1/6

Say it with me: Chinese Yuan Carry Trade.

THREAD 2/6
Japan's Nikkei 225 ran from 8,296 in 2012 to 38,211 because of the "TINA" concept: "There Is No Alternative" to sub-2% long bonds, so buy Japanese stocks. Also, many borrowed in low-yielding yen to buy Nikkei names (the yen carry trade).

China's carry trade set-up is here:

Just like that, Canada enters The Pension Wars.

Thread

1/9 2/9
A country participates in the Pension Wars when politicians and/or influential members of society push large financial institutions to direct investment toward their domestic stock market.

1/15

2024 Prediction

Japan’s $1.5 trillion GPIF and Korea’s $788 billion NPS, the #1 and #3 largest global pensions by assets, kick off the Pension Wars.

THREAD 2/15

The Pension Wars are the push for money management institutions to purchase their own countries' stocks because of political pressure.

Japan and Korea are the two Pension War leaders, but there are others.

1/10

Forget Currency Wars.

Enter the Pension Wars.

Thread. 2/10
Unlike the central bank-led Currency Wars, the Pension Wars are fought by politicians.

The objective: force Defined Benefit and Defined Contribution retirement plans into domestic stocks.

The US, UK, Korea, Japan, Canada and Germany are all fighting the Pension Wars.

1/4
The sharp decline in the National Association of Homebuilders (NAHB) Index points to falling consumer confidence.

This is a classic lag effect. Right now, the housing debacle is just a spectacle for the vast majority of people who didn't have to buy or sell in 2022 or 2023. 2/4
They watched from the sidelines.

But another year brings more people into this housing debacle. That horrible feeling, logging into the MLS and seeing no new listings, every day.

Even worse, having your hand forced and swapping a 3% mortgage for 7% because the school stunk.

1/6
Why is hardly anyone else paying any attention to this? Seriously? I looked up the top tweet on Kishida's "Doubling Asset-Based Income Plan" and the #1 engaged tweet was my own, with 11 measly retweets?? Why is FinTwit completely missing this? 2/6
Imagine what they'd be saying about the S&P 500 if we were weeks away from people suddenly being allowed to triple their IRA contributions. That is happening to Japan's NISA program in January. Not 2030 or 2035.

January 2024.

The world's 2nd-largest stock market.

1/7
One of the least-discussed macro initiatives is Japan's "Asset Income Doubling Plan." Kishida is very clear: Japanese households are holding a ton of cash, he doesn't like it, and so he's pushing them to increase contributions to 401k-style plans. There is a freak-out happening in Tokyo (and London, for that matter) that anyone who wants to IPO will do it in New York, because valuations are higher in the US. I think what is coming to the Japanese asset management industry is a push on...

If any 1 of these 3 charts snap, heads will spin. The stocks of very large corporations have beaten small company stocks by 3.5% per year for the last 20 years. This is the 2nd-widest gap on record. The prior record was set in 1999, just before the Dot-Com bubble imploded.

1/8

The average price of houses sold in the United States is 26 times the price in 1963.

Keep that number in your head -- 26 times the price.

THREAD. 2/8

It was 19 cents for a McDonald's cheeseburger in 1961. Today, a McDouble is like $1.99.

Ten times the price.

But house prices have multiplied by 26.

1/5

This mortgage rate situation will make the student loan thing look like child's play once a critical mass of people start identifying with the righthand side of this chart. Right now, there aren't many of them, so they have no collective voice. They aren't happy. A Covid-era $300k mortgage at 2.5% has the same payment as a current $200k loan at 6%.

That is a totally different house.

A Covid-era $500,000 mortgage at 2.5% has the same payment as a current $300,000 loan at 7%.

We have a big problem.

The housing freeze is an activity freeze.

1/8 2/8

The amount of income you need to qualify for a mortgage has more than doubled. Logically, most of these people are left with one choice: stay in their current apartment or house, whether they like it or not.

1/4

There is a major country, a BIG dynamo, whose economic sentiment is at multi-decade extremes. Everyone is hating on it. This thread is for contrarians. 2/4

The ZEW survey is clear: when asked about "Present Economic Conditions" in Germany, it comes in 81 points below the present conditions in the United States. This is akin to "Sick Man of Europe" discrepancies. It is also very near the generational lows posted in 2004 & 2005.

The jobs market will weaken from here.

1/9 2/9

A net 39.4% of US banks say they are tightening lending standards. This started rising in late 2021. The unemployment rate looks set to follow it higher.

These housing charts are unsettling.

1/9 2/9

Housing affordability has tanked. Quickly. The system struggles to function when the rules of the game change like this.

1/5

RV sales for May were -38.8% over the last year; total YTD shipments are -49.7%. A bit misleading, really, because the 2022 quantity was so high due to Covid money. This thread isn't about RVs; it's about front-loaded demand and the subsequent hangover. 2/5

Beyond RVs, think about dishwashers, a 2nd family car, new earrings. These were purchased because of the trillions dished out during Covid. The old dishwasher was still functioning, but a new one was purchased because of Covid money. Now, credit card vigorish is 20%.

I have some charts I'd like to show you. 2/
The amount of income you need to qualify for a mortgage has doubled since Covid. The US housing market is officially dysfunctional.

1/4
This is such a quagmire in housing. Of the scant quantity of homes that are for sale, 29% are new ones. That's because so many existing homes are occupied by people who refinanced at <3.0% when the Fed was on tilt. They're stuck, and so are the buyers. twitter.com/i/web/status/1… 2/4
People don't pay for a team to come in and fix bricks, or at least most people don't make that phone call, unless a home inspector writes up a report that points out a problem with the bricks. It's just that simple. Housing-related jobs...

1/8

The Japanese Stock Market: A Bull Case 2/8

The MSCI Japan index is +11.4% in 2023, beating the 9.9% return on the S&P 500. Indexes that hedge JPY are up even more, owing to the yen’s weakening. At ¥138, the competitive dynamic is notably changed from the ¥103 that persisted a couple years ago.

More on JPY later.

1/9

The metrics point to job losses and rapidly declining inflation.

THREAD 2/9

A ton of job openings now, but the NFIB survey of small businesses tells us it goes down next. Maybe sharply.

1/5

Builders started construction on a bunch of apartments during Covid. 2/5

Even with all of those apartments being put up, we are in Construction Materials deflation right now.

It means homebuilders are going to have declining input costs, and in turn, lower price tags on the houses.

1/5
Just got off the phone with an old colleague. He’s downtown, in the office, working for MegaCorp.

“I’m the only person here.”

Three years after Covid started and not one other employee came in. More office landlords will default.

THREAD 2/5

So much office vacancy – and that’s with unemployment at 3.6%. Everyone is going gaga over the big payroll numbers. That will change soon, if I'm right that the labor market is next to roll over.

As it does, this map gets worse.