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2 Aug, 4 tweets, 2 min read
Japan's big pension fund diversified its sovereign bond exposure away from US Treasuries over the past year. Still US-heavy but broadening out. Via Bloomberg.
bloomberg.com/news/articles/…
The BOJ also announced last month that they will buy be buying foreign green bonds (this'll likely mean ongoing European bond purchases in the future). reuters.com/business/susta…
More aggressively, Russia is de-dollarizing its reserves and shifting its trade from dollars to euros for its dealings with European countries and China, which is notable because a sizable portion of its exports are energy and commodities. From April:
bloomberg.com/news/articles/…
Things keep shifting towards a more multi-polar, multi-currency world, as described last year here: lynalden.com/fraying-petrod…

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More from @LynAldenContact

Lyn Alden Profile picture
4 Aug
Nassim I've not bashed you or said anything negative about you.

I critiqued the set of arguments in your recent paper, not the author behind the paper, or your other works. I haven't used ad hominem remarks against you, although you have against me.
I know it can feel tribal when people have their work disagreed with, especially online.

But being tribal or personal is not my intention; the focus is on the content of the paper and the arguments therein.

People disagree with my work plenty. I welcome it.
Earlier this year I published a paper that was somewhat critical towards Ethereum, highlighting risks/concerns from an investor perspective:
lynalden.com/ethereum-analy…

The Ethereum community crowdsourced a response, so I shared it with my audience:
Read 4 tweets
Lyn Alden Profile picture
3 Aug
Regulators have historically had a tough time predicting systemic bank risk ahead of time.

Bank capital ratios, for example, were not predictive of the 1929 or 2008 financial crises. Risk-weighted and raw charts: ImageImage
Capital ratios are of course critical for analyzing the health of a specific bank balance sheet, but historically failed to detect system issues in the bank lending sector.

That's why they were reformed post-GFC, to make them more granular.
Historically some combination of private debt as a % of GDP, monetary base as a % of total bank loans, and the percentage of bank assets held in nominally risk-free assets, has been more predictive.
Read 8 tweets
Lyn Alden Profile picture
2 Aug
On one hand, fiat cash is a "defensive asset", with low volatility. Naturally, you need some cash to pay expenses (inevitable) and for optionality on buying other types of assets (optional).
On the other hand, fiat cash is the only speculative asset I own, meaning the only asset I expect to decline in value over the long run but that might go up in the short run (meaning other assets temp go down in price vs fiat cash), allowing me to rebalance into those assets.
Just about every other asset I own, is something I expect to be worth more 5-10 years from now, than today.

But fiat cash is the opposite: something that I expect to be worth less 5-10 years from now, even with interest. But I speculate on holding *some* anyway.
Read 7 tweets
Lyn Alden Profile picture
31 Jul
Three weeks after this tweet from Sep 2019, the Fed began buying UST (US Treasuries) in October 2019, before the pandemic, and nearly two years later hasn't stopped yet. 🧐 Image
Fed Unveils Plan to Expand Balance Sheet but Insists It’s Not Q.E. (October 2019) nytimes.com/2019/10/11/bus…
I enjoyed sharing content with fellow macro analysts, as we dissected what the September 17, 2019 repo spike meant.

In fast-moving markets, this relatively recent event is almost forgotten now, but remains historically important.

IMO, the MVP from that event was @LukeGromen.
Read 4 tweets
Lyn Alden Profile picture
23 Jul
Several people have correctly pointed out that bank loans haven't kept up with bank deposits.
However, if you add bank holdings of Treasuries to their loans, the gap fills by quite a bit. The rest is mainly excess reserves.
This is because, as @LukeGromen has elegantly pointed out a number of times, banks *are* lending, albeit mainly to the federal government.

It's like the 1940s more-so than the 1970s.
Read 4 tweets
Lyn Alden Profile picture
23 Jul
All the folks who were tweeting out year-over-year M2 growth rate charts several months ago aren't tweeting them anymore, since the charts are less sensational, so I'll do it.

M2 YOY % change is down to about 13%, from a peak of 27%.
I highlighted this effect since last year, where the rate after the crazy March/April 2020 period is a more modest "only 13%" growth rate. My chart from back then:
The rate of ongoing M2 expansion will largely depend on fiscal decisions.

As I've pointed out, this period is more like the 1940s, not the 1970s, and so money supply growth is primarily about fiscal spending, not bank lending.
lynalden.com/may-2021-newsl…
Read 4 tweets

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