When we look back in a few months, it is likely this week will have marked narrative inflections for Peak Disinflation and Peak Soft Landing.

These shifts will coax markets higher even as the underlying economic structure softens and we enter the sweet spot of recession odds. As immaculate disinflation gives way to The Economy Can Handle 5% rates (it can't really), the lags of monetary policy will follow.

Recall that 12 months ago, Powell had only hiked 150bps of the 525bps so far. This lag is misunderstood and widely mis-priced by investors today.

The 3m10y yield curve remains in a deep inversion. This has occurred before every recession since 1968 and this time is unlikely to be different.

A new bull market has never begun from this state.

Let me share a few data points.🧵 Uniformly, re-steepening of the curve out of inversion happens before or during recession, not after.

In two instances, the low of the market was one month before inversion *ended*.

In all other instances, the market low was not for several more months (9.5 on average).

"We have enough workers. The problem is a shortage of people willing to work."

No. We have a shrinking supply of 🔵prime aged workers, an 🔴excess of elderly, and we aren't having enough babies.

Prime aged workers as a % of the population peaked in 2007. Elderly skyrocketing.

https://twitter.com/txmctrades/status/1535437877403852801

This isn't just a matter of gig workers hidden from unemployed, or marginally attached failing to apply for jobs or respond to surveys. Those things occur but they don't change this story.

This is a secular dynamic at the species level that was fully exposed by pandemic shocks.

Combining 14 US downturns over a century shows a consistent cycle.

The typical event sequence:
1 New Orders Peak
2 Mfg PMI Peak
3 Housing Permits Peak
4 YC Inversion
5 Earnings Peak
6 Stocks Peak
7 Unemployment Low
8 Industrial Prod. Peak
9 CPI YoY Peak
10 Recession Start In recovery, the typical sequence is:

10 New Orders Trough
11 Housing Permits Trough
12 Mfg PMI Trough
13 Stocks Trough
14 Industrial Prod. Trough
15 Recession Ends
16 Earnings Trough
17 Unemployment High
18 CPI YoY Trough

With risk higher, folks are asking me a) if I've changed my bias or b) if macro looks better.

a) No.
b) It does not.

The peak inflation, imminent pivot, China re-open trade is driving a strong rally, but continued deterioration is still extremely underpriced by risk assets.

https://twitter.com/TXMCtrades/status/1612110532072316929

A cyclical downturn is a roller coaster and the pathway is non-linear- a phrase I stress often.

Dislocations can be driven by positioning, narratives, and short term imbalances- all of which culminated in Q4 to spur a technical reversal from the doomy depths.

https://twitter.com/txmctrades/status/1617873966085066752

We're in the eye of the storm.

Inflation is subsiding, lending comfort to anxious bulls who see light twinkling in the long tunnel. For a time they will be rewarded.

But the fragile fascia is fraying, and will soon expose the soft underbelly of a still decaying economy. Investors are bruised and battered after a year of rates-driven repricing.

Behaviors conditioned over a generation suddenly ceased bearing fruit, and the market heaved in pain.

An historic tandem collapse in stocks and bonds cracked the countenance of countless strategies.

Data over the past century aligns *heavily* with market lows arriving later than many expect. I've been sharing this data with you.

Because the odds are so consistent, I feel the only cogent view for the bottom being in must include the belief that we won't see a recession. If you believe that a recession is likely, then to claim the bottom is in, you must be articulating a belief that this time will be wholly different from all prior recessionary bear markets, and you need to show receipts.

History favors the other side.

An incredible year finally ends.

The next leg of this saga has no precise analogue. We carry traits of several prior eras.

An inflationary everything bubble, bursting atop a long term debt cycle, cast atop a cresting multi-generational demographic swell... in a commodity shock. Curtains are drawing upon the globalized lowflation era that excused weak wage growth with abundant foreign labor and cheap consumer goods.

The likely path ahead, a minefield of inflationary impulses, is still broadly downplayed (thus underpriced) by markets.

https://twitter.com/TXMCtrades/status/1590180579625951233

Self teaching is my preferred way to learn, but it comes with trade-offs.

On one hand, I am unburdened by formal education, so I don't carry many common cliché beliefs.

On the other hand, I have many gaps in my knowledge because I didn't start with a solid foundation. Everyone has a different superpower.

Mine is the willingness to learn anything the hard way, and my ability to communicate what I've learned to others.

I lean heavily into these natural strengths and they do much of the lifting for me.

Figure out what yours is and lean in.

Look y'all, I'm not saying the halving isn't cool. It's an engineering marvel.

But I will make the argument that the halving doesn't drive price action the way its reputation suggests, and I think a lot of folks have it wrong.

Some charts and ideas 🧵

https://twitter.com/TXMCtrades/status/1574387149495050242

The halving is a magical event where the issuance rate of new #BTC is halved every 210,000 blocks.

It is fundamental to Bitcoin's design.

It is also arguably the most well known, most priced-in aspect of Bitcoin. The entire issuance schedule is known over a century in advance!

One of the lingering Bitcoiner dreams is an idiosyncratic decoupling from all tradfi markets.

In my view, this makes little sense for a monetary asset.

I suspect the larger #Bitcoin grows, the stronger the sympathetic link with tradfi will be. It cannot be fought, bitbros.

https://twitter.com/TXMCtrades/status/1541961015247753217

I hold this view because it seems to me that #BTC desires to be a denominator for some amount of commerce.

In achieving this, it must necessarily form a symbiosis w/ existing markets and begin mediating the exchange of value for other goods and services.

That's the whole point.

One thing I'm watching is rent, an inertial piece of the core CPI basket. It is rising historically fast and could be a tailwind on inflation.

The historical relationship between home and rental prices gives clues about what to watch for.

Drink in this chart and continue. 🧵 We begin with ⚫️rent CPI (18mos ahead) vs 🟠median new home prices annually.

Rental costs tend to follow home prices on a 12-18 month lag (avg lease is 1 year).

Historically, rent usually doesn't begin *slowing down* until home prices are *flat or negative* on a yearly basis.

I see some big analysts projecting markets will have another leg down very soon, immediately followed by a march to new highs.

I think this view is cognitively dissonant and lacks historical context.

We can have one or the other, but probably not both.🧵 Put macro aside.

Accepting that all markets are related, let us consider the Dow Jones.

It caught the 200wk MA and pre-covid high pristinely, preserving parabolic market structure.

If it break this support, there is almost zero historical reference for new highs soon after.

Powell said today that "we'd all love" to return to a pre-pandemic labor force, but I'm not so sure that's possible.

While he and other govt officials keep citing a strong labor market, the underlying data belies a fragility.

A few charts. 🧵 It's true, the labor force has been growing, but it still remains far behind real progress.

As of now, the labor force is just -610k bodies short of the 🔴2020 peak, but that ignores lost 🔵trendline growth over 2yrs.

Accounting for this, we're still 3.5 MILLION workers short.

#BTC's bull was ignited by radically dovish CBs + fiscal stimulus, leading to:
* Historic global risk appetite
* Massive Grayscale arb
* Microstrategy buys

All of that, like low inflation, is in the past.

What makes a bull (ravenous demand) also kills a market in its absence.

https://twitter.com/TXMCtrades/status/1526275582740373505

The 2020-21 bull was authored by central bank policy, not by a tectonic shift of public interest in sound money.

Grayscale alone acquired as much #BTC as all other large entities combined in late 2020. Their effect on the market is hard to overstate.

https://twitter.com/TXMCtrades/status/1532356336243154949

Financial cabin pressure is rising as quickly as price.

In the span of human history, debt based systems have known a single destiny.

When gazing across the present landscape of money, labor, and credit- the spectrum of outcomes has only one hue: debase until bust.🧵 The Fed, limited by a lens of tradition, is driven on by an unemployment rate warped from secular demographic shifts.

https://twitter.com/TXMCtrades/status/1536456569101111296

They will likely march forward until the labor market, largely bereft of its willing supply, capitulates from consumer weakness.

#BTC futures open interest has expanded mightily at the lows.

As an annoyingly curious guy by nature, I took a look.

My findings led me to OKX. Let me show off some charts.🧵 🟤OKX's star has been rising of late.

OKX's total market share of #BTC futures recently surpassed 🟡FTX for the #2 spot, trailing only the king dog 🔵Binance.

Their pie slice has grown from 12.9% to 21.7% since June 6th. Most other exchanges are roughly the same in that span.

The # of countries with the twin illness of swelling debt and deficits is increasing, and history proves nations on this path face eventual sovereign default.

A few charts 🧵 We begin by looking at sovereign bonds via @MoodysAnalytics.

Since 2008, sovereign bond quality has drifted lower. Some advanced economies have been reduced to Speculative Grade with fewer achieving AAA ratings.

Many are clamoring for a pivot with sugarplum dreams of March 2020 in their heads. They all selfishly want another bite at the apple.

The Fed *does not want* to ease into high inflation & risk social unrest. They'd need to be *forced* to do so. That catalyst doesn't yet exist.

https://twitter.com/TXMCtrades/status/1525508741235453953

Another flawed belief IMO is that easing (or pausing hikes) will automatically create risk appetite. That piles of cash are simply waiting, sidelined.

Persistent inflation >5% will complicate that force.

Cash is sidelined because safe havens are toast and costs are exploding.

The wounded tire of reflecting on their own pain.🩸

Skeptics, non-natives, exiles, scorned investors, & tradfi ogres alike are bellowing their tired mating calls of cryptodeath & dancing upon graves.

Anything to deflect from the $Trillions of losses across markets and classes. The whole crypto space was warranted a reckoning due to a ponzi collapse and a stunning counterparty insolvency pyramid.

But much of the vitriol about BTC from skeptics is born from ingrained beliefs about "intrinsic value" and translucent analytical torpor.

In my view, the money printer doesn't go BRR unless something calamitous enough occurs that the Fed *and Congress* are willing to stomach entrenched high inflation because what broke is *even worse*. I think a lot of the pivot talk ignores a) what is required to create an appetite for renewed spending in Washington, and b) what pivoting early would mean for inflation expectations.

A pivot means abandoning the fight vs inflation, to risk living with it in unmoored perpetuity.