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Feb 2 • 6 tweets • 2 min read
Portfolio update (+4.9% P&L YTD)

- Long Nasdaq vs short Russell
- Short Bitcoin
- Short Crude Oil
- Long Chinese Real Estate
- Long 10y UST vs 2y UST (flatter curve)
- Short High Yield Bonds

Why this setup?
The overarching macro thesis is that US growth will slow down further while the Fed tightens - a delicate situation for most risk assets.

Bitcoin and High Yield bonds ranked as the most exposed assets to such a tricky macro environment and with plenty of room to reprice.
I like commodities structurally, but I felt like Crude Oil was stretched on the back of geopolitical tensions and due for a correction as aggregate demand slowed materially into Q1.

The trade is not working and rolls against me, will stop out if proven wrong.
Chinese Real Estate and long QQQ/short IWM are medium-term trades.

Chinese developers were slaughtered but we got the first clear indications Xi is redirecting some credit towards developers via state-owned banks.

QQQ > IWM a structural winning trade in a slowing economy.
As the Fed tightens while the growth impulse is clearly decelerating, it cements expectations for a weak long-term structural growth (low long-end yields).

At the same time, front-end yields move higher to price in the Fed hiking cycle.

Result: flatter yield curves.
Every trade loses maximum 2% of my residual capital (hard stop losses).

Trades are designed to realistically achieve >2.5% P&L if I am right.

Hint: I am right just slightly above 50% of the times.

Being a disciplined soldier with some macro edge is good enough.

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More from @MacroAlf

Alf Profile picture
Feb 4
The bond market is talking. Very loudly.

Let me try to translate for you what it's saying.

A ''wtf is going on in fixed-income'' thread.

1/10
Central Bankers are freaking out about inflation, and they want to be seen as reacting strongly

As a former bond investor, all you hear is ''green light to push short-term rates to🌙and test them''

And indeed: Fed Funds futures now price in more than 5 hikes in 2022

2/10 Image
Investors often think in probability terms

While the mean outcome sits at around 5.3 hikes, the hawkish right tail is getting increasingly fatter

Markets are pricing >17% chance the Fed will hike 7+ times (!) in 2022 vs 3% prob. of 0-3 hikes

@MetreSteven any thoughts?

3/10 Image
Read 10 tweets
Alf Profile picture
Jan 30
A good reminder of the risks of being involved in speculative manias from the CEO of Sun Microsystems, a company whose stock price went 100x between 1994 and 2000.

Yes, 100x in 6 years.

A short thread on what its CEO Scott McNealy had to say when the bubble burst.

1/6
By 2002, the dot-com mania had largely deflated and with it many trillions in ''wealth'' were wiped out.

At an investor gathering in April that year, Scott McNealy gave a glorious short speech that includes his most famous sentence.

''What were you thinking?!?!''

2/6
“At 10x revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends...That assumes I have 0 costs of goods sold, which is very hard for a computer company. That assumes 0 expenses, which is really hard with 39000 employees''

3/6
Read 6 tweets
Alf Profile picture
Jan 26
This is the most hawkish Powell I can remember since late 2018.

There are major implications for asset classes across the board: let's go through it with a short thread.

Ah, and few trade updates!

1/8
The synopsis of the press conference:

Journalist *asks whatever type of question*

Powell *I don't care, I'm gonna tighten*

You name it: growth scares? LFPR being weak? yield curve being very flat? risk assets and financial conditions wobbling?

Zero f*cks given by Jpow.

2/8
He did nothing to remove the most disruptive tail of the distribution of future outcomes.

Asked about 50 bps hike? Didn't deny it.
Asked about hiking at every meeting? Didn't deny it.

So, here is what the market is now pricing by Dec 2022.

Almost 5 (!) hikes as base case.

3/8
Read 8 tweets
Alf Profile picture
Jan 25
New trade!

Long Chinese equities, in particular Chinese Real Estate (ETF: CHIR).

Entry: 12.04
Stop: 9.63
First Target: 15.65

Sized conservatively given low liquidity and decent volatility, but targeting big upside (+30%).

A short thread on the rationale.
1/6
China has opened the credit taps again, and they have the unique possibility to direct credit when they want and where they want it.

The actions taken by the PBOC but most importantly the guidance given by officials towards state-owned banks to stop the bleeding are key.

2/6
The deleveraging in Chinese real estate has been huge, and it has tracked the large '20-21 fall in the credit impulse

Now, the first concrete signs for a turn in credit impulse are there

And the first outlet for this newly created Chinese credit is Chinese assets

3/6
Read 7 tweets
Alf Profile picture
Jan 23
New trade!

Short Oil (CL1 future)

Entry: 85.1
First target: 72.4 (15%)
Stop loss: 93.6 (10%)

- Real demand & inflation to disappoint against what's discounted
- Long oil crowded as hell
- Decent backwardation given the macro framework

A short thread.

1/6
Real demand and growth are likely to disappoint from here, in my opinion.

Here are earnings lagged by 12m against credit impulse.

For reference, consensus expectations for Q1-Q2 for S&P500 YoY earnings are +5-6% versus same quarters last year.

2/6
Inflationary pressures are likely to fade away too, and much more quickly than what consensus and breakevens are pricing in here (2022 YoY inflation priced at 3-4%, I expect <2%).

3/6
Read 7 tweets
Alf Profile picture
Jan 22
A short thread on how to fast-track your career in Finance.

I became the Head of a $20 bn Investment Portfolio at 27y old - how the hell did I manage that?

Well, at least 50% was luck

The rest, a mix of hard and soft skills (latter: often overlooked, but super important).

1/5
Hard skills count, a lot.

In my experience, it's all about curiosity and dedication really.

If you don't love what you do and you don't work hard, then leave it.

Getting a bit of math & coding helps, but the drive to learn more every day is the key.

2/5
Soft skills count much more.
In order:

- Communication: you can be the smartest guy in the room, but if nobody understands you...forget it.

- Networking: really, speak to people!

- Diplomacy: there is so much politics in a large corporation. Learn how to handle that.

3/5
Read 5 tweets

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