Thread by @anishteli

In mid 2008, I first heard the phrase "canary in the coal mine" in a speech by Stephen Roach at the Trident Hotel while he was here for Morgan Stanley's annual conference. I had to go look it up what exactly did it it mean. Later during the year I experienced what it meant. (1/n)

https://twitter.com/ETPrime_com/status/1501409703955337221

In 2016 Stan Druckenmiller warned the 3k attendees at NY Sohn Conf that policymakers have no end game but market do. And at some point market will have no choice but to wake up and realize that the sugar highs being provided by the fed no longer give them the desired "kick"(2/n)

1920s-US rebuilt its postwar economy & put the returning soldiers back to work. Munitions factories started producing consumer goods. Irving Fisher declared that stocks had reached a permanent plateau. The newly born Fed did not want to upset a good thing going and sat back (3/n)

Until it was too late. In 1929 between Jun and Sep Dow (the index not the stock) went up 20%. Before it closed the year with ~30% fall from peak. This was the trailer. The movie was yet to come. (4/n)

Over the next two years 1930 & 31 the Dow Index went from 294 to 41. Down 89% In 52' Hoover accepted that the booming 20s were allowed to become "stock-exchange Mississippi Bubble" by the Fed (5/n)

In contrast to 2008, Fed slammed the brakes too hard & the Dow took 2 decades to see its 1929 high In 2008, Fed Gov was Bernanke, who was a leading scholar on, no prizes for guessing, the Great Depression of 1929. Incidentally RRR was the canary in 2005. BB swatted him away (6/n)

Bernanke was not going to make the same mistake the Fed made in 1929. He decided that this time he would do the opposite. Give a drug addict more drugs and kick the can. Treasury secretary Paulson went on bended knee to Nancy Pelosi to get his bazooka worth $780bn approved. (7/n)

And post QE1, most of us are familiar with the story. the 2010s have been one of the most profitable and least volatile decades in equity market history thanks to successive QEs. But everytime Fed tried to take punch bowl away, markets threw a tantrum. (8/n)

Bernanke passed the can to Yellen who passed it to Powell jit. Covid hit, & Powell went back to the same playbook with 4-5x 2008 bazooka. But guess what, this time came inflation. This as they say in India, was "out of syllabus". It had not come in the last 10 years. (9/n)

2022 - Powell and Fed are caught between rising inflation and a flattening yield curve. And then Russia attacks Ukraine. Oil is on the boil "Sorry Cathie" Back to 2008 levels Enough to cause demand shock & destruction. Remember in times of stress all correls go to 1 (10/n)

This is not new as my fav character in Margin Call, John Tuld(or is it Dick Fuld) says these large dislocations have happened in the past. “It’s just money; its made up. Pieces of paper with pictures on it so we don't have to kill each other just to get something to eat." (11/n)

"It's not wrong. And it's certainly no different today than its ever been. 1637, 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1987-Jesus, didn't that f$#k up me up good- 92, 97, 2000 and whatever we want to call this. It's all just the same thing over and over;" (12/n)

"We can't help ourselves. And you and I can't control it, or stop it, or even slow it. Or even ever-so-slightly alter it. We just react. And we make a lot money if we get it right. And we get left by the side of the side of the road if we get it wrong.” (12/n)

Which is why I disagree with my knowledgeable friend @Prashanth_Krish that fed losing the plot is not nuclear. Its painful for sure, will cause massive dislocation & maybe felt even for a decade or 2 Nuclear to me means tht there is no hope. So no one is saying 👇 (13/n)

Now what was the point of this history lesson. Bcos our Sensex has a thing for the Dow Jones boy. An Rsqr of 0.94 And while we have have been benefitting from the Jones families largesse, we will be hit hard when the music stops. (14/n)

What to do I asked @passivefool ? He said my monkey brain says buy gold. I think he is indian with some links to Druck. Bcos guess wht Indian households and Druck are doing. Buying gold. Today there was block trade on one of the gold ETFs and there was one on 24th Feb too (15/n)

Druck says this is not just metal to him. It is a currency. And if you have read it till here then this is where I say this thread was for education only. I am a human and not a "canary" in a gold mine. Pleasedoyourownresearchandconsultyourfinancialadvisorbeforeinvesting. (16/n)