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.

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.

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.

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.

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.

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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...

1/ How to think about @firstrepublic ?

It's very simple:
Will the regulators actually solve the problem and stop the banking crisis

Or

Will they find a half-ass solution that solves this particular issue but leaves the broader system just as fucked? 2/
Whether a group of TBTF banks buy $FRC at a sweet discount or the FDIC takes it over the question we need to ask is?

Do the regulators finally realise that either the Fed cuts rates to close the spread btw deposit rates and RRP, or BTFP accepts any bank loan as collateral?

1/ Let's Fucking Go! Another Friday, another US bank on the brink of being deaded by the FDIC. 2/ The issue with $FRC is that their balance sheet has few treasuries and a lot of other dog shit like commercial real estate loans which are not eligible collateral for the #banktermfundingprogram

1/x The @firstrepublic saga

$FRC indicating down 15% at the open ...

If they make it to the weekend without being taken over by the FDIC colour me surprised. 2/
If FDIC takes over, the next question is whether deposits over $250k will be made whole. This is a decision of US Treasury Secretary Yellen. She told the market she has the authority to deem a banking institution systemic and then gtee all deposits.

1/ Swap lines what's going on?

TLDR another way to bailout non-US banks that isn't obvious to the average person. 2/
It's politically toxic for the Fed to be seen bailing out foreign banks when so many small domestic banks need help.

But the Fed can't have foreign banks dumping treasuries into an liquid market and further fucking shit up.

.#SBF_FTX

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Before I finish, let’s do some math.

Assumptions:
FTX deposit base = $15bn
Alameda position notional = $1.3bn
Processed withdrawals pre bankruptcy = $5bn 2/

First let’s assume that alameda’s position goes to zero for a loss to FTX of $1.3bn.

Net of customer deposits that’s $13.7bn

.#SBF_FTX

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The exchange should never lose money if a customer gets liquidated. There is no excuse giving you hedge fund alameda an account with liquidation turned off. 2/

All this talk about what Alameda did is misdirection. It doesn’t matter how they hedged or didn’t hedge, or what dogshit was in their portfolio.

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What happens now that Baron CZ passed on FTX bailout and SBF is bankrupt. The next question is who could save FTX? 2/
If CZ, the richest person in #crypto, can't do the deal. No one can do the deal.

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There is a #China health presser tomorrow, if this tweet is true, and the rumours onshore that Xi may ditch COVID zero in a matter of weeks it might explain a few things.

https://twitter.com/HAOHONG_CFA/status/1588499103704846336

2/
When I look across the assets I track I see strange things.

$CNY up 2%, massive!

$GOLD $SILVER $OIL $BTU all ripping while SPX and Nasdaq are unch.

2-yr yields barely off their recent highs post FOMC.

Jobs report was decent so JayPow will stay the course.

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Guess who is pumping $BTC and $ETH 2/
The US Treasury is thinking about supplying the market with more short term T-bills to alleviate a shortage.

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Another episode in gimme 'dem dollaz!!!

All the central banks be dialin' for dollars at the NY Fed. 2/
The NY Fed creates and lends dollars to "friendly" central banks, which is called Central Bank Liquidity Swap Operations.

nyfed.org/3ebqn6l

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Curious thangs going on with $ liq 2/
Big jump in $ liq driven by a reduction in reverse repo balances.

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Let's play a little game called "Hide Those Treasuries".

The Rules:

The Fed is reducing it's balance sheet, $ liq -ve

The US Treasury is issuing bonds to pay for large and increasing fiscal spending, $ liq -ve

But we want stonks to pump, what to do?

https://twitter.com/DeItaone/status/1564691726702465031

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Who will buy the bonds the Treasury must issues so voters can get more stimmiez?

Foreigners, no
The Fed, no
US Commercial Banks, maybe, they need some help

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Ouchie. Time to do some thinking.

Are you trading a medium to long-term fundamental thesis?

Or are you trading short-term price action? 2/
The short-term price action is ugly. Assuming you are long, it could mean you read the market wrong. Is it time to cover, sit tight, or add more? That all depends on your nerve and how well you can read the chart.

1/ An interesting observation about the current $ETH futures term structure. 2/ The curve is in backwardation, that is futures < spot, out until Jan '23. My guess is because traders are hedging out $ETH exposure pre-merge just in case ... tech is hard.

This article is so amazing I don't even know where to begin. Let's dig into this beauty of an interview with Su Zhu and Kyle Davies.

bloom.bg/3onF4EY Common y'all. Su ain't flashy, he rides his bike to work and to the marina where his superyacht is moored.

ONLY 2 homes, brah you straight slumming it in the Kampong aka Tanglin.