Since 2021

Bitcoin

59k to 59k

Gold

1750 to 2500

*Last ten years - Gold’s largest drawdown? 21% vs. Bitcoin -82%, -58%, -65%, -75%.

*A store of wealth holds its value. It doesn’t lose half its value or more every few years. No human being can put large portions of their personal wealth in an asset that drops 50-75% every few years. Gold is a colossal reservoir of liquidity, approaching a $17T market vs. bitcoin at $1.5T.

Chart from @Maverick_Equity

File under another multipolar world headline...

*MAERSK TELLS ALL ITS CONTAINER SHIPS TO PAUSE RED SEA VOYAGES A large percentage of sea-borne container traffic goes through the Red Sea. Even cargo from Shanghai to New York goes through the Red Sea. All the cargo that goes from China to Europe goes through the Red Sea. Very few go around Africa since it's more costly. Halting this traffic has the potential to disrupt a lot of cargo traffic...

With US Treasuries at 5%, Bank of America is close to 45x levered, at 6-7% infinitely levered.


For all of 2008, as Lehman was failing, the value of their core (safety) capital (US Treasuries) was moving higher, NOT lower.

*As interest rates move down, bond prices move up.

Off the Recent Lows

Orange Juice +45%
Natural Gas +43%
Sugar +41%
Gasoline +33%
Uranium +28%
Oil +24%
Lean Hogs +22%
Soybeans +16%
Iron Ore +15%
Coal +14%
Wheat +14%

*Bloomberg terminal data, lows since Dec.
**ALERT: Inflation expectations, US 5yr BEs, at a nine-year high. EU Gas Up 22% today

“The likelihood of a repetition of the crisis of last winter has gone down significantly, which can also be seen in the forward market, “But we have to be clear that the structural change ...

What do bonds know? We are looking at the 3-month US Treasury Bill yield vs. the 2-Year US Treasury yield. The Fed is holding up the front-end T-Bill yields with rate hikes and hits of more vs. market participants pushing down 2’s yield betting on recession - future rate cuts.

(2)

“Policymakers consider themselves vindicated after they followed through on their half-percentage-point rate rise last week despite global market volatility” FT

*the ECB hasn’t figured out banks can’t fund them selves with front end rates this high after the AT1 debacle. The ECB is “smoking on the dynamite shed..”

(2)

Goldman Sachs goes “all in” US consumer finance, then pukes 🤮 it out 18 months later? Really??? Tell me more… Flashback to 2006-2007, Goldman was the FIRST to exit subprime — it was a classic, hall of fame stop 🛑 loss. Today, as colossal interest rate risk hits the $4.8T consumer finance mkt - they cut bait again while most are asleep. History rhymes, indeed.

Dear Equities,

$1M in T-Bills, Interest Paid

February

2023: $51K
2022: $6k

Best regards,

Cash Reverse Robinhood - with $4.8T of consumer credit (auto leases, credit cards, student loans, home equity lines of credit, etc) - every 1% move hits the little guy and gal with $40B of extra interest costs - all the while the top 40% cash in on the interest gravy train.

(2)

Breaking news - Central banks socializing bond market losses and privatizing gains is not disinflationary.

*ECB, Fed, and BOJ $2T of current market-to-market losses - - held to maturity, losses deferred. The year 2022, was the worst year for bonds in 30+ years. In the 90s James Carville famously said: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would want to come back as the bond market."

(2)

Dear Mr. Powell,

Close to $11T US Treasury bonds maturing - next 24 months, need to be refinanced.

Funding Rate

Current: 1.6% to 1.9%
New: 3.4% to 4.6%

*interest as a % of the budget explodes from 8% to nearly 17%.

**interest (blue) below is a very conservative estimate. On the House GOP's budgeting-cutting enthusiasm -- the goal of cutting $130 billion from discretionary approps without touching defense or veterans' health means freezing those two items and cutting everything else by 21% immediately. That's just not realistic.

via @Brian_Riedl

Interest on $1M in US T-Bills

Jan 2023: $46k
Jan 2022: $3k

* “56% of Americans can't cover a $1,000 emergency expense with savings” CNBC, January 2022. Wealthy investors just got a colossal pay raise vs. the lower / middle class consumer up against inflation. It’s clear, we have two economies in the USA, any company facing the bottom 60% of consumers is taking on encroaching stress conditions while the high net worth consumer is doing just fine up a against the brutal tax that is inflation.

(2)

Colossal Leverage - Underneath the Surface - Liability Driven Investing - LDI turned £5oobn of
underlying assets into £1.5tn of invested money. “The depth of leverage in the system, which is in multiple places that are difficult to
track.” Amundi CIO @FT Dear Clueless Central Bankers - over longer and longer periods of time - when you don’t allow the business cycle to function and suppress the natural - “true cost” of capital, you incentivize and perpetuate this garbage. Don’t kid yourselves, this is NOT an isolated case.

(2)

Friday was a Significant day - Bank of Japan intervention and a Federal Reserve Policy path shift, it was an inside job. Three things you need to know:

thebeartrapsreport.com/blog/2022/10/2… The fix is in -- What is driving equities as we approach the US midterm elections?

Last Few Weeks

DJIA +15%
S&P +11%
Nasdaq +10%

*Dow Industrials are just 11% off all-time highs. Massive short covering in QQQ names - with a colossal rotation in the works.

Be careful trading stocks when major developed market bonds are trading like this. There is NOTHING more dangerous, than academics who have NEVER taken a professional risk, never actually sat in a risk-taking seat - but now sitting on trillions of pounds and dollars of risk. State of Play - We had a three standard deviation move in UK rates and the BOE´s chief economist was saying "let markets be markets" yesterday with pension funds imploding.

(2)

The Art of a Gamma Squeeze

1. Buy out of the money - YOLO calls in SIZE.

2. Force Dealers to buy stock to hedge the calls they sold you.

4. Pump up the bullish sentiment with bs

5. Find more greater fools

6. Dump your shares before they do.

*Jay Powell´s U.S. equity market. .@GaryGensler

Nobody and I mean nobody, is going to call for taking a look at the options market. We'll get 'hey, isn't that something..." With sooo much money in options, they cut commissions to zero for stocks -- options are the LAST cash cow for "discount" brokers.

(2)

The Madness of "Group Think" has no bounds... Think M2, 40% of all dollars ever created were done so in 2020 - 2021.

*Federal Reserve US Money Supply M2

Dec 2021: $21.8T
Jan 2020: $15.4T

$6.4T / $15.4T = 41%.

Econ 101

What happens when you subsidize demand and arrest supply? Anyone? Global developed market politicians have spent the last five years attacking fossil fuel, production, exploration, capex - through disinvestment, regulations, and sanctions. From ESG to green new deals, globally - investment is $2T+ below the previous 2014 trend line.

Here Come the Sheep

"We now see recession risk as higher and more front-loaded." Goldman.

*Just like the race 3-4 weeks ago -- who can be the economist to predict the most rate hikes -- Now it´s -- "I can be the one to predict the worst recession" Bloomberg Economic "Consensus" - the Forecast

2022 GDP Outlook

Today: 2.6%
6 Months Ago: 3.8%
10 Months Ago: 5.0%

*With Q1 negative and Atlanta Fed being near 0% for Q2, you need a colossal Q3 and Q4 to get to 2.6%.

One Year Ago - "Yellen advises G7 to "Go Big" in stimulus measures." May 2021: Yellen says we must go big on stimulus.

October 2022: Yellen says inflation fight remains top priority after hot September report.

*Hundreds of billions deposited into US bank accounts, 43% of all dollars ever created were done so in 2020-2021.

Adam Smith on the Risks of Globalization (1)

"Every individual endeavor to employ his capital as near home as he can, and consequently as much as he can in the support of domestic industry; provided always that he can thereby obtain the ordinary, ... ..or not a great deal less than the ordinary profits of stock. Thus, upon equal or nearly equal profits, every wholesale merchant naturally prefers the home-trade to the foreign trade of consumption, and the foreign trade of consumption to the carrying trade.

(2)

Federal Reserve vs Inflation CPI

QE1: Nov 08 - Mar 10

1.07% to 2.31%

*$1700B assets buys

QE2: Nov 10 - Jun 11

1.14% to 3.56%

*$600B asset buys

QE3: Sep 12 - Oct 14

1.99% to 1.66%

*$1500B asset buys

QE4: Mar 20 - Mar 22

1.54% to 7.91%

*$6000B asset buys

w Eric Peters 2022 Wall Street research consensus - the end of this program would have little impact on stock prices - if anything they raised their equity price targets for this full year. US Equities were in correction BEFORE the Ukraine invasion.

*47% of the Nasdaq, off -50% pre-war.