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Jan 23 • 5 tweets • 3 min read
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U nailed it imho….first thing people do is go back to the last episode (2018-2020) w/o a good understanding of the changing contextual backdrop as well as QT mitigants that are currently in place & evolving further.
$XLF #Reflation
Another big time clue imho… $BAC did a 4.5% Pref Issuance a few days ago… if that ain’t a sign the Market has too much liquidity not sure what is….
$XLF #Reflation
Here’s the bridge…..
$XLF #Reflation
Conclusion:

Inter-Bank Credit Risk is Declining Despite OIS/LIBOR Ripping with Multiple Rate Hikes getting priced in… to fight Unhinged Right Tail Inflation. The Fed is “Repairing” stuff not “Breaking” it with Rate Hikes… notwithstanding #TechPetrocks

$XLF #Reflation

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More from @gamesblazer06

PlungeProtectionTeam Profile picture
Jan 22
The question for Investors (longer term horizon) is when do you sell $XLF ?
The answer is when Deposit Betas finally catch up to ~50% or 10Y3M Inverts Investors start to Pay Less & Less for every $1 of earnings power (driven by the Flow Through Rate of Inflation)….
Long Term “Investors” who respect the Credit Cycle Started selling $XLF at the Peak of Price/TBV on $BKX in Jan 2018 at 2.1x & also long $ZROZ …as Deposit Betas were Peaking + Cyclicals/Commodity stocks like $CAT etc..
The other natural question that should pop up is…well if the Taper is coming & BKX is 1.8x…why shouldn’t 1 sell now? Won’t the Fed kill the Cycle w QT.. why on earth would 1 wait around… after doubling/tripling money from the March 20 bottom.. why wouldn’t 1 crystallize gains?
Read 7 tweets
PlungeProtectionTeam Profile picture
Jan 21
From most recent peak:
$XLF -7.5%
$QQQ -13%

YTD:
$HYG -1.8%
$XLF: -2.1%
$LQD -2.7%
$QQQ: -12%
$BKLN Flat
$JPM $145 - Way Oversold imho.

Banks, Front End & Valuations….
$XLF #Reflation
The Yield Curve….

Not Remotely close to an Inversion. $XLF #Reflation

Closed at 1.58% -4bps.
Read 16 tweets
PlungeProtectionTeam Profile picture
Jan 21
Reserves up to $4.98B as of the 19th
If the thesis is QT is causing the Sell Off… maybe look at Reserves. Market Liquidity is Up… Not Down.

+$129B WoW $XLF #Reflation
Bank Liquidity has gonna Bananas… the Wall of Cash is coming…. So are Rate Hikes. $XLF #Reflation
Read 4 tweets
PlungeProtectionTeam Profile picture
Jan 21
This set up doesn’t exist today…CCCs were widening in late 2018 & 2019….Fuse was lit… now not so much.

CCCs don’t care at all about #TechPetrocks $ZROZ & high duration stuff getting smoked.

$XLF #Reflation 🚀
Yield Curve (10Y3M) Steepening, Dr. Copper Ripping, HY Bonds Unch all year at +310bps OAS, CCCs have tightened -12bps this year..& tightened by -18bps in the last 10 days…
$HYG is 4 year effective/spread duration… not terrible… CCCs shorter at 3 yrs & +667bps OAS. $XLF
The Yield Curve is Steepening….

Front End of the Curve ain’t anywhere close to a Double Dip Recession.

Maybe the Talking Heads know more than the Bond Markets?
I Highly Doubt it.
$XLF #Reflation
Read 5 tweets
PlungeProtectionTeam Profile picture
Nov 22, 2021
$6 Gas is here already?

Still super cheap….this is nothing… stock up.

#ESG + #FedClimateStressTests + #AltLeft #PriceControls are coming.

That’s a lethal combo to send Gasoline Prices to levels we perhaps haven’t seen in Decades. $XOM gonna be lit. 🚀
The good news 4Banks is that the #AltLeft BBB Green economic agenda puts a Nasty Secular overlay on Inflation, that’s like adding Kerosene on one of the biggest Cyclical Recoveries since WWII… So when Consumer Savings get drawn $XLF Cards will be ready to Finance Deficit = NII🚀 ImageImage
UK’s Bulb files for Chapter 11 (Insolvency)…at some point the bulb should switch on for the #AltLeft #GreatReset Stepping back a bit.. Wind & Solar likely never commercially viable.. adds to Public Debt & Subtracts from Consumer Savings.. As for Bulb, thx Germany! #EnergyCrisis
Read 6 tweets
PlungeProtectionTeam Profile picture
Nov 2, 2021
What’s your Convexity Profile?

What do you make if right & IORB Hikes won’t blast the economy coz of Private Sector De-Leveraging.. & what’s your downside at ZIRP if wrong?
$XLF #Reflation
Let’s say PermaBears are right & we have ZIRP forever… Banks have the highest Capital levels in 30+ Years… & can easily payout 100% of earnings at 13% CET1…

Worse case ATM payout machines w 10% All In Yields… Sure beats buying a Massive 10 Year Govt Bubble at 70x P/E imho.
30% Divy… & 70% Buyback Ratios….in 5 Years…amount of Tangible Book Value Reduction… in a PermaBear ZIRP forever world…+ low credit costs…can easily get u to high Teen ROTCEs… & if we do get Inflation & Rate Hikes don’t Invert the Curve..ROTCEs are gonna Rip w TBVs👆 $XLF
Read 7 tweets

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