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Mar 16 • 4 tweets • 2 min read
1/4 Controversial article from @LHSummers, calling the #Fed to raise interest rates drastically to curb inflation. I understand frustration over the excessive monetary debasement and procyclical policy excesses in the past 2 years, but... washingtonpost.com/opinions/2022/…
2/4 IMO this was driven by fiscal & health policy holding monetary policy hostage. @LHSummers compares the current situation too much with 70s, when reasons for inflation were different (credit vs. fiscal impulse) & conditions were different (debt levels and demographics).
3/4 40s are a better comp. IMO, focus should be to curb money supply growth (which is currently 14%pa) instead of obsessing over current CPI prints, especially when these are amplified by supply shocks. I believe #Fed knows this and will keep process smooth and accommodating.
4/4 Getting M3 slowly back to 5-7% pa would automatically adjust #CPI growth to desirable levels. For more detail, check out my article below. fallacyalarm.substack.com/p/inflation-wo…

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More from @fallacyalarm

Fallacy Alarm Profile picture
Apr 28
1/4 here is how bankrupt 🇩🇪 is: in '21, 🇩🇪 employees paid €93bn in federal salary tax and the govt injected a €107bn subsidy into the pension system (which is completely unfunded) keep current pension payments going.
2/4 which means that the entire tax of 🇩🇪 employees was not enough to cover the bills for the retires although pension contribution is at a stunning 19% of salary. and this will even get worse over time: today 1 in 5 germans is >65. by 2030 it will be 1 in 4, by 2050 1 in 3.
3/4 on top of that, pensions are dynamic, i.e. linked to wage growth. solid 6% increase in 2022. a zero discount rate perpetually growing completely unfunded liability while real economic capacity shrinks bundesregierung.de/breg-en/news/p…
Read 4 tweets
Fallacy Alarm Profile picture
Mar 26
1/6 Yield curve inversion talk is heating up on Fintwit, so I’m gonna share my 2c. Yes, it may be a recession indicator, but it's important to understand the mechanics. Typically long duration bonds carry a risk premium over short duration bonds bc expected volatility is higher.
2/6 So why would an investor demand more yield on 5y than 20y? Only makes sense if they expect falling interest rates bc then it's attractive to secure long duration cash flows today. But why does an investor expect falling interest rates? 2 possibilities in inflation context:
3/6 a) They expect falling real interest rates, i.e. falling productivity of money as an asset. This is a function of money supply. Money printing has a curve flattening effect in this regard.
Read 7 tweets
Fallacy Alarm Profile picture
Mar 2
Couple of reasons why $TSLA is the best asset to own right now.
1) Before considering any news flow, the stock is trading at a 50% discount to fair value purely based on EPS growth valuation.
2a) Recent company news flow is incredibly bullish, not just Berlin and Austin will finally open in the coming weeks, the expansion of Giga Shanghai will be huge driver for production and deliveries for years to come. reuters.com/business/autos…
2b) Earnings call comment regarding postponing new models to maximize output incredibly bullish cross-read on demand and optimism regarding FSD. Huge production and delivery beats in the coming years in the making!
Read 9 tweets
Fallacy Alarm Profile picture
Feb 17
1/3 the economic policy uncertainty index (EPU) has almost reached historical peaks in dec'21 and jan'22. it is compiled based on newspaper articles and searches them for frequency of certain trigger words. fred.stlouisfed.org/series/USEPUIN…
2/3 it has peaked near tight presidential elections, wars, the financial crisis and fiscal battles such as debt ceiling debates. Check out the details from its creators here: policyuncertainty.com/media/BakerBlo…
3/3 have spikes historically been good for stock market returns? the table below shows the highest EPU levels since 1985 and what the next 12 months $spx returns were.
Read 4 tweets
Fallacy Alarm Profile picture
Feb 13
1/9 don't think so much about #jeromepowell, check out the deleveraging happening in the option chain! here is why:
2/9 options gained enormous popularity in 20/21, especially in retail, which peaked in the meme stock mania in Jan/Feb 21. this was fueled by the monetary and fiscal stimulus which created a rare case of a bull mkt with a sustained vix >20, ideal setup for momentum strategies.
3/9 options are leveraged bets, they can fuel bull runs, but also exacerbate corrections once the deleveraging process starts. last year, total option vol has been 2x the '19 level in terms of # of contracts traded.
Read 9 tweets
Fallacy Alarm Profile picture
Feb 9
1/7 How does $TSLA's capex compare to $MSFT, $AAPL, $META, $NVDA, $AMZN & $GOOG? @DoctorJack16 @RonMadison11 @MatchasmMatt @EmmetPeppers @TeslaLarry @TSLAFanMtl @ValueAnalyst1 @ICannot_Enough @freshjiva @Ali_Tesla585 @KanaLadoux @1stPrincipleInv @forwardcap @farzyness Image
2/7 Tesla is catching up fast to capital efficiency king like $AAPL and $NVDA, which in my view is the result of their build vs. buy strategy, the agile-based internal coordination and their cash flow optimized mgmt focus.
3/7 Build vs. Buy: Despite its size, $TSLA still operates like a start-up. When they need something, they build it. They barely do any M&A. They even have their own enterprise software, perhaps they will even license that to others at some point? Image
Read 7 tweets

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