A subject worthwhile thinking about. A DM group discussed this a few days ago (chart h/t to 🔒) where I suggested the combo was a setup for the Fed raising rates faster/sooner than people think.

The timing is right. There is more buffer in place than people think.
Higher oil & commod prices, higher average wages, more benefits, higher rates, etc should all help dampen ProfitMargin/GDP, but it starts from a very high place. And the UER from a relatively low place (given the history in the 70s where inflation and slightly higher rates and
costs meant higher nominal GDP, and lower-trending labor share of GDP), and given the recent quit rate we are seeing, and the labor mobility rates, room is being made to shift people up the curve in many places, and to absorb more labor at the lowest income brackets.
All this said, that first chart of labor share of GDP appears ENORMOUSLY goosed by a barbell of covid stimpacks and the tax code changes. If one were to look at the change by bracket and remove covid transfers, it would look remarkably different. There are, however, changes as
seen in recent moves by large-employers (min-wage level increases).

To me, the "benefit" of raising rates faster is that the marginal spot cost of energy, container shipping, etc, as well as higher vax rates seeing more out-of-home activity will (in my opinion) drop off, and
that will dampen inflationary tendencies (mitigating some of the "cost" to margins of hiking rates), while if demand pull is so strong that such costs do NOT fall back, not hiking would have been a mistake and hikes will come faster and furiouser.
As I said in the DM group, I think that not enough people on fintwit have studied (much less experienced) situations where demand pull caused inflation and how far Fed Funds moved to offset that.

The Fed research staff has, and Fed governors are often old enough to remember.

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More from @bauhiniacapital

30 Sep
This FT article by @Urbandirt, @KanaInagaki, and @ArashMarkazi is SUPER-informative if you read between the lines.
And if you know your history of Elliott in Japan, you'd have a think about where the leak was sourced from.

And if you knew the history of activists in Toshiba, you'd have a think about about where the stock came from.

And if you were reading the tape closely, you might get
an idea about that, and then you'd have a think about what that would mean after the near-term completion of the strategic review process.

And if you knew the history of Toshiba, METI, and activists because you followed closely (and read the report)...

Read 4 tweets
28 Sep
US, at 70,000 cases a day, raises the alert on HK citing a "moderate" level of cases of covid.

HK has not had a local case in 41 days. Not a single case. It has had 2 in cases in 3+mos. Both working in airport lounges dealing with incoming pax.

70,000 cases a day on a population the size of the US is equivalent to 1500-1700 cases a day in Hong Kong.

Hong Kong has had 12,000 cases... total. About 7-8 days' worth of the US on a population-equivalent basis.

HK has seen 213 deaths. About 1/80th the US rate per capita.
And I am told the 70k cases/day in the US understates the reality because of weekend/poor reporting. Actual numbers averaging 120k, which means HK's total caseload in 20mos is about 4-5 days of the current US rate on a population-equalised basis.
Read 4 tweets
22 Sep
It’s a holiday…

…so we’re goin’ to the moon!
It’s less impressive up close.

May try again after dark. Image
Looks small from a distance. Image
Read 5 tweets
21 Sep
As a follow-on, and leaving it unconnected...

When people think about contagion, they should think about HOW whatever comes of this affects them and their life?

Will US equity owners see massive Chinese household selling of US equities based on this? No.

Will US bondholders
see massive selling of USTs by the Chinese govt to bail out the industry?


Will Chinese consumers spend less on LVMH products? Maybe.

Will Chinese consumers stop buying premium Kona coffee, American furniture, American-made cars, etc? Stop. It was never a thing.
How about iron ore?
I've seen this one bandied about. It's a bit complex. Contango would NOT be the trade. Contracted sales this year are next year's construction demand for steel.

If you expect a total regime change in the amount of floor space constructed, that is 2023 biz.
Read 6 tweets
21 Sep
An excellent treatment by @michaelxpettis. Frankly much more expert and adult than most of what has been written (long form helps).

Definitely worth a read. I would go one step further and say...
...the issue between "good growth" and "bad growth" has effectively resulted in the asset base (and GINI coefficient allowing it) which triggers the warning that houses are for living in, not speculation. The debt growth has served local governments, developers, and has served as
the primary outlet for excess savings for a high nominal growth economy. IF land prices had been fixed, land auctions were by lottery, and price/sqm paid to local govts rose at CPI+0%, developer margins were fixed at cost plus 10%, and land without permits were returned
Read 27 tweets
20 Sep
For people spreading around the Sinic Holdings (2103.HK) chart, thinking it matters... it doesn't.
look at the price chart for the previous 9mos, and how it moved during covid. It has always had tiny official float and even lower actual float.
Sometimes stocks have that pattern. Then they don't.

It isn't the market realizing something all of a sudden. There was no real market.

It is almost always a holder unable to keep holding it up and a margin loan getting called with collateral sold.

I mean fer chrissakes... the stock 'traded' US$900k a day on its median day in the past year.
Read 4 tweets

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