Y? US Tariff bill coming due in 3q … at least the mrkt believes that after NFP print. No major econ is creating enough credit fast enough to boost nominal gdp. So $BTC tests $100k, $ETH tests $3k. Come see my @WebX_Asia Tokyo keynote Aug 25 for more info. Back to the beach.
Some of y'all are running scurred, but I LOVE TARIFFS, some chart porn to understand why.
Global imbalances will be corrected, and the pain papered over with printed money, which is good for $BTC.
The $ is weakening alongside foreigners selling US tech stocks and bringing money home. This is good for $BTC and gold over medium term.
We need #China to ease by allowing domestic credit creation to flow offshore via a weakening $CNY. With a 65% effective tariffed levied, China could respond by allowing $CNY to weaken past 8.00
Let's play "Hide the Bailout", it's my fav game because politics is all about misdirection. Everyone scrutinises every line of the Fed balance sheet, so they can't hide them there anymore. Now they hide them on the FDIC's balance sheet.
Thx NDR's Joe Kalish for helping me find out where the FDIC is hiding the money lent to the likes of JPM to gobble up bankrupt regional banks like First Republic.
The FDIC is a direct arm of the USG. So if they need money to fund loans to TBTF banks, it must be financed by Grandma Yellen at the Treasury. When the banks start going bust again, look here for a record of the bailout.
Putting aside the Hamas v. Israel two-sided tragedy, the action to watch is over in north east Asia. Both China and Japan are committed to weakening their currencies and it will lead to disaster for US Treasury bond hodlers aka muppets.
As $JPY weakens, 10-yr yields rise. Jp can manage the speed of the devaluation by selling down its holdings of treasuries which is putting upwards pressure on yields.
If Jp weakens, Ch must as well as they compete for global exports. $CNH is ~10% overvalued vs. JPY based on historical recent trends.
Why do I love these markets right now when yields are screaming higher?
Bank models have no concept of a bear steepener occurring. Take a look at the top right quadrant of historical interest rate regimes.
It's basically empty.
If the banks' models don't have it, then it is considered not a possible outcome and traders don't hedge.
As the 2s30s curve steepens along side 2yr and 30yr rates rising, fixed income trading desks start bleeding money and can't figure out why.
Due to the leverage and non-linear risks embedded in banks' portfolios, they will be selling bonds or paying fixed on IRS as rates rise. More selling, begets more selling, which is no bueno for bond prices.
Follow the money, a lot of noise is being made about possible China capital flight.
Something is going on because $CNY has depreciated almost 15% YTD.
I asked Andrew Collier a china researcher what the best metric would be to quantify possible capital flight. He said to look at the difference between China intl net export earnings and the official foreign reserves.
YTD China foreign reserves increased +$32.407bn, but total next exports are +$553.253bn, that means there is $520.846bn in money that has left China to do something ???? 🧐🧐🧐🧐🧐🧐
1/ A longer essay coming soon on my take. This $JPM / $FRC deal means the US regulators decided to nationalise the banking system.
2/ The 8 TBTF banks are effectively nationalised bc they have a govt gtee on their entire deposit base. They will not be allowed to fail regardless of decisions they make. Socialised losses, privatised gains, it's a great deal but...
3/ When called upon the 8 TBTF banks must absorb their shitty cousins who couldn't handle the rough and tumble free market. The prodigal childrens' equity holders will get a 0 first, but the depositors will find a new home in a safe TBTF bank.