Expert in fixed income, equity, and derivatives of both. Started at "Liars Poker" Salomon, last job as head of long duration (US Treasurys) for Morgan Stanley.
Feb 20 • 6 tweets • 2 min read
To be able to have reasonable forward view now, must understand how the economy is evolving since the massive fiscal stimulus starting with covid made Personal Consumption the main factor, must consider Personal Consumption Expenditure first.
Note the year over year % change is in excess of per covid, and the annual change in level is around 1 trillion a year.
Feb 11 • 7 tweets • 1 min read
Should be kept in mind that SP500 is only a few ricks above the 2021 high, yet NGDP has expanded an additional 3 trillion since that point. Throughout 2022 and parts of 2023 the markets latched onto a monetary cycle meme that expected the opposite.
Therefore SP500 should further break free of this error of Fed monetary cycling and reflect not only that 3 trillion NGDP growth from Jan 2022, but also anticipate likely more NGDP growth. 6000? 7000?
Jan 29 • 9 tweets • 2 min read
as I babble about QRA - what experience or knowledge do I have to allow me to say such outrageous things? In later half of 1980s I was in a meeting with E Craig (Sali) and my boss at the time John to discuss the upcoming QR.
It went like this.
"John we will fund all the US Treasurys you wish to buy along with us in the auctions" turning to me, he asked "Is this so?" "Yes it is so"
John went silent and E Craig was starting to give Bob, the salesguy, dirty looks.
He went silent for a long time.
Jan 27 • 6 tweets • 1 min read
The importance of monetary games. As Fed is clearly not data dependent now in terms of here and now, but only forward space, then "games" are developed to replace the here and now bustle and fill the void of no longer present reaction function.
These games come in series and usually based on some meme or the meme with highest holding in the popular view. The are even attempts to author the pop meme for trading gain.
Jan 23 • 4 tweets • 1 min read
well guess this is where it has to go. using mortgage 30 year concventional to peg down a US Treas 10y year, and then a NGDP last 6 months to define a neutral Fed Funds rate - heck use 5.4% - gonna figure out how to do an affine curve model.
then figure the risk premium. do same procedure back for 30 years, see what I come up with.
if seems robust, that is the term premium. curious what it says about forward views on econ. also see where equity
Jan 21 • 5 tweets • 1 min read
In markets, the most dangerous are those fools who are far smarter than I and are expert traders. Just they feel they have to have a brilliant macro or monetary explanations as they can not abide being but brilliant traders. Dangerous if you do not do exactly their trades...
....all you get is their loony macro theories. Then they can say - I made alot of money with those theories so beats me you lost money. "The easy money has been made" at exactly time and level of max (so far) US Treas 10 years market rate.
Jan 19 • 6 tweets • 1 min read
As far as I can figure out, to see reason in what is obviously a self damaging national policy, the current immigration policy (or lack of policy) is a brazen attempt to revive 3/5th a man clause in the US Constitution. It is to swell or protect number of House seats in Dem area
Otherwise the policy is senseless. So if a Dem, you welcome (at first) these never to be citizens and voters to areas Iike NE urban areas, or mid-west like Chicago, or LA and NW. Sanctuary and all that.
Jan 17 • 6 tweets • 1 min read
Bonds - risk free bonds - are only of extra value if they have expectations of neg correlation to equity which in turn is because bonds are insurance for an adverse business cycle, otherwise they price to inflation expectations.
But if there is no business cycle like now, then bonds will not be rich versus the pricing to inflation.
Jan 17 • 4 tweets • 1 min read
The deficit understates the size of the fiscal stimulus as it doesn't depict the redistribution of the federal spend. Payouts were mostly in the form of direct 'helicopter' money while taxation was from same sources as before covid
This means the deficit being net understates the power/amount of the stimulus in terms of consumption, wages, and savings. Net, the fiscal impulse was as much as 3.5 trillion
Jan 16 • 5 tweets • 1 min read
for now over a 8 quarters I have been ridiculed, ignored, or blocked. Yet for 8 quarters I have been right, not because of brilliance but because I use current data and ignore the Fed forward guidance and forward monitoring.
i think almost all cannot afford to do what I do.
they cannot afford doing so as it means realizing what a con this current Fed is now. It means spending some time and learning Neo Wicksell policy. They must read Woodford Jackson Hole 2012. They must give up their punditry as is all Fed Reserve centric.
Jan 16 • 7 tweets • 3 min read
It seems everyone is using ideas of Federal Reserve flippantly and in error.
And equally so, ignoring the fiscal (federal government) input to the US economy.
It is time to consider what exactly is the Federal Reserve doing to the economy, and what is the federal government doing
It is readily done to break these flows down with great accuracy using Fed Reserve H8 tables provided weekly, and monthly BEA data. Data is disaggrated to daily and then using M2 and M2 with velocity, brought to current values.
Jan 14 • 5 tweets • 1 min read
The housing market has been the first mover to show the Fed policy changes. If the fiscal is usual march under the evolving of Congess "purse strings" role, then monetary policy will dominate.
So, the new home sector will be the first to show monetary tightening. And the set back in new homes has been expected since Powell announced the Fed tightening Jan 2022
Jan 13 • 7 tweets • 2 min read
the size of the fiscal response to the Covid emergency cannot be overlooked. it was off a size that is similar to WWII fiscal shaping of the US economy. the Fed was not even mentioned for close to 20 years after WWII and then as an irritant in the Keynesian promises.
the Treas Fed Accord of 1951 was required to just let the Fed breath . it was a fiscal dominant world until Volcker 1979. this was the rattles of the 20% plus of NGDP spend and then more starting in WWII. why do folks seek to ignore this reality given the covid response…
Jan 12 • 18 tweets • 3 min read
Was asked why JPM earnings was a marker? The ern were as they have always been since 10/22, so now 6th earnings that are surprises to the upside. Ever since Dimon warned in Jan 22, no doubt getting a talking point page from Michele Smith, every analysts
....carries on being in synced with the Fed authored meme tabled QI 2022 that a large raise in Fed Funds would result in a recession, raise unemployment. Was the price to pay to contain inflation. This was the source of Dimon's stern words on Jan 22 and was repeated by many CEO
Jan 8 • 5 tweets • 2 min read
There can be little debate that Fed Funds have not been tight and at most are now approaching neutral - reality have been at ease for almost a decade.
so if Fed Funds are not an issue, the inputs which form NGDP (and thereby employment) are US federal government net spend, and the Federal Reserve limiting or tightening credit correction. The "fiscal impulse" and the "monetary impulse".
Dec 31, 2023 • 12 tweets • 2 min read
Come across in many places the notion of market based ease, the opposite of market tightening. Usually both are offered up as to the efficacy of the Fed as otherwise there is no signs of the Fed. Reality is that this market based idea of ease or tighten proves there is no Fed.
Prior to the current market based tightening, the was the market based tightening - "near steepener", USTreasury 10 year rise to drop the mortgage market, all based upon - supposedly- on Fed actions or Delphic promises of the Fed action.
Dec 28, 2023 • 15 tweets • 5 min read
This is a repeat of The Monetary Frontier
on how the US Treasury yield curve sends false signals out to the rote economist and pundits as the yield curve in central to all probability of a recession occurring models.themonetaryfrontier.substack.com/p/the-us-treas…
(links to the NY Fed model in The Monetary Frontier.
Dec 28, 2023 • 8 tweets • 2 min read
That many are starting to think US Treasurys and equity will always have a positive correlation, both being partners in inane phrase 'risk on, risk off' trading, shows to what level the Fed has corrupted or destroyed proce discovery. I am afraid this Fed will bring us to knees.
And has nothing to do with tightening or ease or inflation (Fed has just perhaps normalized Fed Funds and has no role in inflation now), but by destroying the vital negative correlation between risky and risk free assets.
Dec 26, 2023 • 5 tweets • 1 min read
It is important that one discovers or re-discovers the risk free yield curve. That almost all confuses the US Treasury yield curve with the RFYC is the main reason most blew it ( and continue to blow it) in 2023 recession econ call. @theStalwart @stevehouf @carmenarmen
In recent #Oddlots @AnnaEconomist has an extraordinary interview with full support from Tracy (and seemingly polite questions considering the obvious from Joe) where she goes on and on explaining why her tribal call for a recession was really right given her use of "state of the
Dec 25, 2023 • 4 tweets • 2 min read
this chart also shows how near useless it is to call for a recession or a monetary "cycle" given there are really only 3 data points since 1982. and an argument can be made 2008 was an exogenous shock, and 2020 obviously was an exogenous shock. so makes only 2 data points
this also shows what the Fed does - it is a trim tab and the heavy lifting is all done by fiscal. the Fed only can serve to solve immediate liquidity crisis by Bagehot remedies and by sharp quick raise or lowering of Fed Funds to be normalized ASAP
Dec 23, 2023 • 4 tweets • 1 min read
Well a 5% rally by 12 31 23 is doable. Yes unlikely but doable, just for fun. 4750 ain't 5000 but I know no one with a reasonable rational structural view that anticipated such levels. I am satisfied with my contribution to the public square of fintwit 23.
And who knows. Maybe 25%. If I have done anything useful it is to at least raise sincere thoughtful questions on the Fed centric meme. Noted one Fed expert - and he is expert - now calling for 6000 12/31/24. I take that as a compliment.