Trinh Profile picture
23 Nov, 11 tweets, 5 min read
Hello from Hong Kong - the weather has turned colder as we head towards the winter, which is intensifying EUR weakness as colder weather adds to the energy crisis as well as seasonal spike of Covid & thus lockdowns/protests. Jerome Powell got the job & key for USD & rates ⏫⏫🔥
Since his confirmation again, note that no matter the administration (Trump or Biden), the Fed continues on w/ the same person in charge w/ relatively dovish policy as real rates super negative.

But Jerome Powell is more free to rock the boat now & markets price HIGHER rates.
Look at markets' implied expectations of interest rates. On Bloomberg, type MIPR GO (weird to care about rates after decades of ZIRP) but rates markets are on the move & after the vol this year, it's heading one direction - upward. JPO talked about corrosive impact of CPI, so?
So this is basically team "transitory" moving towards doing something about CPI & markets listened. It has listened & questioned the Fed mantra of QE tapering divorced from interest rates lift off & started selling bonds, esp the short-end. Here we are. USD rates matter globally.
If the price of cash is less TRASHY, basically increasingly less negative as expectations of rates go up to narrow the gap w/ inflation, then RISK assets pay attention. And it isn't just risky assets. Relative value w/ others such as EUR. Let's take a looksie. Btw, PMIs out today
To understand the relationship between FX & rates market, we must think in relative value & the CHANGE of that relative value.

Here u see markets expecting higher RATES in the US but look at the Eurozone, higher but by LESS than USD. Why? Well, it goes back to macro & monetary.
The price of the USD is its interest rates, which are going higher as expectations of a stronger economy + CPI = Fed tapering + higher interest rates in 22. What about the price of EUR? Well, higher but markets still sees NEGATIVE RATES. Why? PMIs were strong but starting to sag
Why is it sagging? Covid-19 reaction function + energy crisis. Higher cases = now lockdowns in EU while in the US even w/ higher cases in the summer no lockdown. US & Europe differ in the energy crisis, one net exporter & the other importer. MOST KEY is monetary policy divergence
Christine keeps saying that INFLATION IS TRANSITORY, as in even if it goes past the ECB 2% target, this lady isn't going to lift rates or reduce accommodation.

Look at CPI, hasn't been this high since 1996.

Jerome is saying differently. He's tapering & lately CPI is corrosive.
This chart is powerful right? How did we get here - inflation at all time since since the 1990s & central banks say negative interest rates still NEEDED.

Once you're NIRPED, hard to go PIRP. No matter what Draghi said, this isn't TEMPORARY.

And so, here we are. What about 2022?
I gotta go as this week is crazy busy given our Outlook coming out & I have to say I have had a lot of fun thinking about the Asia Pacific region locally, regionally and globally.

Learned a lot & frankly the exercise cements my passion to learn & important to sit back & read.👋🏻

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More from @Trinhnomics

22 Nov
Good morning! Back at the ICC & it is a gloomy day (eyes on the Fed as talks of faster tapering got markets jittery on more to come).

Happy to be back! Office looks amazing with the new reno!

And very excited about Bank of Korea this week! Hike, hike, hike! Ahead of the curve!
South Korea first 20-day exports off the chart for November, rising +27.6%YoY (from 24% in October) (imports +41.9%).

What was up? Chips & ships (+32.5% & 250%, respectively); And oil +113.6%
Down? Autos down 1.9%.

Where? China +24.2%, U.S. +8.9%, EU 13.1% & Japan 25.2%
*South Korea export engine continues to be rather robust, driven by strong demand for chips and ships
*Higher China import of Korean goods means that Chinese exports likely to be strong as well as Korean chips are a key input for industrial goods in CH
*The BOK will hike Thursday
Read 4 tweets
19 Nov
Someone please send the Turkish central bank a memo that we're at the tightening part of the cycle globally, following the Fed's tapering, especially with inflation around 20%.

Want to see global inflation? Let's start with North America:

USA 6.2%
Mexico 6.2%
Canada 4.7%


Spain 5.4%
Ireland 5.1%
Germany 4.5%

U get the point. Yes, we got zero interest rate policy in the USA & NEGATIVE interest rate in Europe. But the direction is TIGHTENING.
Repeat after me: REAL RATES ARE VERY NEGATIVE. Very negative. What does that tell you about money & asset prices & volatility ahead should inflation proves not transitory (already has but whatever).

Let's look at Eastern Europe:

Turkey 19.9%, higher, but alas, they cut rates!!!
Read 8 tweets
19 Nov
Ready? Let's talk about equity performance in this year in USD

Best? Argentina, Vietnam, Nasdaq, Russia, SPX, and India 🇦🇷🇻🇳🇺🇸🇷🇺🇮🇳 💪🏻
Worst: Turkey (roasted!), Brazil, mainland listed HSI stocks or China offshore, Malaysia, Hong Kong, Asia, Korea 🇹🇷🇧🇷🇨🇳🇲🇾🇭🇰🇰🇷🤮

What about 2022? Image
Turkey was the worst, and a lot of it is FX driven. Want to hear a lira joke?

Knock, knock!
Who's there?
Turkish lira here!
TRY/USD! 😬🇹🇷

Jest aside, what expectations did u have about 2021 in end 2020 that weren't true?

How about a weaker USD? Image
Vietnam yielded +36% while HSI Chinese enterprise -17% so that's a +53% gap

Is Vietnam doing better than China in terms of growth? Not if you look at the latest GPD which Vietnam bombed out at -6.2%YoY while China at 4.9. What's holding then China back? Itself, as in regulations Image
Read 4 tweets
18 Nov
A friend reminded me to look at the data after Covid. Given that most of the deaths occurred in the elderly, seems that millennials gained some wealth during Covid. That said, we got even more debt, and some bad stuff like consumer credit. Silent gen went to Gen X + millennial?
US assets:

Most are in equities (40.3trn)
Real estate is 34.9trn
Pensions are 31trn
Private business is 13.7trn
+ Others like durables.

Want to know what millennials own of the largest asset? 2%

Only 2% of total corporate equities & mutual funds. No change before/after Covid.
SPX rose almost 25% this year & our generation owns roughly 2% of total equity assets so we're basically so behind in asset valuation.

Let me show u what we have in wealth as a share of total for different assets end 2019 & Q2 2021.
Read 6 tweets
18 Nov
Missing Southeast Asia beaches & food & BSP decision at Boracay is such a tease. I once had a business trip in Palawan. Another one was Bali🤗. Decision is a hold but what is more interesting is this upcoming presidential election in May 22. All in the family! Duterte, Marcos...
Marcos' son is running for presidency while Duterte's daughter is running for VP. Did u know that they run on diff tickets? Anyway, the last person who had more than 6-year term was Marcos (he served 3 terms & bankrupted the country & as a result they had to reinstitute the ban).
The interesting about Marcos is that he really influenced the Philippines till now. His expansionary policy (remember the nuclear reactor he paid for but never used & the Philippines is still paying the external debt that he incurred) left the Phils shy of spending, until Duterte
Read 4 tweets
17 Nov
Good morning! 2 more days & we are out of quarantine. One of the positives of being stuck in a room for 2 weeks is that plenty of time for work & cuddles 🥰 w/ the baby & fewer choices to make (no need to wonder where to go & what to eat & what to do 🤷🏻‍♀️).

Shall we chase the $?
The US released its monthly holders of US treasury. Note that this is stock (which includes valuation effect) while flow just tells u net buying & selling by foreigners. Net flow is positive for long-term but stock shows lower, which means investors worried about INFLATION!!!
The Philippines & Indonesia have central bank decisions today. Both are expected to hold rates, very different than Latin American counterparts that have been forced to hike. For Indonesia, still low inflation & soft recovery mean they'll want financial conditions to be loose.
Read 4 tweets

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