So, how big an 🫏-kicking did the rest of the world receive over the last couple of months as all U.S. asset classes and the US$ got simultaneously, unceremoniously pummeled?

We think a good term is EPIC.

Quantifying the Tariff Shock Impact on Foreign holders of U.S. assets: a 🧵

Given the newfound correlation (in a bad way) of US equity and fixed income markets with the US$ during the recent drawdown, we undertook a project to try and compare the MTM losses suffered by foreign holders of U.S. assets relative to those sustained during the GFC of 2007-2009. Despite having to make some significant assumptions and generalizations, we feel like the following conclusions are, at the very least, “in the ballpark.”

1) The percentage drawdown for foreign holders of U.S. assets in the 6 weeks ending April 8th 2025 was roughly ~19%, which is 2X the percentage losses they sustained during the 18 months of the GFC from Q4 2007 through Q1 2009.

2) The total amount of MTM losses in local currency terms, given the rapid growth of U.S. equity, treasury, corporate and agency debt holdings in the intervening years, over those 6 weeks was roughly 9X those suffered over the 18 months of the GFC.

Conclusion: A shock of this magnitude over such a short period of time, coupled with increasingly confrontational U.S. economic and political policy, may well lead to a reversal of decades of the “virtuous cycle” of asset flows from the Rest of World (RoW) into U.S. securities. In particular, we see the potential for U.S. equities and corporate bonds to be sources of funds for foreign holders looking to reduce their outsized positions in US$ assets as the current market instability may well be a feature, and not a bug, of the current administration. Over the last 20 years, foreign holdings of U.S assets have grown dramatically. According to U.S. Treasury data as of June 2024, equity, treasury, agency and corporate bond holdings have risen 441%, 561%, 25% and 314% respectively since 2006. In total, foreigner’s exposure to U.S. assets rose from ~$9T to ~$43T. Big.

@RaisingTheBAR47 @calvinfroedge With all due respect to @RaisingTheBAR47 (sincere), I’m going to side with @calvinfroedge.

The Latin majors look attractive to me, $PBR and $EC are formidable business that consistently generate superior ROIC and FCF relative to US/Euro majors and absolutely vs. US E&P. @RaisingTheBAR47 @calvinfroedge FCF generation at $PBR is absurd. They paid down $80B in debt since 2014 while dishing $60B in dividends ($50B last 2 years).

$XOM paid down $10B in debt and paid $120B in divs, current market cap is 8x $PBR.

$EC no slouch, paid 100% of current Mcap in divs since then.

1/4 Marathon Q3 letter released. Accred/Qualfd can sign up at MRAFunds.com or DM.

Theme #1- Support for pivoting asymmetry in crude markets: OPEC cutting into an economic downturn is NEW BEHAVIOR and indicative of a changed oil price dynamic. chart @CornerstoneOil 2/4 Theme #2- Metals markets inventories drawing similarly to energy despite China closures and economic slowdown- worth watching.

Theme #3- Expectations for rapid rate declines seem a tad optimistic, history says the road to +/-2% may be a long one

Sunday Musings:

Several weeks ago we wrote to our LPs that we believed the oil markets were transitioning from 40 years of having a firm ceiling and no floor towards having a firmer floor and a vastly diminished ceiling.

This week's Saudi comments support that view. Historically, OPEC increased production into economic downturns. The resulting downside volatility discouraged western investment.

Their willingness to reduce supply to make room for Iranian barrels indicates they no longer need to, as decarb/ESG sentiment achieves same goal.

Preview: Marathon Q1 (fashionably late edition) Resource Market Thoughts

Full fund commentary available to accredited/qualified investors, sign up at mrafunds.com

Hilights: Commodity markets were well on their way to shortages before the invasion of Ukraine. While most focused on the energy market impacts, we remain most concerned about the agricultural market ramifications.

Ukraine and the Energy Policy Problem - a 🧵+ 📽️

Why is it that the global reaction in the first days after the invasion of Ukraine was limited to toothless sanctions, sending “hopes and prayers,” and bathing buildings in blue and yellow light?

Why can’t we help them? 1/12 2/12 The answer is simple:

The western world has spent the last two decades making short-sighted energy and resource policy decisions that gave our adversaries substantial geopolitical leverage over us.