Babak 🇺🇦 🌻 Profile picture
@TN
Apr 20, 2021 30 tweets 17 min read Read on X
Whichever way you personally lean, the most consequential narrative that will determine the framework for major investment decisions is #inflation vs #deflation.

ICYMI: @JeffSnider_AIP presented his case on MacroVoices

Whether our future challenge is deflation vs inflation will ultimately determine the value of not only traditional assets but also new ones.

#Bitcoin & #cryptocurrencies in general have had an evolving narrative to explain away the madness - most current one is "digital gold".
The overwhelming consensus is one of an inflation ravaged future economy.

It's just so obvious, isn't it?

And so effortless to make the argument that it would be asinine to suggest otherwise... and yet, recall Granville on the obvious in financial markets.

h/t @NuitSeraCalme Image
Almost impossible to not be hit over the head with the #inflation narrative from the financial media, FinTwit, etc.

Case in point, here's a recent video from BBG: "Could Inflation Trigger the Next Commodity Supercycle?"

US wage growth expected to decline and turn negative later this year due to composition & base effects - WH Council of Economic Advisors

whitehouse.gov/briefing-room/… Image
ICYMI: Dr. Lacy Hunt of Hoisington (April 2020) interview at @MacroVoices Podcast where he lays out his views on #inflation vs #deflation and the macro-economic forces at play, as well as what it would take for hyperinflation to arrive in US:

If you wish to get a better perspective, 'stand on the shoulder of giants'.

The most recent report from Hoisington (PDF) 1Q 2021

hoisington.com/pdf/HIM2021Q1N…
Chart of US bank loans relative to deposits & velocity of M2 stock. #Inflation? Image
A few more charts via BoA ML to illustrate the overwhelming domination of #inflation as the current narrative in financial markets.

The YoY increase of mentions of "inflation" during earnings calls is literally off the charts: Image
According to the April BoA ML GFMS, expectations of higher global CPI is at historic highs: Image
Only for the second time since this question has been asked in the GFMS, more respondents expect higher growth coupled with higher inflation (see 2011): Image
So it isn't surprising that the big Boogeyman of inflation/bond market tantrum is now the most feared 'tail risk': Image
A historical view of how tail risk concerns have shifted over the years: Image
Inflation is also the top concern from the latest Barron's "Big Money Poll": Image
Chart of velocity of M2 (with an 18 month lead) compared to CPI:

h/t @RothkoResearch Image
Ben points out that we're very close, if not already, at an apex where historically, inflation expectations have stalled out:

"momentum behind global inflation data releases is reaching extremes seen in July 2008, June 2010, and March 2017"

chart via @benbreitholtz Image
Short interest in $TLT bond ETF reaches 25%, similar to previous extreme in early 2017 (then 10 yr $TNX yield fell from high of 2.6% to low of 2.06% fall of 2017)

bloomberg.com/news/articles/… Image
Notice the beautiful dovetailing between the $TLT short interest and the previous chart from Ben ☝️☝️
And another view of the same macro reality from a different lens: speculative position in copper futures & ISM, again suggesting a blow-off in the #inflation narrative

chart via @BittelJulien Image
Honestly, am surprised to hear this from @EconguyRosie: Why the commodity supercycle narrative is overblown - Once the full picture of a divergent economic recovery becomes clear, commodities will likely fall from the stratosphere

financialpost.com/investing/davi…
"... higher prices from supply bottlenecks in the manufacturing sector are typically short-lived. High prices and an improving COVID situation will bring more capacity online by the end of 2021, in turn dampening inflation pressure next year."

guggenheiminvestments.com/perspectives/m… Image
People freaking out about #inflation: record quarterly fund flows into inflation protected bond funds. Q1 had +$19.2B inflows despite a negative avg return -0.62%, the historical quarterly net flows (back to 2003) are just +$1.7B

chart via Lipper Image
Beating out lumber & crypto! The Rolling 1 year Sharpe ratio for 5 year #inflation expectations (TIPS breakevens) over the past year reached a record 4.4

chart via @benbreitholtz Image
FWIW: if you have #contrarian leanings, it is difficult to not recognize the extreme crowding taking place within the #inflation/#deflation debate Image
The impact of used cars/trucks on the recent inflation number: 2.96% vs 2.28%

bloomberg.com/news/articles/… Image
Flows into commodity funds accelerate with 18 straight weeks of inflows (scroll up to see the flows into #inflation protected bond funds). #sentiment

chart via Lipper Image
ICYMI: David Rosenberg @EconguyRosie at MacroVoices explaining why the data does not support the overwhelmingly popular secular #inflation narrative.

The accompanying chart deck to the above (PDF):

macrovoices.com/guest-content/…
Chart of TV #sentiment re expectations of higher interest rates showing historically high extreme accompanied by low uncertainty. #contrarian

chart via @benbreitholtz Image
Prof @AswathDamodaran on #inflation, both expected and unexpected and the subsequent effects on different asset classes (#gold, real estate, stocks, even mentions #cryptocurrencies):

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More from @TN

Jun 7, 2021
Goldman Sachs' survey of 25 CIOs shows that #Bitcoin is their least favorite asset class
With growth and value leading the most favorite:
This stands in stark contrast to the larger survey conducted by Bank of America ML GFMS (May 2021) where long #Bitcoin was deemed the most crowded trade:
Read 4 tweets
Apr 8, 2021
Quick look at a few #sentiment charts:

Investor Intelligence newsletter sentiment metric continues to recover with bulls 60.8% (+6.4%), bears 16.7% (-.8%) and the correction camp at 22.5% (-5.6%)

chart via @WillieDelwiche
Retail investor #sentiment much more optimistic with those expecting the stock market to continue to rally at the highest levels since January 3rd 2018:

chart via @WillieDelwiche
The 4 week MA of bearish AAII respondents is close to a record low as well:

chart via @hmeisler
Read 11 tweets
Apr 7, 2021
Checking in with the options market, the very LT trend remains clearly bullish (all major MAs in sustained synchronized downtrend): Image
While the market has accelerated higher, the short term standardized equity put/call ratio remains surprisingly neutral(ish): Image
The only recent bullish option signal I noticed was from ISEE's Call/Put ratio which opened up a significant gap between its 10d MA vs 50d MA (see below). This was similar to late October 2020: Image
Read 4 tweets
Mar 22, 2021
While #sentiment for gold is most definitely depressed and close to historic extremes...

chart via @MacroCharts Image
The Bullish Percent index for the gold miners/equity sector is not as extreme: Image
Here's another breadth metric, the percent above 200EMA. It fell to almost 10% on Mar 8th and since then it has bounced strongly: Image
Read 5 tweets
Mar 7, 2021
The view from 30,000 ft... a very long term chart of stock market #valuation (via 3Edge): S&P 500 Market Valuation 19...
Similar, but slightly different #valuation gauge from Bridgewater: US Equity Price Gauge Perce...
S&P 500 Price to Forward Earnings Ratio remains below its pre-pandemic highs but still very stretched historically #valuation

via NDR h/t CMG S&P 500 Price to Forward Ea...
Read 5 tweets
Oct 24, 2019
Lowry Research 1/7:

"the forces of Supply and Demand suggest the market is consolidating its gains from the Dec 24 2018 and June 4 2019 lows through this sideways trading rather than forming a significant topping pattern."

edgeandodds.com/smart-investin…
Lowry Research 2/7:

"Thus, the probabilities are this period of consolidation will be resolved to the upside through a rally that carries to new all-time highs. (…) Historically, breadth tends to lead price in moving to new highs."
Lowry Research 3/7:

"Thus, if precedent holds, the new highs in the various Adv-Dec Lines reinforce the probabilities the market’s current sideways movement will be followed by a rally that carries the major price indexes to new highs in the months ahead.”
Read 8 tweets

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