Alf
@MacroAlf
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CIO of https://t.co/evoEgFfdrz (Macro Hedge Fund) | Founder of The Macro Compass: Institutional Macro Research
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Joined December 2020
Gold prices could soon hit new all-time highs (again). Here is why you should pay attention. 1/.
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This is a massive speech by Putin. ''The economy of imaginary wealth is being inevitably replaced by the economy of real and hard assets''. His strategy is clear. Sticky inflation -> higher (real) rates needed -> pain for hyper-financialized economies.
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Order is restored. Domino's Pizza just announced it filed for bankruptcy in Italy. You don't f*ck around with Italian pizza.
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Big news: hearing from several sources in the UK that some pension funds are quickly becoming insolvent due to huge margin calls they can’t meet. The massive move in 30y UK swaps and bonds coupled with risk assets tanking behind the problem. That “explains” the BoE action.
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Portfolio manager at one of the largest hedge funds in the world, and he specializes in real estate:
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SVB does not deserve a bailout. A deep look at their financial statement reveals how horrific they were at risk management. And in my opinion incompetence explains only part of it. Moral hazard must have been at play. A thread. 1/.
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30y mortgage rates just hit 4%. At this rate, people are going to soon find out their houses are “worth” much less than they think. And this has important second round effects on spending and sentiment. Real estate is the biggest global asset class by market cap. Watch it.
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$30 trillion. That’s roughly the amount of ''financial wealth'' wiped out from the bond, credit, equity and crypto markets since the peak in 2021. It's roughly 30% of global GDP. In case you were wondering :).
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There is a huge macro theme unfolding under our eyes. Yet almost nobody is paying attention. Big things are going on in China. 1/.
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Spent hours going through SVB's financial statements and changed my mind on the topic. These guys weren't bad at risk management. They were outright horrific. They literally gambled billions away. You should not reward this level of moral hazard with a bailout.
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Something very important is going on in the pension fund industry. Why was the Bank of England forced to intervene as the lender of last resort?. Is something going seriously wrong?. A thread. 1/.
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Italian guy working in a US pizzeria share his end-of-day tips. Not too shabby?!
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As per last week, Copper is officially in a bear market. And Copper bear markets have preceded each and every recession over the last 30 years.
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Massive Fed meeting, and huge market reaction. A thread that breaks down what happened, step by step. 1/.
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10 books that will fast-track your learning journey in global macro. A thread. 1/.
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Why this sudden meltdown in bank stocks?. A couple of interesting theories and charts are doing the rounds, so let's have a look under the hood. A thread. 1/.
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Given the Nvidia valuations, I think it's worth sharing this anectode from the 2000s. At its peak, the Sun Microsystems stock hit valuation of 10x sales. When stocks took a massive beating later on, this is what its CEO Scott McNealy had to say to investors:
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The percentage of 25-34y old living with parents or relatives in the US. 1970: 11%.2020: 29%. Says something about wealth was distributed. Very little upside in real wages, and a lot in financial assets and house prices.
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Gas & electricity bill for a business owner in the South of Italy (literally a few km away from my hometown). - July 2021: EUR 120k.- July 2022: EUR 979k. In his own words: ''A holiday in July would have been more profitable than running my business with these input costs''. Ouch
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Thoughts and prayers to people who took a mortgage to buy real estate in the Metaverse.
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Powell hikes 75 basis point and yet Nasdaq & Bitcoin are going to the moon. What the heck?. While I disagree with the unfolding market narrative here, let me try to explain why we are witnessing such a rally. A Fed thread. 1/.
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The S&P 500 trades at 17x forward P/E. The S&P 494 trades at 13x forward P/E.
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The UK holds less than $100 bn in net FX reserves. That's roughly 3% of GDP. For comparison:. - Japan: ~20% of GDP.- Switzerland: ~115% of GDP. Good luck ''defending'' the Sterling.
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Please understand money. Anything above $250k kept in a bank deposit is not your money. It’s an unsecured liability of the bank.
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The 5 largest economies in the world are experiencing the fastest slowdown in credit creation in over 20 years. History suggests that earnings and economic activity will follow. Soft landing my a**
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Here we are. After a prolonged inversion, the US yield curve just dis-inverted. Here is why it matters. Thread 1/.
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Massive announcement by the Fed and US policymakers. The gist: all depositors of SVB and Signature Bank made whole, and a new facility to provide liquidity to banks under stress. A short thread. 1/.
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This is where Uncle Sam got and spent money in 2022. What surprises you the most?
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A very simple and yet effective chart. House prices plotted against mortgage rates. Look at that orange dot and draw your own conclusions.
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2000: Fed raises to 6.50%, breaks the dot-com bubble. 2008: Fed raises to 5.50%, breaks the housing market. 2018: Fed raises to 2.75%, breaks the stock market first and the repo market after. 2022-2033: Fed hikes to (?) and breaks (?)
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Japan will now allow 10-year yields to trade as high as 0.50%. And while this seems like a minor policy change, it is likely to cause some serious market volatility. Why?. A thread. 1/.
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2000: Fed raises to 6.5%, breaks the dot-com bubble. 2008: Fed raises to 5.5%, breaks the housing market. 2018: Fed raises to 2.75%, breaks the stock market first, the economy and the repo market after. 2022: bond market pricing terminal rate <2% and people be like ''nooo wayyy''
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Apple's market cap alone is equal to the sum of the bottom 180 companies within the S&P 500. Impressive and scary at the same time.
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China is generating more electricity from coal alone than the US from all sources combined. Quite a perspective to consider when discussing Net Zero and greener economies at a global level.
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A very interesting Fed meeting. As always, the devil is in the details. Let's have a look at some of the most interesting nuances and market implications. A thread. 1/.
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The Bank of Japan just raised interest rates for the first time in 17 years. Here are the implications for global markets. 1/
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Rumors are out that China has formed a committee to assess strategies to exit the Covid Zero policy and reopen the economy. If true, this is a big change for global macro conditions.
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Is the European banking sector on the brink of a systemic crisis?. I have worked for a large European bank for 8 years - pockets of weakness and structural problems are undeniable. But let's look into some data to make a non-emotional assessment. A thread. 1/.
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At 7% mortgage rates, the housing market is dead. We are crippling the biggest asset class in the world which is also key to the business cycle. But don’t worry, “this time is different” and the economy and markets can handle it :).
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All they told you about money printing is really, really wrong. Let's dig into how our monetary system and money creation work. A thread. 1/.
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A bear market rally starts by squeezing out shorts. It extends through some narrative that seems to validate price action (2001: worst is behind; 2023: soft landing). In the end though, to morph into a new bull market it needs fundamentals and/or the Fed. You have neither in 2023.
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Something big is happening in China. For the first time ever, 2-year government bond yields in China seem headed below 1%. Thread. 1/.
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People are still in La-La Land and buying the never ending dips in denial of the prevailing macro cycle. In the meantime, the Swiss National Bank just hiked 50 bps. The Swiss National Bank (!), for f*ck’s sake.
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Almost the entire European continent is now operating at electricity prices above EUR 600/MWh. This is roughly equivalent to $1000 (!) per barrel of oil. The last decade average cost of electricity was in the EUR 20-30/MWh range. Not sure a few hikes are going to fix the EUR here
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The bond market is talking. Very loudly. Let me try to translate for you what it's saying. A ''wtf is going on in fixed-income'' thread. 1/10.
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SBF: “I made a lot of mistakes, but I never tried to commit fraud”. In 2022 somebody can literally misappropriate $10bn of customer funds and weeks later publicly state “sorry bro I made a mistake” and that’s it. Disgusting.
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Electricity prices in Germany hit new records, and they are now 10x (!) higher than the 2010-2020 average. Many industries simply aren’t economically viable with these extremely high input costs. In my opinion, European markets are still in La-La Land and not reflecting this.
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10 books that will fast-track your learning journey in global macro. A thread. 1/.
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Turning one year older today!. As per tradition, I will release the only real alpha I can ever bring to the table on FinTwit. My grandma's sourdough Neapolitan pizza recipe. Hold tight, here we go!. 1/
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I get very often asked about the best global macro books out there. Here is 10 books I found exceptionally good. 1/12.
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Your timely reminder that Avocados are still a better inflation hedge than Bitcoin.
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In late 2007, the Fed and major US banks were predicting a soft landing.
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It took 215 years for the US to reach $7 trillion in debt. It then took only 27 months (March 2020 - June 2022) to add another $7 trillion. Debt is not a bug of our credit-based monetary system. It's a feature.
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This is the most ''holy crap'' graphics I've seen in a while. In 20 years, China has managed to become the number one trading part for. basically the entire world. Indeed, holy crap!
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To put things in perspective, the Chinese real estate market is the biggest single asset class in the world with an estimated market value of roughly $55 trillion (as per Dec 2021). Larger than the US stock market. Chinese real estate output just shrank by 7% YoY in Q2.
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Recently:. 1) Brazilian President Lula asked why should every country be tied to the US Dollar rather than just trade in its own currency?. 2) BRICS countries finalized agreements to trade with each other in their own currencies. So, has the de-dollarization started?. Thread.1/.
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Fed minutes summary. “Don’t f**k around with us by pushing ARKK, sh*tcoins and Nasdaq to the moon or we will have to hike to 8%”.
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The Bank of England now forecasts a recession lasting 5 quarters (!). The same Bank of England just announced a 50 bps hike, promised more to come in Sep and most importantly it will embark in active QT bond sales. We’re witnessing the biggest monetary policy conundrum in decades.
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The only chart that matters for the housing market in 2023. Who is the marginal buyer here?
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This picture is a great visualization for how our monetary system works. Your house price in $$$ keeps going up. Your house price measured in Gold does not. Here is how it works:.1/
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There is so much going on in financial markets around the world. And as most of it is actually happening outside the US, it can easily get overlooked. A global macro thread. 1/.
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In the 2010s, everybody was a “smart” investor. You bought a house & became a millionaire: no skills, just mortgage rates dropping year after year. You bought stocks & bonds and went to sleep achieving 10% yearly returns: Central Bank put + disinflation. The game has changed now.
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A recently published paper shows companies with the highest employee satisfaction levels (dark blue) consistently outperformed competitors over time. Treating employees like garbage doesn’t pay off.
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No energy consumption -> no long-term, sustainable economic growth.
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December 2023 Fed Funds future. Yesterday: 4.84%.Today: 3.84%. These moves are of truly historical proportions.
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Land prices in the Metaverse are collapsing. Even if the land is virtual, the pain is real.
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In my hometown in Southern Italy the average salary is EUR 1,000/month and nobody can afford Teslas. Yet every time I am here I see people enjoying the little things and always ready to step up to help others. And I wonder if this is a deeper form wealth than just money.
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Long gone the days when investment banks would bring me out for fancy dinners week in & out to make me trade billions with them. Much better now. I work my a*s off to post valuable macro stuff for free here and get insulted by anon accounts. Gotta love FinTwit! :).
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This week, Exxon’s market cap exceeded Meta’s for the first time in many years. That resonates with Putin’s recent speech when he said:. “The economy of imaginary wealth will be inevitably replaced by the economy of real and hard assets”. Do you think this trend will continue?.
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*Powell: Fed may need to sell MBS at some future date. Let me translate: house prices need to drop and we are going to make sure that's the case. Got it?.
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Deutsche Bank calling for 5-6% Fed Funds rate needed to tame inflation. I can tell you at those rates you not only tamed but literally killed inflation, growth, the housing and the stock market, the bond market, and Cathie Wood’s joie de vivre.
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Big policy mistake by the Bank of England. Given the fiscal largesse, markets were asking the Central Bank to step up and tighten. Instead, they decided to try and force real yields down. The market might well decide to seriously go after the GBP. Playing with fire here. .
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Tesla's stock split added 1 full Volkswagen’s worth of market cap to Tesla almost instantly. Time to burn our finance textbooks, guys.
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The Fed is desperate to win their core inflation fight. To succeed asap, they need to:. - Get people unemployed.- Hit the housing market hard. Don’t fight the Fed.
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The BIS paper on the ''$80 trillion of hidden US debt'' is making the rounds. It's really important, and it deserves the attention of every macro investor. A thread. 1/.
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20-year investment grade corporate bonds are yielding 6.22%. Not sure many realize how important this is for the big whales in bond markets: pension funds and insurance companies.
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If CPI prints at 0% every single month between now and December (!), we will still finish 2022 with 6.3% YoY inflation. And you talk about pivots.
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I left the banking industry roughly one year ago. It's been a tough but very good decision. No compliance officers, no corporate politics, no suits. Instead, I met some amazing people and put in a ton of hard work to share my macro framework. Long FinTwit, no stop losses!.
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CNBC just did a ''Markets in Turmoil'' episode. Expect a 40% return in the stock market by May-2023: 100% hit ratio, have a look!. 🤣
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Today, we got very important news. Markets don't believe Powell, at all. A thread. 1/.
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The best trade of your life. EUR 150,000 buys you a 100sqm house with garden at a whopping 5 minutes walk from:. - This.- Awesome food.- Sun the whole year.- Kind and warm people. Long the South of Italy.
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Once you adjust for buybacks and you realize most of the stock market returns over the last decade came from…. …buybacks.
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The world right now: banking crisis, what happens when markets open, what will the Fed do. Me on a Sunday in the South of Italy with 22C and the sun shining:
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BREAKING: you can now get a mortgage to buy real estate in the Metaverse. A new frontier for unproductive credit creation has just been reached.
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100 years of history show that recessions were ALWAYS able to bring inflation down to <2%. If you hit demand bad enough, you'll get there. How long does it take to slow CPI from 6-10% to 2%?. Using 1948, 1969, 1990, 2008 as examples, anywhere between 5-30 months (16 on average)
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