1- #ConnectingTheDots Lots of focus on what the Fed will do next, and whether inflation comes down

That is the WRONG debate

Yes, inflation has PEAKED. Yes, it will come DOWN

But why is the 10-Year is UP, despite declining inflation expectations?
2- Industrial data is CRATERING - Yesterday's US Composite PMI at 45, fastest contraction in 13 years

Yet, COMMODITIES and OIL trend UP

If US PMIs are at 45 and Oil is at 95 $/bbl, where will Oil be when the cycle turns UP again?
3- Add to that a ballooning US deficit in years to come

Who's gonna BUY all those bonds issued to finance it?

Banks maxed out, China/Japan reduce, who's left?
4- Conclusion: The REAL debate is about the dramatic structural changes to the economy

They will still be there, whatever Powell says at JACKSON HOLE, and whether it's a 50 or 75bps hike next

End.

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More from @fkronawitter1

Aug 25
1- #ConnectingTheDots Checking in on #Housing following recent data

Question 1: What will happen to HOUSE PRICES?

Let's keep things simple - there is a RECORD number of houses under construction... Image
2- ...the SUPPLY of new homes is near a RECORD... Image
3- ...affordability is tracking very POORLY... Image
Read 10 tweets
Jul 20
1- Two more #Housing datapoints out today. June home sales much below expectations with 5.12m vs 5.35m consensus
2- And mortgage demand, which leads home sales, at lowest level in 22 years cnbc.com/2022/06/08/mor…
3- #Housing is the "engine" of the US economy. If the engine is slowing very hard, so does the rest of the train!
Read 4 tweets
Jul 18
1- #Germany #Ukraine Germany has made huge strategic mistakes, some explainable, some much less so, like advancing Nord Stream 2 in 2015, when the Donbass was already at war and Putin had shot down a passenger plane bbc.co.uk/news/world-eur…
2- As a fellow German myself, I know that - true to prejudice - we are good at order and precision. This explains good German engineering. The flipside is an inflexible mind. This makes us vulnerable to dogmas

Two dogmas need to die in Germany’s energy crisis
3- The first is Nuclear. The Bundestag decided not to extend the 3 remaining plants, which generate ~6% of Germany’s power. One of them is ISAR 2, which is not far from Munich where I grew up, and Germany’s largest nuclear power plant preussenelektra.de/de/unsere-kraf…
Read 12 tweets
Jul 15
1- #Connectingthedots Today the NY Fed survey came out, which surveys local manufacturing businesses. The headline number, which is based on *current* view, looks benign. So "all is good"? Image
2- That's the lazy view - there is plenty more detail! Businesses are also asked about their views 6 months from now, and that outlook is dire:

New Orders on a mult-year low indicate very weak business going forward: Image
3- Prices paid drop visibly. This has historically been a lead indicator for CPI. It corroborates my view that inflation will likely come down markedly soon Image
Read 5 tweets
Jun 17
Why today's economy and markets most closely resemble 1974 (1/5)
In the late 1960s, the Vietnam War strained America's finances. In order to to maintain it's concurrent spending programs, the US expanded its monetary base. Today's parallel -> "war" against Covid and stimulus cheques (2/5)
The stock market responded to excess money with a boom in growth stocks which peaked in 1972. Today's parallel -> Nasdaq/Crypto (3/5) Source: http://economics-files.pomona.edu/GarySmith/papers/N
Read 6 tweets
Jun 14
Why we are likely headed for a hard landing (1/5)
6%+ mortgage rates have pushed affordability to stratospheric levels. At a time of slowing of economic activity and declining asset prices, this likely slows Housing close to a standstill - who will be willing to overstretch themselves into that context? (2/5)
As @sidprabhu points out here, if housing activity were to return to 2008 levels, that would reduce GDP by 2% already (3/5)
Read 6 tweets

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