The Los Angeles and Long Beach ports collectively unload just under one million containers a month. For the last year, they have been running at/near a record pace.
In other words, they are running as fast as they can. The problem is they are at their limit.
3/13
The much-heralded solution is to run the ports 24/7. The problem is the Long Beach terminals are already 24/7 and the LA terminals are already running 18 hours a day. These added hours at LA are only going to increase unloadings by 2%-3%. This is not going to matter much.
4/13
There are also problems getting these containers off the dock.
Unfortunately there is a trucking shortage, which has led to soaring trucking rates (chart).
Demanding more trucks at 3 AM to get these unloaded containers off the dock is going to be a taller order.
5/13
So even though the ports are running at capacity, the containers are going nowhere. This can be seen by the stagnate increase in rail car loadings.
The entire supply chain has to run beyond capacity at once for this to work. Good luck coordinating this.
6/13
This is leading to a backlog of ships anchored off LA.
And since these containers are taking longer to unload, shippers now have to factor in this dead time anchored off shore.
This is a disincentive to ship, so the number of empty containers are piling up in the ports.
7/13
This is leading to a recent fall in container rates. No one is in a hurry to ship these containers back to China for reuse if they are going to just sit anchored off LA for many days. Then one has to struggle to find a truck to haul it away.
8/13
Many think the falling container rates mean the supply chain’s problems are being alleviated.
That would be true if these rates were falling along with the no. of ships anchored off LA, trucking rates, and the number of empty containers all falling as well. They are not.
9/13
The impression by many in the financial markets is this supply chain problem will be fixed in a few months.
They also though the same this summer when Biden similarly convened a meeting in June to fix this problem. But today it is worse than ever.
Why?
10/13
Simply, demand is booming. Below is personal consumption since 09, its trendline, and residuals (actual-trend).
Consumption is off the charts at $662B > trend.
Again, we want a record amount of stuff and the supply chain cannot handle it.
Too many stimmy checks.
11/13
So by ‘fixed’ many assume increasing the throughput of the supply chain to meet overstimulated demand over the short term is doable.
But if the problem is the supply chain is at capacity now, expanding will be hard/impossible over the next several months.
12/13
So to bring everything into balance, prices will rise until enough demand is destroyed to bring everything into line with the limits of the supply chain.
We might be seeing this happening as Q3 growth expectations are crumbling as prices are soaring.
13/13
This is otherwise known as stagflation ... which simply means higher than average prices rises (inflation) accompanied by lower than average growth.
Wall Street viscerally hates this word. But that does not mean it is wrong. Just inconvenient if true.
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A great piece by @EconTodd and James Carter about how the US Treasury messed up the last 15 years ago. (h/t @judyshel)
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Rather than issuing 50- or 100-year bonds when interest rates were at rock-bottom, the US Treasury dismissed this option and simply continued to borrow on a short-term basis. Now that US interest payments are ballooning, the scale of this blunder has become apparent, as have the implications for future generations.
This almost triggered me to read as I have been arguing the same thing.
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April 29, 2012
“I don’t get why the Treasury thinks floaters are a good idea with short-term rates at zero percent, as they only have one way to go, and that’s up,” said James Bianco, president of Bianco Research LLC in Chicago in an interview on April 24.
“They should be lessening the cost of financing the United States government for the taxpayers,” Bianco said. “The Treasury should be issuing 100 year or perpetual bonds until the market can’t stand it anymore to lock in these rates.”
In a 2019 op-ed I wrote for Bloomberg ...
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For more than 60 years, the Treasury has relied on a select group of primary dealers – currently numbering 24 - who are not only authorized to trade with the Fed, but are also obligated to bid at government debt auctions. That means they are expected to put their own capital at risk and buy the securities issued by the Treasury. This group of dealers accounts for a large chunk of the Treasury Borrowing Advisory Committee, or TBAC, which counsels the government on its financing needs.
The Treasury has historically placed a great deal of weight on this group’s recommendations. The TBAC has lately stressed the importance of regular and predictable securities issuance, along with demand for that issuance. When the Treasury brought up the idea of ultra-long bonds in 2017, the TBAC cautioned against the move and pointed to surveys of investors that suggested tepid interest.
As this chart shows, the current BTC price is the average purchase price of the Spot BTC ETF buyers. ~$57K to ~$58K
2/6
So, about $37 billion in Spot BTC assets (x-GBTC) now have no profits and maybe a small loss.
3/6
As I have been detailing, the 13F shows very little institutional buying of these ETFs. 95+% of the buyers are either hedge funds, institutional investors holding less than $100m, or retail degens.
It confirms my fear that the Spot BTC ETFs are effectively "orange FOMO poker chips" for paper-handed small-time traders (degens).
These degens are getting close to their breakeven, which could turn them in big-time sellers.
Let's dig in.
3/11
A Citi study shows that investment advisors (IAs) hold ~35% of all ETFs. The table shows the 4 largest BTC ETFs. IA's (blue ribbon) hold less than 1% of the New BTC ETFs.
For comparison, see the two popular non-equity ETFs, GLD and TLT. IAs hold 22% of HYG and 40% of TLT.
The deficit as a % of GDP (bottom), now 5.93%, is higher than in any period except the Great Recession (2007 - 2009) and the 2020 COVID shutdown (dotted line).
The government is borrowing to spend money like the economy is trying to recover from a recession.
2/6
This separates Federal revenues (orange) and spending (blue).
The difference is the deficit (middle panel).
The bottom panel (black) shows that taxes only cover 73% of federal spending. The other 27% has to be borrowed.
3/6
Yearly federal spending is $6.24 trillion or 22.3% of the US economy (or nominal GDP).
Like the deficit chart above, the only time the government has spent this much as a % of GDP is when trying to get the economy out of a recession.
The 13Fs are a disappointment. Very little wealth manager adoption so far (like 1%).
Unrealized gains are shrinking fast.
Why I've been skeptical of Spot BTC ETFs.
2/7
* March 11 = only $1B inflow day.
* March 12 = Brokerage report saying $220B of inflows over the next 3 years (effectively predicting constant inflows, forever).
* March 13, all-time high close (5PM ET price)
Since the mid-March frenzy, inflows peaked (top panel).
3/7
The 3/31 13Fs are coming out, and they are disappointing for those who thought a big boomer wave of buying BTC ETFs through wealth managers was underway. Only odd lots.
IBIT has only 27 13Fs with more than 10,000 IBIT shares (~$360k), way less than 1% of outstanding shares.