A shoutout thread for the best FinTwit people out there - those are all nice, and highly valuable accounts to follow.
No pr*cks allowed on this list.
I will miss many for sure, feel free to shoutout for your preferred global macro accounts!
0/11
First mention to my friend @AndreasSteno. A truly awesome guy, who is well versed at global macro and can change his mind as facts change (very rare!).
We all miss him, but a bird told me we won’t have to wait long!
1/11
A smaller but fantastic account is @dampedspring. I recently had a chat with him on @RealVision and it confirmed what I already knew: he has a solid framework, he can elaborate very well and he is honest with his P&L as he managed real money and knows the game.
I see people often freaking out about the US NIIP, which signals the US is a large net debtor nation vis-à-vis the rest of the world.
Breaking news: nothing to see here, this is just the design of our current monetary system!
1/4
Our monetary system foresees a fully elastic fiat money supply.
Credit expansion is not immediately tied to any hard assets (e.g. gold), and the US sits at the epicenter of this system as it owns the global reserve currency.
As the system feeds on continuous leverage...
2/4
...the nation producing the global reserve currency is in charge of exporting it abroad.
The Eurodollar system compounds this problem, making the system even more dependent on continuous $ supply.
Erdogan just promised to refund all mark-to-market losses in xxx/TRY if those losses would exceed the interest rate you can gain by owning deposits denominated in TRY.
If you believe him, you now have free carry in TRY/xxx without P&L risks.
1/4
FX carry trades (once upon a time, TRY was considered as an FX-carry candidate) work well if the interest rate differential is more than enough to offset the MtM and volatility across FX pairs throughout the lifetime of the trade.
Recently, that didn't work well...
2/4
A 10%+ yearly interest rate differential between TRY and any other ''funding'' currency like EUR or JPY was not enough to compensate even for a week of MtM losses and volatility.
Erdogan now promises to fund all your MtM losses and let you eat the pie (the carry).
How?
3/4
Answering the top 10 questions I received in a previous tweet, here we go!
1/10
Question #1: ''Why is 10yr not going up with Fed about to finish QE/star hiking/inflation printing high?''
A: 10y yields are roughly the sum of 10y real rates, 10y CPI expectations and term premium. When the Fed tightens, the medium/long-end of the bond market extrapolates lower nominal growth going forward (= lower rates) and more certainty about this outcome (= lower term premium)