Look, I really get the deflation spiral we are in.
It just so happens that currently, ISM PMI and ECRI seem to be pointing towards sustained growth and inflation for an interim. This does not mean a recovery or secular inflation, but only that the current economic bounce might
go on a bit longer.
Outside of a credit event (Monitoring with TED spreads and High yield OAS), the natural tendency seems for nominal yields to rise.
Gold falling and the rise in copper/gold ratios seems to corroborate with the idea of a sustained bounce. I just can't help but
find parallels with the uptick in economic growth/inflation during 2016-2018, before the economy started to crumple again under the pressure of higher yields.
2 quarters of increasing inflation will be enough for all the inflationists to call game and pile in with even MORE
leverage, short bond and short USD.
That is probably when the market does what it does the best and catches the most amount of people flat-footed at precisely the wrong time.
Thus, during the next 2-3 quarters, Bond-bearish, but will not try to short term; only delay taking a
position in long-durations.
The USD is another issue, inflation rising seems to be a worldwide phenomena (Rising does not mean secular inflation, just a cyclical bounce), and since currencies trade relative to each other, there is no particular reason why DXY should fall much.
in fact, people piling into the EUR has probably made the DXY more likely to go up since the EUR narrative is balanced precipitously on hopium.
Thus, long USD, will wait until next year to go long duration.
The increased growth seems to be driven primarily by manufacturing, which has been picking up the slack that retail has caused. For whatever reason, manufacturing seems to have picked up world wide and is increasing on a rate of change basis.
Ideally, would like to see ECRI and Manufacturing ISMs/World wide manufacturing stats to start rolling over by Q2/Q3 next year before placing any large long duration bond bets.

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More from @KeyPaganRush

23 Oct
Many people don’t seem to understand MMT and fire off at it, but a lot of the points they try to make don’t make any sense because they do not understand what MMT is and isn't saying. The main source of confusion comes down to the nature of money.
Money can be fixed to something with a supply constraint, or it can be freely floating. The choice between these two creates markedly different outcomes in terms of the monetary system.
People typically think of money system that is tied to gold; govt can only spend money when they have FIRST COLLECT enough gold to back the money they issue. Printing more money simply creates increased claims on a limited supply of gold, thus inflating the price of gold.
Read 21 tweets
9 Aug
Basic Statistics PSA:
Fixating on the case fatality rate without considering incidence is myopic; this is how the mathematics breaks down.
Say we compare two countries, lets call them Sensibleland and Deludedland, both countries have populations of 1,000,000
A disease called 2020Sucks suddenly breaks out and we want to know which country has dealt with the disease better. So we look at the case fatality rate (CFR), say Sensibleland has a CFR = 30% whereas Deludedland's CFR = 5%. Has Deluldedland handled the disease better?
Trick question, you need to know the incidence.
Say that 10% of Sensiblelands population caught 2020Sucks in a year, giving an incidence rate of 10%/year.
Out of Sensiblelands entire population, 100,000 caught the disease. Out of those 100,000, 30,000 die making Cfr= 30%
Read 6 tweets

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