Luke Gromen Profile picture
Founder & President, Forest for the Trees (FFTT). Author of "The Mr. X Interviews, Volumes I & II.” RT not endorsements.
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13 Nov
1/ I remember during the Bush/Obama lame duck period, a number of clients in my former seat expressed acute concern that Obama had supported union "card check" legislation as they saw significant risk that companies like WMT might be unionized under the coming Obama Admin.
2/ So I called several different long term union officials (one of whom had worked w/Jackie Presser) & asked them if they thought union activity would increase under Obama as a number of investors were concerned would happen.

The unanimous union leader response? "LOL."
3/ The union leaders all thought an increase in union activity under Obama was a preposterous concept, even as a growing # of investors were concerned it could happen. The union guys were proven totally right.

IMO there might be a lesson here for the current lame duck period.
Read 4 tweets
12 Nov
Left unasked: Why has the US government chosen to effectively keep its young people in student debt slavery to the tune of $1.5 trillion?

US political shifts are increasing the odds of a "bond fire".

#DebtJubilee #Gold #BTC
2/ If I was tasked with ensuring the US suffered from "secular stagnation" as described by @LHSummers, one of the first things I would do would be to load up my young people with $1.5 trillion in non-dischargeable student debt.
3/ Then, I would follow trade and economic policies (outsource mfg but allow the proceeds to accrue solely to the 1% instead of reinvesting some of proceeds in education, infrastr, & job retraining) that saw the majority of wealth accrue in the hands of old people w/a low MPC.
Read 10 tweets
27 Oct
1/ Stan Druckenmiller: "How did we [earn such high compound annual returns] over such a long period of time?

Very simple. While others were focusing on the present, we looked and focused on the future in terms of analyzing unsustainable situations"...

FFTT-LLC.com
2/ "And when I look at the current picture of expected tax revenues combined with benefits promised to future generations, this is the most unsustainable situation I have seen ever in my career." -Stan Druckenmiller, April 2016

FFTT-LLC.com
3/ So many debating what various election outcomes may mean when the most important choice isn't on any ballot, anywhere in the US (or in the world):

Kill the economy, or kill bondholders' purchasing power.

FFTT-LLC.com
Read 4 tweets
16 Oct
The @nytimes Editorial Board says Donald Trump is "our national crisis", but Trump is just a symptom of our true national crisis:

Thanks to our post-71 USD system, it now takes 53 weeks of work to afford essentials...the crisis being that there are only 52 weeks in a year.
2/ The US's "national crisis" will continue til the structure of the post-1971 USD reserve status is changed; til it is, nothing will change. Essentials will continue to rise in cost while wages won't, as the US suffers from worsening "USD Dutch Disease" ftalphaville.ft.com/2019/03/13/155…
3/ "USD Dutch Disease" relegates US's role in world to producing the USD's that China needs to buy up the world's finite assets, sacrificing US middle- & wkg-classes to do so. This means there will likely be no de-escalation of political tensions til the USD status is changed.
Read 8 tweets
1 Oct
1/ "It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something…
2/ "The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 yrs, as far back as the Sumerians."

-Fmr BIS Chief Economist William White, Jan-16
3/ Only question is whether the effective jubilee will come in nominal or real terms; if it is in nominal terms, today's sovereigns will be the 1st in history to default for lack of printed money. Only gold & BTC win either way.

Quote above from here:
telegraph.co.uk/finance/financ…
Read 4 tweets
26 Aug
How to get inflation > target in 2 easy steps:

1) US govt says: "The $864B deficit we ran in June is the new normal. That'll be the deficit EVERY mth from now on."

2) US Fed then says: "We will not allow 10y UST ylds > 60bps."

This is likely coming.

nytimes.com/2020/07/13/us/…
The world has long been gaming the USD system to its advantage; what I describe above would be the US gaming the USD system for OUR advantage for a change.

The world wants USDs? Fine...we'll MMT $10T per year of free stuff until the world adjusts the USD's value accordingly.
3/ "You want to threaten our Rx supply chain China? Fine. Executive order, $200 billion in 0% money 'loaned' to the US Rx industry to bring back mfg by 2022. Fed will hold the notes."

"INTC? Your turn. Here's $200B for you to build 10 new fabs in the US by 2023."
Read 6 tweets
23 Aug
@profplum99 @GreekFire23 @hendry_hugh @scientificecon 1/ China has a debt problem. W/finite rsvs & a non-convertible ccy, this means if China has a current acct deficit, it'll have a late-90s SE Asia ccy crisis (aka CNY crash & social unrest. China runs curr acct deficits in 2 places primarily:

1. Tourism
2. Commodity imports
@profplum99 @GreekFire23 @hendry_hugh @scientificecon 2/ Rising energy imports in particular mean as China imports more oil at higher USD prices, it's curr acct will fall closer to deficit & CNY ccy crisis = bad

China has 4 options to stave this off:

1/ Stop growing
2/ Produce more oil
3/ Buy more oil abroad
4/ Print CNY for oil
@profplum99 @GreekFire23 @hendry_hugh @scientificecon 3/ #1 isn't an option politically; #2 isn't geologically; #3 is what China's been doing w/their USDs for yrs; #4 began in 3q14 & is now accelerating meaningfully:
reuters.com/article/us-chi…
Read 10 tweets
23 Aug
@GreekFire23 @hendry_hugh @profplum99 @scientificecon 1) It's not a gold standard; it's a neutral reserve asset replacing USTs as primary reserve asset of the USD-centric system.

2) I'm not arguing for anything, I'm describing what's happening; MMT discussions are only accelerating gold replacing USTs as primary rsv asset:
@GreekFire23 @hendry_hugh @profplum99 @scientificecon 3) You cannot run MMT with USTs as primary reserve asset. The system will collapse.

Step 1 to MMT is the world moving to a neutral rsv asset to settle imbalances (which are primarily driven by commodity import/export imbalances.)

We are nearly a decade into this happening.
@GreekFire23 @hendry_hugh @profplum99 @scientificecon 4) The reason this is happening is b/c since 2008, UST's o/s have risen 8.8% CAGR, while UST ylds have averaged 2% across the curve.

Storing commodity surpluses in USTs under those terms is a guaranteed way to go broke in nations where the populaces don't deal well w/that.
Read 4 tweets
27 Jul
@PrestonPysh @RealVision @hendry_hugh 1/I agree. More likely, it will just be the world's 2-3 biggest oil exporters selling oil in CNY (already done), and the system (ie the gold market) adjusting, relative to oil (see the gold/oil ratio) & the USD (see the gold/USD ratio.)

No explicit pegs will be needed...
@PrestonPysh @RealVision @hendry_hugh 2/ Every nation will be free to print as much to finance their deficits as their political hearts desire, to be reflected in the valuation of their currency v. gold, and through the gold link, v. everyone else's currencies, a lot like what Zoellick said:

reuters.com/article/us-gol…
@PrestonPysh @RealVision @hendry_hugh 3/ "The former U.S. trade representative, who served in several Republican administrations, said such a move “is likely to need to involve the dollar, the euro, the yen, the pound and (a yuan) that moves toward internationalization and then an open capital account."
Read 7 tweets
27 Jul
THREAD: Many comments on "what gold is telling us." Here's a take I haven't seen yet:

1/ Let's pretend the currency system is a human body. The US says it wants to de-couple from China; 20 yrs ago, we could've de-coupled & it would've been like amputating a finger or a hand.
2/ Even 10-15 years ago, perhaps "de-coupling from China" would've been like amputating an arm, or a leg from our currency system.

However, after 20+ years of $200-400B surpluses (USD exports), & China's (generally) savvy reinvesting of those USD exports...
3/ "De-coupling from China" is no longer amputating an arm or a leg off the currency system; it is like cutting out some critical organ like heart, the lungs, or the liver out of the currency system...
Read 6 tweets
21 Jul
One of the Congresspeople condemning Judy Shelton as Fed governor bc “she’d be bad for the economy” was given a detailed warning & explanation about the imminent implosion of the US & global financial systems by a friend of mine, yet this Congressperson ignored my friend. 🤔
This Congressperson puts themselves out as well-versed on why Shelton would be bad for the US economy, yet this same Congressperson didn’t recognize that the US economy was literally only weeks from collapsing, despite having why it was about to collapse explained to them 1x1.
Instead, this Congressperson listened to my friend, gave my friend “the okey-dokey” treatment, and sent my friend on their way (my friend flew to Washington on their own dime to meet with this Congressperson in hopes of trying to prevent the economic collapse that followed.)
Read 4 tweets
25 Mar
1/ The pandemic is exposing the fundamental problem of the post-71 USD centric economic system that treats the majority of the US population's debt as the wealth asset of a small minority of the US.
2/ When the primary asset the majority of US society has is their health (& so getting sick will possibly bankrupt them & in any case hurt their ability to pay off debt owed to the minority), there's little motivation of the majority to "hurry bk to work" & risk illness or death.
3/ This is a potential problem for the minority that own most of the "wealth" in the US, because much of that "wealth" is in essence debt owed to the minority by the majority. The tension b/t the minority debt holders & majority debtors is beginning to rise.
Read 5 tweets
10 Jan
@jposhaughnessy @wolfejosh 1/ There was a distinct difference between Bretton Woods (1944-71) gold standard and what followed (1971-since, Petrodollar.)

USD reigned supreme from 1944-71, but it was linked to gold, which allowed US creditors to reign in LBJ's guns & butter.
@jposhaughnessy @wolfejosh 2/ US govt didn't like that, so they ended the link to gold in 1971. So it really wasn't USD that reigned supreme 1944-71, it was gold.

Since US govt ended link to gold, Petrodollar has reigned, and this means a USD monopoly on energy enforced by US military, and...
@jposhaughnessy @wolfejosh 3/ ...it meant US caught "USD Dutch Disease" - we became "the Saudi Arabia of money", which hollowed out the US, except for those parts of the country in "the USD export biz" - Wash DC & Wall St. Can read more abt USD Dutch disease in this v good article: ftalphaville.ft.com/2019/03/13/155…
Read 6 tweets
13 Aug 19
@TonyYin11897410 @DeepThroatIPO @adamscrabble @BaldingsWorld 1/ A key thing most analysts on China have missed that DTIPO has picked up (implicitly) is how China used the USD system against itself. The Petrodollar means US was supposed to be "as good as gold for oil", or USD = OIL...
@TonyYin11897410 @DeepThroatIPO @adamscrabble @BaldingsWorld 2/ But the US abused this, printing far more USDs & making far more USD obligations than could ever be satisfied w/physical oil priced at anywhere near a USD price that wouldn't collapse the global economy.
@TonyYin11897410 @DeepThroatIPO @adamscrabble @BaldingsWorld 3/ For example, a few yrs back we did an analysis showing total US obligations currently are ~80 yrs of 100% of current global oil production at current USD oil prices to satisfy. Means only way to fulfill these USD obligations = oil prices so high they'd collapse China, EM's.
Read 6 tweets
16 Jul 18
THREAD: 1/ In early 2008, we decided to sell our house & were approached by an executive w/local a professional sports franchise about an off-market transaction to buy our house. The executive knew the housing mkt was soft & came to the negotiating table impressively prepared.
2/ He researched what we paid for our lot, what we paid for our house, the size of our house, recent local comparable transactions, what those translated to price/sq ft, and what that then implied for a reasonable price range for our house given its square footage.
3/ He was very thorough and knew the housing mkt was soft so he clearly felt like he had all the leverage & he negotiated like he felt like he had all the leverage, which is to say, confidently. However, there was one thing I knew that he didn't know...
Read 6 tweets
15 Jul 18
If any of my sons wrote the 1st sentence below as an answer to a history exam, they would fail the exam. It is, in every sense of the phrase, “fake news.” Yet here we have the President of the CFR solemnly asserting it as true, needlessly discrediting the rest of his statement.
1/ Why do I care? This is classic “Boy Who Cried Wolf” stuff. Repeated statements such as these (that are easily proven false) from the heads of institutions that have been the pillars of the “Rules Based Global Order” do immense damage to that RBGO over time.
2/ Anyone in the world with a smartphone & Wi-Fi can instantly research western govt operations in the past 70 yrs alone that are in direct contravention to Haass’ 1st statement. It takes maybe 30 seconds on Google to learn Haass is flat out lying.
Read 5 tweets
15 Jul 18
In 2004, I sold 100% of my exec comp stock options after learning the 140-yr old bank I wkd for was changing its name to that of the mortgage division. I was summoned to my boss' office to explain why I was dumping my stock & was all-but-told it was a career-limiting move.
My boss was a friend, so I told him my logic: By the time a 140-yr old bank finally decides to change its name to that of the mortgage division, its seemed highly unlikely to me that the housing/mortgage boom was still in early innings.
Of course, we had just been given an update about how much business the mortgage division was doing, & how much more it was going to grow over the next 5 years, & in fairness, the mortgage folks were killing it - this was 2004. But intuitively, it just didn't make sense to me...
Read 6 tweets
20 Jun 18
Lots of post-mortems on what GE did wrong that led to it being expelled from the DJIA, none of which cited this Immelt interview in @EdwardGLuce's excellent book "Time to Start Thinking", which is curious since China/US trade tensions would seem to make it all the more relevant:
Immelt wasn't the only leader Luce interviewed who was sounding the warning all the way back then. Here's Andy Grove:
Here's the head of Cal State Camarillo's Biotech Dept:
Read 6 tweets