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Michael Kao Profile picture
@UrbanKaoboy
May 24 • 12 tweets • 5 min read Twitter logo Read on Twitter
Musings of the Day, 5/24/23:

This is all brave talk for the BOE -- before it has to plug another hole in the Gilt market and sacrifice GBP again.

#USDWreckingBall

twitter.com/i/web/status/1… Image
MbS warning/blaming speculators yesterday for Oil’s weakness reminds me of Mahathir’s similar accusation of speculators when the Malaysian Ringitt devalued in Summer’97 (which cascaded into the Asian Contagion of ‘98).

It’s a tell on underlying MACRO WEAKNESS.

@BurggrabenH
I'm gonna tell you Oil Bulls right now:

This move is a FADE.

OPEC+ will have to cut again before the year is over, imho.

@BurggrabenH
My first job upon joining Canyon in 1997 was to help hedge the overall portfolio amidst the unfolding currency crisis (Asian Contagion 1.0).

I think we are on the precipice of Asian Contagion 2.0.

Caveat Emptor -- especially for PROCYCLICAL PLAYS.
I doubled up on a tail hedge yesterday after putting out this thought. It's going to be an interesting couple weeks.
It's gonna take more than "ouchie" talk to keep Oil levitated in the short-term, folks.

I said the intraday Oil Spike was a FADE earlier, and I'll say it again. Consider yourselves warned.

@BurggrabenH Image
Not convinced about Demand Destruction for PROCYCLICAL PLAYS?

Maybe take a look at a commodity that has been the BIGGEST beneficiary of the Gretaverse AND has no OPEC+ to artificially constrain supply:

COPPER Image
🫢And DXY not even 104 yet... Image
Asian Contagion 2.0 Watch

The only reason why DXY is still below 104 is because EUR has not capitulated...yet.

@SantiagoAuFund @BurggrabenH Image
Thank you to @BurggrabenH, Lakshmi Sreekumar of Cap One, and the management team of my PermianCo for having a lively discussion about OIL.

I am working on an Oil Deep Dive Update. Stay tuned for a Substack drop soon.
As we approach an OPEC+ meeting where there is uneven compliance (esp. with Russia) to recent cuts, recall PTJ's 1987 "Trader" movie quote:

“...anytime you try to get 13 people to agree to anything...wild horses couldn’t keep from betting against them succeeding in that.”
And here it is:

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More from @UrbanKaoboy

Michael Kao Profile picture
May 25
Musings of the Day, 5/25/23:

If you haven't read my latest Oil piece, please take a look as it has macro implications.

I said yesterday's spike (or any spike right now) was a FADE. See chart below.

Image
Because swallowing up one of your only competitors after they implode is not anti-competitive?

I have no solution for this, but this made me think that the bank resolution process needs to be revamped to maybe divvy up assets amongst smaller players?

In honor of my Goldman Sachs Commodity Index (GSCI) trading roots and what I had to do every Sunday night as a junior trader at 22, I give you a quick visual tour of the major commodity groups to assess the current picture of macro health.

urbankaoboy.com/p/re-macro-com…
Read 7 tweets
Michael Kao Profile picture
May 25
I normally like to drop my Substacks over the weekend, but because I'm heading to BottleRock Napa tomorrow for the long weekend, here it is NOW.

Re: Oil-Thesis Recap & The Supply/Demand Singularity Revisited.

urbankaoboy.com/p/re-oil-deep-…
I want to thank the management team of my PermianCo, Lakshmi Sreekumar of Capital One, and Alexander Stahel of @BurggrabenH for their invaluable insights and work. They’re the ones doing the real work — I am merely synthesizing.
Re: USD Wrecking Ball, consider what I said above, esp. now that Germany is in recession:

The Fed doesn’t have to hike at all anymore for a USD Wrecking Ball to wreak havoc; all it has to do is pause and wait for other central banks to wilt first and out-dove the Fed. twitter.com/i/web/status/1… Image
Read 7 tweets
Michael Kao Profile picture
May 23
Musings of the Day, 5/23/23:

Home-Grown is the New Normal.

Hopefully, the asymmetric and unidirectional tech transfer to China comes to a screeching halt.

wsj.com/articles/china…
Little do people know that this is all because we have passed the event horizon of a supermassive black hole and time has slowed to a crawl.

H/t DB for the chart. Image
The end of China’s Demographic Dividend is STRUCTURALLY INFLATIONARY, and now this backlash against China’s IP theft accelerates that trend.

The countervailing force in the short-term, however, will be CNY DEVALUATION.

substack.com/notes/post/p-1…
Read 11 tweets
Michael Kao Profile picture
Apr 3
Musings of the Day, 4/3/23:

Listening to Cramer gush about China's recovery because of strength in Macau results makes me think China is getting even closer to CNY devaluation:

1. Caixin PMI yesterday was terrible.
2. PBOC CNY printer go BRRR.

This is BEFORE effects of OPEC+ cuts being felt in the market obviously.

HIGHER FOR LONGERERERER.
BREIT gated for months now, constituting a A/L Mismatch in the Shadow Banking sector.

Think of it as a "financial bottleneck," and one thing I know about bottlenecks is that they don't go away easily -- instead they get pushed to OTHER PLACES.

Read 6 tweets
Michael Kao Profile picture
Apr 3
Kaoboy Musings -- Re: Oil/Inflation/USD-Clash of the Titans. urbankaoboy.substack.com/p/re-oilinflat…
The Great China Re-Opening...or NOT.

This is after a 6T CNY stimmy in Jan!

"Something wicked this way comes."

@BurggrabenH
As mentioned in my post above, this literally is a replay of the scenario I outlined in 2021 about Oil’s ascendancy leading to the USD Wrecking Ball.
Read 10 tweets
Michael Kao Profile picture
Apr 2
Musings of the Day, 4/2/23:

Damn, what does it say about the zeitgeist that my April Fool's joke was much more well-received than what I ACTUALLY believe? 😂🤪
Wow. This was unexpected.

As I've been saying on the matter of Oil, I'd much rather be wrong and make $. As always, the devil's in the details, so let's see what happens.

A lot of folks make a big deal out of settlement of Oil trade in non-USD when it’s actually been happening for DECADES.

The key to watch for is INVOICING AND SETTLEMENT in non-USD, and @anasalhajji does a great job explaining why that is unlikely.
Read 18 tweets

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