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Lawrence McDonald Profile picture
@Convertbond
Apr 1, 2020 • 5 tweets • 3 min read • Read on X
Sovereign Credit Risk is on the rise, where are the opportunities?

We’re hosting a call with @ACGAnalytics at 2pm ET, inquiries here

thebeartrapsreport.com Image
Hosted a solid client call, meaningful takeaways covering political implications for oil prices, Saudi / Russia EM Credit risk and the IMF's heavy load.
*IEA SAYS OPEC+ 10M B/D CUT NOT ENOUGH TO STABILIZE OIL MARKET
Two sides to every story, one large reason why KSA and Russia have had enough. Bottom line, there are lots of debts and leverage on all sides - coupons to be paid. So far, pumping has been the only solution to fend off a large default cycle.

#SaudiArabia
#MBS
#Oil
#Shale Image
*RUSSIA IS READY TO CUT PRODUCTION BY 1.6M/BBL A DAY: TASS

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More from @Convertbond

Lawrence McDonald Profile picture
Aug 17
Since 2021

Bitcoin

59k to 59k

Gold

1750 to 2500

*Last ten years - Gold’s largest drawdown? 21% vs. Bitcoin -82%, -58%, -65%, -75%.

*A store of wealth holds its value. It doesn’t lose half its value or more every few years.
No human being can put large portions of their personal wealth in an asset that drops 50-75% every few years. Gold is a colossal reservoir of liquidity, approaching a $17T market vs. bitcoin at $1.5T.

Chart from @Maverick_Equity Image
@Maverick_Equity As few as 5% of all BTC addresses own over 62% of all available Bitcoin. Thus, liquidity is far far worse than meets the eye. If one large holder needs to sell, the spread between him and the available liquidity is large (see drawdowns).

(3)
Read 9 tweets
Lawrence McDonald Profile picture
Dec 15, 2023
File under another multipolar world headline...

*MAERSK TELLS ALL ITS CONTAINER SHIPS TO PAUSE RED SEA VOYAGES
A large percentage of sea-borne container traffic goes through the Red Sea. Even cargo from Shanghai to New York goes through the Red Sea. All the cargo that goes from China to Europe goes through the Red Sea. Very few go around Africa since it's more costly. Halting this traffic has the potential to disrupt a lot of cargo traffic...Image
Drought Saps the Panama Canal, Disrupting Global Trade - The number of ships that can travel through the vital route has fallen sharply this year because of a lack of water for the locks, raising costs and slowing deliveries.- NYT

*sticky shipping - file under NOT deflationary
Read 5 tweets
Lawrence McDonald Profile picture
Oct 3, 2023
With US Treasuries at 5%, Bank of America is close to 45x levered, at 6-7% infinitely levered.


Image
For all of 2008, as Lehman was failing, the value of their core (safety) capital (US Treasuries) was moving higher, NOT lower.

*As interest rates move down, bond prices move up. Image
After the banks failed in 2008, they were forced to hold far more "quantity" and "quality" of capital. This - ladies and gentlemen - is sowing the seeds of the next crisis. This high-quality capital (US Treasuries) is in flames, dramatically lower in price.

(3)
*Boston Fed. Image
Read 10 tweets
Lawrence McDonald Profile picture
Aug 9, 2023
Off the Recent Lows

Orange Juice +45%
Natural Gas +43%
Sugar +41%
Gasoline +33%
Uranium +28%
Oil +24%
Lean Hogs +22%
Soybeans +16%
Iron Ore +15%
Coal +14%
Wheat +14%

*Bloomberg terminal data, lows since Dec.
**ALERT: Inflation expectations, US 5yr BEs, at a nine-year high.
EU Gas Up 22% today

“The likelihood of a repetition of the crisis of last winter has gone down significantly, which can also be seen in the forward market, “But we have to be clear that the structural change ...
due to the Russian war in Ukraine and the drop out of Russian gas in the supply of Europe is going to stay and therefore the crisis is not over.”CEO at EON

E.ON is one of Europe's largest operators of energy networks, with some 51 million customers.
Read 4 tweets
Lawrence McDonald Profile picture
Mar 25, 2023
What do bonds know?
We are looking at the 3-month US Treasury Bill yield vs. the 2-Year US Treasury yield. The Fed is holding up the front-end T-Bill yields with rate hikes and hits of more vs. market participants pushing down 2’s yield betting on recession - future rate cuts.

(2)
3m vs two-year Treasuries are -98bps, back to 1990, have never been this inverted (pre Lehman it got to -55ish, pre dotcom -77ish). But what does OIL know? A -47% drawdown inside of 10 months, -13% since March 3rd.

(3)
Read 7 tweets
Lawrence McDonald Profile picture
Mar 24, 2023
“Policymakers consider themselves vindicated after they followed through on their half-percentage-point rate rise last week despite global market volatility” FT

*the ECB hasn’t figured out banks can’t fund them selves with front end rates this high after the AT1 debacle.
The ECB is “smoking on the dynamite shed..”

(2)
*SCHOLZ: DEUTSCHE BANK IS `VERY PROFITABLE,' NO REASON FOR WORRY

*Loan book $1.3T vs Deposits $621B

vs.

Equity Market Cap $19B

(3)
Read 6 tweets

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