It is never too late to make a U-turn on the wrong path, says a Turkish proverb.

And yes, Jerome Powell surprised markets after his Omicron comment (many thinks that is dovish) by speaking hawkishly about pace of tapering picking up!
Inflation is at 6.2%YoY, and no matter whether u think it is transitory or not, it is way past 2% mandate & way higher than zero policy rate.

CPI hasn’t peaked btw. Even if it slows, still high. Look at European CPI.

This isn’t just supply side issues, demand is strong
How do I know that? Very simple, we have the same issues here in Asia regarding supply shocks.

PPI off the chart. Have u seen China PPI?

But CPI weak. Why? Demand has been weak & so outweigh supply side shocks.

US CPI is a combo of demand & supply.

Fed is behind the curve.
And so now that he is reappointed & inflation is TOXIC politically, whether u are appointed by the president or elected, because it affects ordinary people & voters.

So u better start acting like you care. And saying transitory isn’t going to cut it if people’s pockets worse.
The Fed is doing the right thing by withdrawing some liquidity from the market & introducing risks to RISK asset like equities so not to create a moral hazard. Need to deflate the bubble slowly to avoid a sudden pop. This is good systemic risk management & the right thing to do.

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More from @Trinhnomics

1 Dec
Rule #1: Buy what the Fed buys
Rule #2: Sell what the Fed stops buying

Sincerely,

@Trinhnomics
But note that while earnings are less important these days than the Fed, earnings represent economic fundamentals, as in macro.

And so the Fed can only sell in an upward economy, as in reducing the supply of liquidity when demand is high.

🤗🤗🤗
But the difference between US equities & say, EM Asia, is that US earnings are GLOBAL. US earnings reflect the US strength as well as global demand. When u sell US equities, u don't just sell on the Fed draining liquidity support but also u have to be bearish the US & global econ
Read 4 tweets
30 Nov
Kudos to the @RollingStone for uncovering a monster that the media has worked to normalize, including his attack on women & morality. The thing about art is that while it may be an expression of beauty, it can also be macabre or promotion of evil by normalizing and ELEVATING it. Image
The fact that this guy dresses like the devil, writes music that is immoral & acts immoral for decades have normalized the sexualization of women.

Btw, George Orwell wrote a great essay on this topic regarding the monster called SALVADOR DALI.

orwellfoundation.com/the-orwell-fou…
Why do I say this? Salvador Dali is hailed for his surrealism but if u pay attention to his art and his life, the guy was a monster and his art celebrated and promoted it.

This is George Orwell review of Salvador Dali's autobiography & how he treated women since he was a child. Image
Read 7 tweets
26 Nov
Korea's largest trade partner is China but don't let that fool u to think that its economic cycle depends on China's domestic demand. It's a supply chain story where Korea chips flow to China as intermediates that will then be exported to the US. Korean economy syncs w/ US demand
Korea's 50bps hike reflects stronger growth in the peninsula thanks to exports & not much disrupted domestic mobility (its strategy to Covid also similar to the US where it never went for Zero Covid).

US retail sales & Korean exports in %YoY. They correlate. US demand matters.
The hike was widely anticipated so the big question is what gives in 2022? More to come? See here on rates where SK rates expectations go higher w/ US rates while China slowing demand = easing expectations. Rates in SK follow US more than CH as relationship is a supply chain 1.
Read 7 tweets
23 Nov
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?
Read 11 tweets
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%.

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

USA 6.2%
Mexico 6.2%
Canada 4.7%

Europe:

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

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