jeroen blokland Profile picture
Nov 3, 2022 5 tweets 4 min read Read on X
On the #FederalReserve hawkish pivot 1/n

It's about the destination now
Forget the speed of rate hikes
Focus on the terminal rate and
how long the Fed must stay there

= how much cumulative pain is needed to crush #inflation
1/n
Powell: 'If we were to overtighten, we could use our tools to support the economy later on.'

Or in other words, we are willing to risk a #recession to get the 'job done' and push #inflation to target.
1/n
Interesting end to the presser with one journalist stating #equities were up after #FOMC - which was not true -

Powell repeated virtually all hawkish sentences he had made during the press conference. He cares about (tighter) financial conditions, not about equities.
1/n
Equities and risky assets fell, but again there was no capitulation. Death by a thousand cuts.
Yet, we are now really close to a significant and broad-based decline in #inflation numbers, meaning another pivot dream is already in the making.

Join @true_insights_ to learn how to position for this
true-insights.net

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More from @jsblokland

Nov 17, 2022
It's alarming to see the Dutch government doing absolutely nothing to get the #Groningen #NaturalGas field going again.
A thread
1/6
To be clear, the Dutch government made a big mistake by closing it down in the first place.

And now it has become impossible to move people even if it would come up with ‘an offer you can't resist.’

Understandable if people say ‘no.’
2/6
But the Dutch government can immediately start investing in repair/strengthening/restoration

This would allow some exploration but, more importantly, at least create a longer-term optionality. 3/6
Read 6 tweets
Nov 16, 2022
Mortgage rates are screaming lower house prices ahead! 1/5

You asked, we answered. In a follow-up on the chart below, which understandably raises a few questions, we took an in-depth look at current US house prices vs. mortgage rates.
In addition to comparing annual nominal house price levels and mortgage rates since 1986, we also looked at:
- nominal MONTHLY data
- REAL monthly data
- both since 1971 (which includes a period of rising interest rates)
- other factors that forecast US house prices.

2/5
Mortgage rates are screaming lower house prices ahead 3/5

The relationship between REAL house prices and mortgage rates is weaker than nominal prices. However, the last eight months (orange oval) remain the clear outliers.

Houses are expensive relative to mortgage rates.
Read 5 tweets
Nov 15, 2022
The #federalreserve pivot dream continues! 1/4

US year-on-year producer price #inflation came in significantly below expectations in October.

On a monthly basis, core #PPI did not rise at all. Image
The #federalreserve pivot dream continues! 2/4

The producer price #inflation 'surprise' is less of a surprise if you take #China's #PPI into account.

Chinese producer prices are down(!) from a year ago!
And the correlation with US producer prices is high. Image
The #federalreserve pivot dream continues! 3/4

#China producer prices also signal a massive decline in Eurozone producer price #inflation. Image
Read 4 tweets
Oct 11, 2022
#Duration works both ways!
#Austria's '100-year' bond, maturing in 2120, with a duration of 46 years, is down a whopping 72% since late 2020 when global yields bottomed.
short thread 1/9
This also answers the many questions about why the value of (UK) #liability-driven investment funds, used by pension funds to match the #duration of their #liabilities, has plummeted. 2/9
Theoretically, since pension fund #liabilities and #assets both drop when #yields rise - it is not called liability matching for nothing - there shouldn't be a problem, right? 3/9
Read 9 tweets
Aug 21, 2022
Economists ALWAYS believe #inflation will quickly fall to 2%.

Forecasting inflation is incredibly hard!

It is impacted by demographics, supply chains, productivity, war, monetary policy, globalization, and luck

Too many factors to correctly ‘model.’

chart via @biancoresearch Image
An earlier note to our clients showed that since 1950 there were just two major moves in #inflation: one up from 1955 until 1980, and one down from 1980 until last year. Before that, inflation was all over the place and more often negative. The last 70 years may be the outlier. Image
Maybe we don't understand #inflation after all.
true-insights.net/maybe-we-dont-…
Read 4 tweets
Aug 16, 2022
Valuation thread 1/7

The S&P 500 Index is up 18% from the low in mid June.
Valuation thread 2/7

#Earnings-per-share are up less than 2% since then and guidance has become significantly more cautious.
Valuation thread 3/7

As a result, the realized PE ratio of the S&P 500 Index has increased to a lofty 21. The forward PE has risen to 19.
Read 8 tweets

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