Putting this here rather than behind the stack paywall and doing it before 6pm because I am seeing a lot of really shit takes on why this was a nothingburger since Iran didn’t hit anything major, “all bark no bite,” and so gold and especially oil should be faded.
1/7 I think people who are thinking this way about oil in particular are scarred by 3 - THREE - successive physical dumps over the past 2 years and that is Martingale thinking gone awry.

1) Russia invaded, and Biden that summer cratered oil with a historic centimillion bbl sale.

2/

People are massively overthinking this. In 2022 I wrote a thread called “Win-Win is now Lose-Lose” for stocks - pls read:



We are now in the same place for bonds and guys are terrified of being short. THE TRAPDOOR IS IN. It’s Lose-Lose. Simply put:

1/4

https://x.com/paulomacro/status/1503478938416332804?s=46

https://twitter.com/zerohedge/status/1777819657539346437

If inflation misses for March and maybe April before scorching later in 2Q as I expect, the Fed has cover to be dovish *which is a shitshow negative for the long end of the curve* as it reinforces the policy mistake made months ago.
2/

While everyone screws around with AI this week, this glorious year for macro continues unabated. Will try to drop a note on the Fed via the blog in my bio tomorrow, but meanwhile here is a rare drop from behind the wall/chat earlier for those who care about the BoJ and yen:
1/ JPY - just occurred to me maybe I have had this all wrong. I should have been listening to myself from early 2022 all along when I dropped the Velociraptor thread that many of you liked back when JPY was <125 on its way to 150.
2/

I would like to express my gratitude once again to all who subscribed to the blog in my bio. It means so much that I can write for and engage with people who value it.
1/5

https://twitter.com/paulomacro/status/1746294872254865881

I had intended to stay somewhat connected here and post interesting one-offs, but I owe it to those who took the leap of faith and were willing to sign up in support of me to focus my energy and attention on them.
2/

I am beginning a new chapter in my life.

As a recently released “free agent” (nothing to do with this account), I now find myself at a crossroads for what comes next.

A thread 🧵(but worth reading to the end for NY buysiders!)

1/ Over these past few years, I have found my writing to be valuable not just to my own flywheel (writing helps me think, which helps me invest better, which makes me want to write), but also for meeting exceptional people & gathering feedback.
2/

This point gets lost on a lot of Recession Bros who keep waiting for claims to explode to 350k+ and unemployment to rip in some disinflationary morass:
1/3 When your deficit accelerates *in an expansion* as it is now, your private sector needs to shrink at that much faster a pace for production/sales/incomes to decline.

Absent that, inflation needs to accelerate faster than fiscal growth to crowd out Private on a real basis.
2/

Ironically people’s market narratives in making sense of what they see are usually late/backwards. Nobody cared about term premium and bond issuance in 1H23, and suddenly in Q3 it mattered (and bonds cratered)…just at the time one should have started worrying about growth.
1/7 The move back down in long-term bond yields since then is really about growth — and the Fed blessed this view in December (remember the Fed is *always* late). But like the market, people are skating to where the puck is now, or the wrong puck entirely.
2/

Year end Xmas comment 2023:

It occurred to me yesterday that everyone sees Powell’s pivot last week the same way: politically motivated. Regardless of motivation, there is something deeper here, a 3D chess move, maybe he didn’t realize it when he did it.
1/9 Long dated rates and spreads collapsing has been a boon for bank accounting and cleaning up the AFS/HTM issue from March. If you are BAML/SCHW/regionals, this is your window to rerack the books.
2/

On Uranium equities, I’ve had a chance to think about some mechanics and flows involved here, and I fear people need to be much more cautious in the near term.

Note I am not talking about the U3O8 spot px - everyone including utilities, CCJ, KAP are short.

$URNM $URNJ $URA
1/21 For starters there is the $URNM and $URNJ ETF selling. This has to do with the PFIC status of underlying holdings (not just Sput but many of the miners like NXE and BOE are PFICs).
2/

Folks - please pay attention. 🛢️

The past 18 months witnessed the Great Destocking. Higher rates + higher cost of storage (higher tanker rates etc etc) + no contango = above ground inventory got sold, esp with merchants paying >8-14% financing.
1/5

https://twitter.com/hkuppy/status/1736013549569286496

High interest rates have forced a destocking of physical barrels, sanctioned barrels (russia, iran, vez), SPR barrels, finished goods/products, and now (once again) paper barrels.
2/

There is an issue I think worth highlighting that is possibly being missed by bulls and bears alike in the bond market.

Many have heard me say that “DMs are becoming EMs” and “the US is speaking Portuguese without realizing it” … let’s start with this as a backdrop.
1/10 DM risk assets as we know have been “up by the stairs, down by the elevator” for many decades. But a defining characteristic of Brazil, S Africa, Turkey, & other fiscal deficit/structurally high rate economies is what a friend calls “down by the escalator, up by the elevator.”
2/

As we settle into December boredom, I can’t shake the feeling that the next several months are going to bring defined by the phrase:

“The Second Mouse Gets the Cheese.”

1/6 For instance, this time last year there were many smart speculators setting up Long non-US and EM equities (and commodities) only to be disappointed as Mag7 became the Ring to Rule Them All in 2023.

Waller’s speech just gave ex-US the green light in 2024…and nobody cared.

2/

We might yet be amazed what things look like when the world restocks rather than destocks. The Great Destocking has been underway for nearly 2yrs now relentlessly from every corner.
1/

https://twitter.com/churnerofmarket/status/1727882316016398522

High interest rates have forced a destocking of physical barrels, sanctioned barrels (russia, iran, vez), SPRs, finished goods/products, and now (again) paper barrels.

Can the market crack lower if Saudi decides to use the stick rather than the lollipop? Sure.
2/

First they came for the Seasonality Bros, but I said nothing because who tf buys stonks in October…. Then they came for Breadth Thrust Bros, but I said nothing because that sht is 100% 24 times since 1950 and will never fail…

You remember how last year in the Equity Bear I talked about how the market just refused to Release and guys would smack vol and implieds meant realized never really went for it?
1/4

https://twitter.com/paulomacro/status/1545447082919706627

Bonds are sort of doing the same thing now - chart from @donnelly_brent totally wild - if you wanna hedge a crash in bonds it is verrry expensive so nobody does, and we just realize a relentless downtrend looking for price discovery.
2/

Thread on UST funding and RRP.

Backdrop: US treasury debt outstanding has gone from $22.7T to $33.2T over the past four years (9/30/19 to 9/30/23), and 30.9T a year ago. So +$2.3T 1y and +$10T 4y. The -12m deficit is $1.7T per below, as of 9/30 (Treasury is on a Sept FY)
1/18



Many expect this deficit to narrow in 2024 and things to “slow down” or stabilize vis-a-vis Treasuries but they simply do not appreciate the EM nature of the US now.
2/

Much attention has been drawn to how the move in bonds has been purely nominal taking real rates higher as inflation expectations remain contained …whoops did I say contained?? 😂 so sorry - ANCHORED. Yes.

1/15 The trade in front of me is to ride the long bond avalanche. But as I hinted tonight… the Trade After the Trade™️ is *NOT* long the bonds.
2/

https://twitter.com/paulomacro/status/1709407547818639602

So here’s my issue. Everything happening lately is sort of outside the Fed’s control. This isn’t deflation where you debate print vs fiscal. It’s QT vs fiscal restraint. It’s not Alice in Wonderland’s 6 impossible things before breakfast - it’s Stranger Things’ Upside Down.
1/17 Powell can’t print oil (oil traders are the 2020s vigilantes). And he can’t control fiscal (although Dimon and pals are literally screaming at Congress that 7% comes next unless spending comes in).

So there’s no solution here.
2/

I have this troll whom I muted a while ago. Somebody flagged his apparent obsession with me and weird desire to instigate some kind of fight with me and @INArteCarloDoss (with whom I have always maintained respectful dialogue). 1/4 As I flick through his feed (couldn’t help it, someone insisted I take 2mins to do this), it reads like a “begging-for-TLT-guidance” stream. It’s weird though, on some level you almost think he could be a bot. But why would anyone program a bot to troll me over TLT? 😂
2/

So I have been thinking a lot about “LDI with US characteristics” today. So I have been thinking about this overnight. They pushed HTM accounting + BTFP to save the banks from duration. The consequence is less lending to the economy. 1/6

https://twitter.com/convertbond/status/1706333831391826085

It is also the reason the giants like Blackstone, Oaktree, Apollo etc are raising billions for private credit funds. They will fill part of the void left by the banks who are stuck and unable to lend.
2/

I’m not sure I have it in me to keep pumping out these framework threads anymore, but I will drop another historical comparison here for you friends to keep an eye on. 🧵
1/18 In 2015 during the heat of fiscal dominance and recession, the rate curve in Brazil went to something like 7% *real* on the NTN-B (Bz TIPS) — super elevated and flat all the way across — basically screaming “you’re Greece in 2010, another wrong move, and it’s over the cliff.”
2/