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Capital Flows Profile picture
@Globalflows
Aug 12 • 20 tweets • 7 min read • Read on X
The price action in stocks continues to confirm the macro regime I've laid out

1)The Credit Cycle is in full swing, causing melt-up mode
2)Inflation risk is greater than recession risk

All of this is coming to the macro end game moment where volatility shocks everyone 🧵👇
On the CPI print today, we are seeing stocks UP and bonds DOWN. Why? because we need to unwind all the bears who thought a single NFP print meant a recession.

As I laid out earlier this week, the play continues to be stocks bidding and bonds at risk of selling off
When stocks are bidding and bonds are selling, it is an indication that INFLATION RISK IS GREATER THAN RECESSION RISK. Everything for this idea was laid out in the interest rate report:
But why is there inflation? It's not because of tariffs. Tariffs are maybe 10-15% of the picture that is causing misdirection. The Fed and every other central banker are saying that they are "looking through" inflation data cause its from tariffs.

This is gross incompetence
This isn't just in the US. Germany pushed through a massive spending bill, the UK has inflation ticking up, and yields in Japan are blowing through the roof.

Everything is pointing to long end yields moving higher and no one wants to acknowledge it cause their so afraid of a recession.
German yields just made a new cycle high. you think there is a recession when german yields are making highs? Cmon anon Image
The inflation and rise in long end yields isnt driven by tariffs, this is 100% about the credit cycle.

Why else do you think that MoM services inflation just came in above expectations? THis is not tariff driven. It is very simple, this is driven by growth and credit increasing in the system.Image
Inflation swaps have been rising since well BEFORE Trump took office or even floated the idea of tariffs. Why? because this isnt about tariffs. Its about HOW MUCH money is in the system. Image
The 10s30s yield curves have been steepening across the US, Germany, and UK, indicating that nominal GDP expectations are RISING. This is the opposite you would see in a recession. Image
If you are trying to understand the mechanics of these interest rate moves there is an entire free breakdown I recorded here with a connected playbook:
People think a recession is a higher probability but then the Russell rallies 225bps on the day as 10s30s steepening. This indicates that the companies with the greatest sensitivity to a recession are doing the OPPOSITE of what theyd do in a recession. On top of this 10s30s is showing higher nominal GDP.Image
Risk assets are going to keep melting up as long the Fed refuses to hike rates in the face of rising inflation data. The money in the financial system is already spilling over into the real economy. When equity valuations are this high (p/s stdv bands below), it shows theres a ton of money in the system that will begin moving into the inflation complex.Image
So we remain in melt up mode where stocks are skewed to the upside and bonds are skewed to the downside. And like I already laid out, it doesnt matter who the Fed chair is, if they cut rates into this environment, the long will blow out to push them back into line.

Image
If they continue to be dovish into this type of regime, it will cause an issue with the currency and ALL assets denominated in that currency. This means people could begin selling USD denominated assets to exit similar to how earlier this year the DXY sold off with equities (Bitcoin sold off too). No one is talking about that cause it goes against their traditional recession cycle narrative.
I have laid out all of the signals in a clear redundancy planning framework here:
None of this ends well because every credit cycle where the central bank makes a policy error sows the seeds of its own demise. We are in the process of the melt up but there will be a time to exit the train.
When the regime shifts, I will publish a report on it here: capitalflowsresearch.com

For now, I am HOLDING my long ES trade x.com/Globalflows/st…
HOLDING LONG NIKKEI TRADE: (banking sector in japan is going wild rn )
HOLDING BTC LONG
We are entering a period of time where thinking clearly pays a premium. The europhia we are and WILL see will test the resolve of even the best. If you can think clearly and execute flawlessly, you will win.

Greatness awaits frens Image

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More from @Globalflows

Capital Flows Profile picture
Aug 11
Memecoins, Crypto, and Macro Liquidity: 🧵

We are seeing capital move out the risk curve and buy assets that have excessive attention due to the changes in cultural consumption patterns

All of these flows are connected
I have already laid out how Bitcoin is a release valve for macro liquidity. This is HOW you frame the drivers for predicting the price of Bitcoin
This is why I have been long BTC and have a bullish view of risk assets broadly.
Read 12 tweets
Capital Flows Profile picture
Aug 11
As we move into the CPI print this week, flows are going to adjust for higher inflation risk

The MAIN idea for the next month: Inflation Risk Is GREATER Than Recession Risk

This is a full breakdown of the context and flows into inflation prints this week 🧵👇
Consensus is expecting a 10bps acceleration in core CPI. What people continue to get wrong is that they think inflation is only tariff-driven and thereby transitory. This is creating a gap in markets where the Fed and other people are "looking through" inflation. Image
This action of "looking through" inflation and labeling it transitory is in itself an incorrect interpretation of the underlying dynamics AND increases the likelihood of inflation turning into a bigger problem.

All of us know that core goods have been accelerating for months nowImage
Read 18 tweets
Capital Flows Profile picture
Aug 7
The next move in interest rates will be a direct result of inflation risk and the credit cycle

Here is a full breakdown of WHERE we are with interest rates and whether cuts/hikes are bullish/bearish for equities and Bitcoin

🧵👇
The first point to understand is that rate cuts are not inherently bullish or bearish for risk assets. Anyone saying this is using recency/confirmation bias.

I laid out in this video that we can have cuts or hikes by the Fed and risk assets can move in either direction. What determines this? How the rate cuts and hikes related to underlying growth and inflation.

x.com/Globalflows/st…
So in simple terms, if you know what the Fed is going AND where growth and inflation is, then you can know if equities and Bitcoin are likely to move higher/lower.
Read 14 tweets
Capital Flows Profile picture
Aug 6
Everyone expects the next Fed chair to be extremely dovish, which is setting up the entire market and economy for a massive disappointment

If the Fed cuts rates into accelerating inflation prints, it will create a significant risk for markets and the underlying economy 🧵🧵 Image
While financial news only focuses on the 1st order effects of the Fed and the economy, the market is AWLAYS pricing the full distribution of 2nd and 3rd order effects.

This is why 1 year inflation swaps are at 2021 levels. They are pricing the risk of higher inflation and indicating that the Fed's stance is too accommodative.Image
We are seeing the same inverted inflation swap curve as we saw when we were in 2021 and 2022. This indicates that inflation is at risk of accelerating, and an imbalance currently exists. Image
Read 18 tweets
Capital Flows Profile picture
Aug 6
The Macro Regime, Credit Cycle, and Stance of the Fed are in the process of being tested

As we approach CPI next week, the flows of capital will show the moment of truth for everyone about WHEN a recession will happen and HOW HIGH interest rates can actually go

🧵👇
Over the last 3 years we have seen shocks to the US economy and every single time, the economy says the same thing: Growth is resilient, the consumer is fine, and the music is still playing.

The historic rise in interest rates due to the Fed hiking? Not a problem. The US economy put up some of the largest real GDP numbers in 2023 following the hiking cycle.Image
Tariff shock in Q1? The consumer is still fine and spending money every single day. GDP barely turned negative and it was only because of the import/export data which promptly rebounded. Image
Read 19 tweets
Capital Flows Profile picture
Aug 4
As we have questions circling about how valid US data is, how much recession risk exists, and if Powell is even doing the right thing, the most important starting point for managing risk is by asking

1) What is currently priced by markets?
2) Is this likely to happen?

🧵👇
Right now, we are seeing a lot of people use the language of "well, everyone I know isn't talking about x" or "everyone on Twitter doesn't even recognize y"
The problem with this is that sentiment isnt a strategy. A strategy is knowing what actual MONEY in the market is betting on.

For example, the forward curve is pricing a 90% probability of a cut. This is a reflection of actual buying and selling by MONEY in the market as opposed to a social media algorithm trying to get the most views.Image
Read 14 tweets

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