I managed to shoot a new chat with @ToStRo using what many may assume was a potato for my photo lens. The audio is ok but the 240 pixelation is torturous. And its filmed in my temporary accommodation on my construction site with no running water or a/c.
It doesn't look good. I was going to walk away and not publish it on Youtube. Truth be told, this video is uncomfortable. My lifestyle is presently uncomfortable. The way I dress is hmm...let's just say I don't look good. I'm not diss'ing you. I'm trying to show you the future
That's what the future looks like. Its not all gift wrapped, clean and ready to be delivered into your inbox. Rather, its challenging and uncomfortable; few are willing to embrace it. The hard truth is that the future can be ugly...our future almost certainly is gonna be ugly
I'm sceptical on the inflation hype. The gonzo in me rails against the faux media shock and outraged headlines. We closed the world for more than a year and then jolted it back into life prematurely with the greatest ever cash incentive to buy...for sure prices have surged
@ToStRo is more a believer. We consider a means to overcome our differences. @ToStRo has an ingenious solution – The Rule of 2 %. That the Fed should only hike rates if the 10-yr T yield exceeds 2%. But could the Feds ever admit their lack of omnipotence ?
This is not a typo. Youtube closed captions are bomb 
We also offer a cool rational for why macro funds own gold. Perhaps the future will turn out differently? But presently the best guess is that you're gonna lose about 1.2% each year for next 10 y owning USTs. Put differently you got to pay for inflation protection.
Of course, gold being gold and having gotten the gang momentarily excited v recently its just chewed everyone to pieces with an inglorious dump. For me its that Lisa Bonnet line from the film Angel Heart that its always the badass that makes a girl's heart beat fast...
Gold is a badass...@ToStRo has promised me he's gonna share his chart of gold price v the inverted real yield on 10 y USTs; it's real tight. Recently less so but throw a mkt cap adjusted BTC into the formula and its tight.
Look fleetingly and gold rises with inflation. Wise man say it has a zero real yield. It's also commercially riskless. I can't think of any other riskless with a zero real yield, they're all neg. Riskless with an inflation wrapper. Now that's macro: somethin for nothin, punk
Not to cse offence but same thing MIGHT be said of BTC except no history. High stakes with little observation points. Maybe that's just me? I no like. And BTC 8x where it was 2 yrs ago and the badass just 19% higher? I ain't endorsing gold off the back of that..all I'm saying
I'm just saying that gold is risk-less, has a free call on inflation and is kinda priceless whereas the crypto is wearing a lot of downside risk. I'm not saying it's gonna tumble but we got to jive with the incertitudes that each asset brings to your wealth portfolio
Anyway we conclude with the genius of @michaelxpettis Something about a recent tweet - the configuration of his words - that finally hit home. Repeat after me, the Fed is not to blame and risk markets are rationally set at where the prevailing conditions dictate.
China, and the other surplus nations, are gaming the economic system. Don't get me wrong. They've done a lot of good. Hundreds of millions of people have been allowed proximity to our lifestyle but just being closer don't move the needle. Economics demands that they achieve it.
That a combination of their wages and the external value of their currency compensates them for their productivity. Achieve that and living stds soar and hard earned exports can be exchanged for shiny new imports from the RoW. Goodbye to nasty persistent trade surplus
But it ain't happening. The goons at the top of the pile pride themselves on those surpluses. Wages are suppressed; they're way less than they're supposed to be. Imagine the effort to keep a billion inflated balls pressed below the surface of a giant lake. That's our world today
The global trade system filets the needy to pay a pittance to the downtrodden. I know its less and less but most western jobs still capture some kind of economic rent allowing for higher consumption levels. It ain't so in China. And those trade surpluses keep on rollin in
Its really the squid game - it's pulling demand out of our economic universe. Its like china is this massive oil field that's just flaring off well paid jobs 24/7. A glut of savings ?? Better said, its the systematic looting of precious demand.
It used to be that savings were the constraint. Everywhere bombed out by global wars and being rebuilt by the savings pool of the last (US) man standing. By comparison a world beset by deficient demand should be easy to resolve. Just boost incomes.
But instead we keep eliminating well paid jobs to feed the squid and its unrelenting quest for global competitiveness. And so losing your job and cutting back spending and raising debt have become the norm.
Debt to gdp has risen 3x in the same time frame. We've come to find ourselves locked into a volatility machine. By any reasonable count the last 25 yrs have borne witness to FOUR one-in-a-hundred year economic calamities...see what I mean?
Remember that when you berate the Feds. I ain't sticking up for them altho I hear they like pets. But all that rage is better aimed at more deserving targets. I told you at the start that our future was ugly. Trade wars are stupid but so is doing the same thing over and over.
Monetary policy is dead. Too much debt to shock behaviour by hiking rates. Anyway, commercial risk is still tanking. Despite the mirage of this year's boom, risk-less Ts remain coveted. In fact the rise of the DXY feels like the breeze of an impending risk reversal...
You wanna get angry? Me? I just wanna get loaded and have some fun...but the next G7 stupid waste of time global leaders summit - throw eggs at them. Insist that they sort it out. Ban the surplus. Free Jack! Free Peng Free the CNHworkers. Pump up the volume. Demand not savings...
For the brave you can watch the horror show here
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