate. I see strong arguments on both sides. One thing which has definitely changed from the 2010s is that there seems to be a permanent critical shortage of workers here which will only ever get worse, not better. Economists' models remain stuck in the pre-2000 world when macro was largely about manufacturing inventory cycles, but it's been over 30 years since we had a typical trade-cycle recession. It's astonishing that house prices and rents (at least in my area) are actually higher now than when the Fed hiking cycle began, which speaks to the fact that there are dynamics and fundamental forces in play here which nobody has yet grasped or elaborated. I don't have the answers, but it seems to me that nobody is prepared for a scenario where inflation surges back above 5% and all of a sudden Fed hawks are talking about rates rising to 7%, 8% or even more, while the long run projections for 2.5% money get totally scrambled. The market is assigning that type of scenario a weight close to 0% when I'd say its more like 25-40%.
I tend to agree with these thoughts, also there is AI into all of this. I talk crypto with people and most people know little about it, very few own it, but when I talk ChatGPT a surprinsingly amount of people not only know about it but they use for work. Google, Meta, Apple are all rolling out AI products. If inflation was going to structurally move to 4-5%, I dont see how the Fed can keep rates at 6-7%, mortgage rates would be like 10% and sure, people have refinanced in the pandemic at low rates but little by little debt comes due and the marginal players in society and in the corporate sector would start to go under. At some point, things would break. The whole idea in a society full of debt is to actually keep rates at or bellow the rate of inflation in order to provide relief to borrowers. If that is not necessary because all the consumers and corporates were so prescient and borrowed at low rates, than who was in the other side getting hurt? The banks, so they must struggle (cuz they pay out in deposits more than they collect on assets). Indeed they are losing deposits (due reluctance to raise deposit rates) and tightening credit (acc to the Fed Survey). Somehow we are lead to believe that the economy doesnt net new credit now? Im suspicious of that camp
It may well be that what we are seeing (in the US) can be explained by three factors: 1) excess pandemic savings; 2) low rates locked in for corporates during 2020-21; 3) distributional issue wherein elite coastal-metro workers (mostly laptop-and-latte remote workers at this stage) and high-quality corporates are doing fine, but lower rungs are rotting away as savings are depleted, blue collar types are eventually forced into the housing market due to mandatory moves for work etc., and lower-quality corporates are forced to borrow at high rates. This is pretty much the consensus and, if correct, implies that the "breakage" is coming and the long bonds trade will pay off handsomely even if yields have a bit of upside from present levels. Also worth pointing out is that, while it feels as though the Fed has been hiking forever and nothing happened, the last three hiking cycles (2016-18, 2004-7, 1998-2000) have lasted at least 2 full years before an accident occurred. So, a financial accident would be perfectly "on schedule" if it didn't really start until late 2024.
Big positive jobs report, yet gold is up and bonds are recovering on nice volume. Feels like it could be a bottom. I bought a bit more. 2/5 now
https://www.wsj.com/world/europe/be...-using-taxes-on-frozen-russian-assets-5acfd29 If that money is taken, then it pretty much makes no sense for China to continue to use Euroclear or Clearstream to deposit USD reserves (as the CFR claims they are doing it). But it will make sense for them to buy gold. So thats what I expect to happen going forward
I wrote this right after the Ukraine war and I stand by 100%. Even the mere hint of seizing Russian interest on its USTs (as well as using the principal to pay for Ukraines rebuilding), to me will already make any central bank from a country looking to start a war/geopolitical friction to shurn USTs as a reserve asset. They will prefer instead to use gold or Yuan denominated gov bonds, for China, it doesnt make sense to use their bonds, so they must use gold. We are already seeing Uranium prices to rise significantly, that will probably continue. For microchips, its probably not a good timing for China to invade Taiwain, given that their economy is struggling and to be hit by sanctions now it would hurt it too much, so they wont do it now. Maybe when their good times happen again. As far as Bitcoin, I do think its an strategic asset for nations, its probably too early for that thesis but its an asset that cannot be frozen, transfers cannot be stopped and the very fact that a nation would support it makes the asset more safe (giving the increase in mining and node capacity in that country). Its basically gold without the hassle of transporting it (with basically 1 hour settlement time). Yes, its volatile but those market to market changes do not matter for a country given that they have political goals and they want to reach it after almost any cost. Put whatever mark to market losses they might have in their defense budget. When will CBs realize that, I dont know but I think at some point they will, probably at much higher market caps.
https://pravda-en.com/world/2023/12/24/237288.html Gold initially, but eventually Bitcoin, thats how countries are going to respond to this