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Michael Kao Profile picture
Michael Kao
@UrbanKaoboy
GS Commodities Trader➡Canyon Cvt/Cap Arb➡Akanthos Multi-Arb/Distressed➡Kao Family Office🏦Globetrotter✈ Headbanger🤘Star Wars Fan🌌 Mixologist🍸Diver🤿
Thread Reader App Profile picture Michael Kao Profile picture ashley chen Profile picture Scott Phillips Profile picture David Profile picture 10 subscribed
Apr 13 • 6 tweets • 3 min read
Glad to be back on again with @dmoses34 & @GuyAdami to talk about Macro, JPY, CNY, Gold, Oil but perhaps most importantly -- HOW CONTAGION HAPPENS. We end with an Idiosyncratic Event-Driven idea.

Show Notes became a full Thread this time!

urbankaoboy.com/p/interview-on… I highlighted BOJ's Dilemma as potentially the FIRST Domino in last weekend's "Battle of the BADS" post.

From the Show Notes this weekend, I wrote:

"Devaluation is the LESS BAD Choice for each of the individual actors (BOJ/PBOC/ECB) acting on its own because even though these countries run the risk of importing Commodity Inflation, they also benefit from Export Competitiveness...

The PROBLEM for Risk Assets globally is that when all of these CBs make the decisions that are most optimal (LESS BAD) for themselves, they can trigger COMPETITIVE DEVALUATIONS, which is what led to the Asian Contagion 1.0 of 1997-1998."

Apr 11 • 8 tweets • 3 min read
Musings of the Day, 4/11/24:

Incredible gaslighting, pun intended.

Just how stupid do they think consumers are? Incredible one day wobble in the Bottom-Most Jenga Block of the Risk Edifice! Image
Mar 18 • 8 tweets • 3 min read
Musings of the Day, 3/18/24:

Given the inability of $TLT to bounce (and the potential Bear Steepener that portends) and the mixed reactions to the AI Lovefest today, I would not be surprised to see Equities end in the RED by EOD. Been pondering the $BA Macro effects.

Will this ration Jet Fuel/Oil Demand (Deflationary) or will it spike airfares (Inflationary)?

Maybe a little of both and a net nothing-burger?

zerohedge.com/markets/less-f…
Mar 12 • 9 tweets • 2 min read
Musings of the Day, 3/12/24:

The CPI came in hotter than expected but maybe not hot enough to forestall a Fed that seems eager to cut (at least based on market reactions).

My own odds of a June cut are rising, although I think it sets the stage for a problem in 2025. I agree with @biancoresearch 's thesis that if they don't cut by June they are trapped into inaction for fear of seeming partisan.

Therefore, I expect a certain "lumpiness" to the Fed's calculus for the June decision.
Feb 24 • 11 tweets • 4 min read
New post in Bio!

Re: Investing - Private Credit & The Ostrich Effect.

Private Credit is the fastest growing piece of the Leveraged Credit Trifecta which also includes Leveraged Loans and High Yield.

This piece covers:

- 4 Liquidity Categories for Yield Vehicles
- The Ostrich Effect of not Marking-to-Market
- CLOs vs BDCs
- Volatility vs Risk of Permanent Capital Impairment

#PrivateCredit #HighYield #LeveragedLoans #Credit #CLO #BDCImage Here is a strong sign that Private Credit is providing Exit Bid financing for Lev Loans.

2023 was the first time in years that the Lev Loan market CONTRACTED despite continued CLO growth.

Private Credit is IMPROVING Supply/Demand dynamic for Lev Loans.Image
Feb 4 • 5 tweets • 2 min read
Episode 5 of KAOS Theory is out!

@ttmygh and I interview retired Brigadier General Robert Spalding (@robert_spalding) on the topic of Information Warfare and the CCP's methods of "Unrestricted Warfare" in this age of rising Geopolitical Conflict.

urbankaoboy.com/p/kaos-theory-… Robert Spalding is a retired Brigadier General of the United States Air Force. He has previously served as Senior Advisor on China to the Chairman of the Joint Chiefs, Defense Attaché to China, and Senior Director for Strategic Planning at the National Security Council under the Trump Administration​​. General Spalding is a Senior Fellow at the Hudson Institute with a focus on U.S.-China relations and is also CEO of SEMPRE (Secure EMP-Resistant Edge).
Jan 24 • 15 tweets • 4 min read
Musings of the Day, 1/24/24:

I covered the last bit of my $XOP Put deltas at 127 and Gamma has taken me long now.

Oil Technicals look slightly better, but the Fundamentals still suck, and I'm likely to whack this thing out again if I can get a decent bounce.

@BurggrabenH Image Already puked my $UVXY for teeny scratch — shame on me for trying.

Taking it all out on pumped Idiosyncratic Implieds and selling some OTM Calls against some of my names that have ripped with this Equity rally.
Dec 27, 2023 • 8 tweets • 3 min read
Musings of the Day, 12/27/23:

EUR strength is both perplexing and obfuscating in its masking of USD strength elsewhere.

Is Lackadaisical LaGarde really going to Out-Hawk Pusillanimous Powell?

Rhetorically, it would appear so, but in the end, ACTIONS speak louder than words.
Image
Image Very confusing Macroeconomic Pond again.

- Bonds, Gold, BTC/Crypto, USD all pricing in Recession->QE.
- Equities and even Base Metals pricing in Reaccelerating Growth.
- Oil is just confused.

If anyone has a Crystal Ball, I'd love to borrow it.🙋‍♂️

Dec 24, 2023 • 9 tweets • 3 min read
I finally finished my new post:

Re: Investing - Opening The Kimono: 2023 In Review.

I seldom talk about my Micro/Idiosyncratic bets, but I "open the kimono" here as I talk both Micro/Macro and share some thoughts on 2024. Think of this as my Year-End Letter to my biggest LP - Me.

Link can be found in my Bio.

Merry Christmas and Best Wishes for 2024!Image The thing I love about that other community that shall not be named is that it allows me to go back and fix typos/grammatical errors after the fact.

I also made a bunch of additions to the post. Enjoy!
Dec 13, 2023 • 8 tweets • 3 min read
Musings of the Day, 12/13/23:

Good chart from Bloomberg by way of @nglinsman and @Halsrethink that corroborates my Dry Tinder Mental Model for Inflation:

Image While I am surprised by today's unequivocally Dovish Dots, remember that the Fed is a monarchy and not a democracy.

I continue to believe that the loosening of FCI will wind up being self-defeating in the end. I would not be surprised to see the Dots migrate back up next year.
Oct 21, 2023 • 7 tweets • 2 min read
New thread is out!

Re: Inflation/Oil/Gold/Yield Curves - Revisiting Bear Steepening, Recency Bias & That 70's Show.

"Loss of Faith" narratives abound with respect to the UST and USD with the recent Bear Steepening, which I debunk.

open.substack.com/pub/urbankaobo… Latest from Lakshmi on Oil, which I 100% agree with:

"We have built up nearly 8-9$/BBL of war premium in a market that has seen no supply disruption, Asian and EU demand showing significant cracks, and the US just about a q behind them."
Sep 22, 2023 • 9 tweets • 3 min read
Musings of the Day, 9/22/23:

We are just now hitting average 10Y yields since 1790, which illustrates in stark relief the dangers of Recency Bias and just how spoiled we’ve become.

Chart h/t DB. Image The corollary is that this Snap-To-Reality happened in just 18 months!

You know how sometimes there is a slight delay between when you stub your toe and when you start screaming @#$%?

That's the Economy. Soft Landing my ass. Image
Aug 3, 2023 • 22 tweets • 5 min read
Re: Inflation/USD/Macro - The "Ivan Drago" Fed.

I thought I would pull out the Macro Presentation part of my "Ivan Drago" Fed piece and put it into Thread form, because it is so important. (THREAD) twitter.com/i/web/status/1… On 7/27/23, I participated in a CRE Panel and closed out the discussion with a 30,000-ft view of the Macro environment. Here are my key points.
Jul 23, 2023 • 61 tweets • 13 min read
Re: USD/China - The Donkey Kong Dollar Peg.

Why CNH/CNY will continue to weaken and why HKD is also vulnerable. (THREAD version) twitter.com/i/web/status/1… Like many kids who grew up in the 70’s and 80’s, I was an arcade game junkie. One of the games I invested countless quarters in was Donkey Kong, in which a lovestruck Mario braves numerous challenges to rescue the Princess from Donkey Kong, who has taken her captive. Image
Jun 4, 2023 • 9 tweets • 3 min read
Musings of the Day, 6/4/23:

Channeling Christopher Moltisanti, "there might some dysentery in the ranks" within OPEC+.

wsj.com/articles/saudi…
Jun 2, 2023 • 16 tweets • 5 min read
Musings of the Day, 6/2/23:

How much wood could a Fed Chair chop if a Fed Chair could chop wood?

Yes.

May 25, 2023 • 7 tweets • 3 min read
Musings of the Day, 5/25/23:

If you haven't read my latest Oil piece, please take a look as it has macro implications.

I said yesterday's spike (or any spike right now) was a FADE. See chart below.

Image Because swallowing up one of your only competitors after they implode is not anti-competitive?

I have no solution for this, but this made me think that the bank resolution process needs to be revamped to maybe divvy up assets amongst smaller players?

May 25, 2023 • 7 tweets • 3 min read
I normally like to drop my Substacks over the weekend, but because I'm heading to BottleRock Napa tomorrow for the long weekend, here it is NOW.

Re: Oil-Thesis Recap & The Supply/Demand Singularity Revisited.

urbankaoboy.com/p/re-oil-deep-… I want to thank the management team of my PermianCo, Lakshmi Sreekumar of Capital One, and Alexander Stahel of @BurggrabenH for their invaluable insights and work. They’re the ones doing the real work — I am merely synthesizing.
May 24, 2023 • 12 tweets • 5 min read
Musings of the Day, 5/24/23:

This is all brave talk for the BOE -- before it has to plug another hole in the Gilt market and sacrifice GBP again.

#USDWreckingBall

twitter.com/i/web/status/1… Image MbS warning/blaming speculators yesterday for Oil’s weakness reminds me of Mahathir’s similar accusation of speculators when the Malaysian Ringitt devalued in Summer’97 (which cascaded into the Asian Contagion of ‘98).

It’s a tell on underlying MACRO WEAKNESS.

@BurggrabenH
May 23, 2023 • 11 tweets • 3 min read
Musings of the Day, 5/23/23:

Home-Grown is the New Normal.

Hopefully, the asymmetric and unidirectional tech transfer to China comes to a screeching halt.

wsj.com/articles/china… Little do people know that this is all because we have passed the event horizon of a supermassive black hole and time has slowed to a crawl.

H/t DB for the chart. Image
Apr 3, 2023 • 6 tweets • 2 min read
Musings of the Day, 4/3/23:

Listening to Cramer gush about China's recovery because of strength in Macau results makes me think China is getting even closer to CNY devaluation:

1. Caixin PMI yesterday was terrible.
2. PBOC CNY printer go BRRR.

This is BEFORE effects of OPEC+ cuts being felt in the market obviously.

HIGHER FOR LONGERERERER.