"The real carry trade isn't a HF trade. It's Japanese pension funds, insurers, institutional money, all quietly deciding that returns are better outside Japan than inside it."

This is, unfortunately, dead wrong. Incontrovertibly so. Pure poppycock.

This should be embarrassing.

https://twitter.com/JeffSnider_EDU/status/2078328912925569254

Helpfully, the Ministry of Finance collects and publishes the data for foreign securities and publishes it every week/month. GPIF, Life insurers, etc all do too quarterly or yearly.

MoF and GPIF data is shown below. Other public pensions copy GPIF.

Interpretation in next page.

There are a bunch of breathless comments out there from twitter engagement farmers on the Japanese govt, the yen, regarding FinMin Katayama's comments at a news gaggle last Friday morning.

Various comments in the media talk about "pressuring" or "encouraging" the GPIF and other Japanese pension funds to "repatriate" or "shift" funds from overseas assets to domestic assets.

To start with, there was a cabinet meeting Friday. After cabinet meetings, there is always a press conference. Different ministers answer press questions.

A question was asked of

There is a classic quote about currency pegs. There's never been a peg which hasn't broken.

There is a secondary quote about currency boards. There's never been a currency board which HAS broken (involuntarily).

If a country sets up a currency board, no swap line is needed.

https://twitter.com/ericwallerstein/status/2051720943442206737

The nature of Hong Kong's Linked Exchange Rate System (which hasn't collapsed since its demise was imminent in a 2019 white paper by Kyle Bass not to mention man more before), is that the floating currency is backed by USD. Every HKD printed has USD behind it in reserves.

You know all those "experts" like this guy who rely on LLMs to tell you what things cost in the future by using past costs?

Yeah. Didn't think so. I don't know that many either. Just this guy. I don't know any expert in the field who would make a real decision by asking an LLM.

https://twitter.com/AlexEpstein/status/2023919849433706912

The supposition he made a couple of days ago was that it would cost 23x as much as natgas.

Given subsidies at their highest were never 95%+, utilities who have solar as by far the highest portion of incremental generation capacity - both last year and

https://x.com/AlexEpstein/status/2023187542888349959?s=20

@abcampbell Well done. The two things I would note are:
1) conversion of PV panel mfg to copper, at that payoff profile, might not take as long as that. The supply chain is very concentrated. The top 10 mfrs in polysilicon, wafers, cells, and modules are 80-90% share. Know-how needs are not @abcampbell super diversified, and it can be done in steps. Low temp curing of silver-coated copper paste formulations are already out there. Given a lot of new PV panel mfg capacity is still to come on line in the years ahead, given expected growth rates, if new mfg capacity were switched

For people looking at the Trump trade "deal" with Japan and saying "Trump removed all barriers to US cars and trucks selling in Japan", the correct response to that is... "Uh.... no."

Japan has a zero-tariff policy on automobile imports. The US has been able to export. It hasn't in part because they don't sell well. The majority of US auto exports to Japan are made by Japanese companies in the US.

The USTR every year puts out a report called the National Trade Estimate Report on Foreign Trade Barriers. It's long (397p this year). The section on Japan

Let's start from the back end. "Tell me why I am wrong."

OK. Fair. Here is why you are wrong. A 🧵:

Bill, your assumptions are, well, assumptions.

The first assumption is that this is a trade war between the US and China. That is wrong.

To my knowledge, Donald Trump has

https://twitter.com/BillAckman/status/1916088788557742186

broken EVERY SINGLE trade agreement which was in place between the US and other countries, before him or which he, himself, signed, including USMCA which was "maybe the greatest deal ever done."

Donald Trump has, for decades, been a fan of tariffs. He ran on it. He put tariffs

The proposed USTR schedules for port fees are out.

For Chinese/HK/Macau owner/operators (not necessarily of Chinese vessels) For foreign (non-US) owners of Chinese vessels:

with exceptions:

Just getting around to the USTR Section 301 hearings on the Proposed Action in Section 301 Investigation of China's Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance.

Like the USTR report released in Jan, it is something of a disaster. 500+ pgs of it. There are people who support (politicians, labour unions, ports, dockworkers, steel companies, etc).

They almost all use the same talking points from the USTR report which were... wrong. They were factually incorrect in the USTR report and they were the same, or worse in the

The problem with Miran’s argument is shown in his own quote.

If two non-US countries TRADE with a USD price, and they do not tariff each other, then it is frictionless. The US does not collect 10% via tariffs.

I’ve been through this before but a reserve currency is not so

https://twitter.com/stevehou0/status/1909344035418079455

because people trade using a dollar denominated price. It is based on where the end profit is allocated to as savings.

If a European company buys 1mm bbl of oil from Aramco, first EUCo uses Euro to buy USD. Gives to Aramco who gives it to Shipper (who EUCo has also paid USD)

@BlankBl23041510 @Citrini7 1) I don't think the market believes they will last as set.
2) There are many paths.
3) One path is simply a LOT lower consumption.
4) Over even a medium-term, if the system put in place has permanence of intention, it leads to capital controls (i.e. lower real yields) @BlankBl23041510 @Citrini7 but basically, if you have partial or full capital controls and lower real yields, that's simply financial repression by the state - financed by low returns on capital and less choice.

To get from A to B, there are a finite number of outlets and offsets.

@Citrini7 Ask yourself what you think a reserve currency is.

Is it the fact of a stock of financial assets in a currency?

Or is it a propensity to have a flow?

If the trade deficit (flow) immediately goes to zero, the stock remains unchanged.

Other flows shift. Americans net save. @Citrini7 Americans consume less (because they save more). They produce more to consume what they cut off from the outside world. Jobs which were related to consumption become jobs related to production. All fine. The savings finance the part of the govt deficit no longer financed by

@dampedspring @Crinklebine I agree. But I think not one of them actually understands how tariffs flow through the economy.

The Bessent/Friedman idea of inflation is that tariffs don't create inflation because when the price of one thing rises, but nominal income does not, then the prices of other things @dampedspring @Crinklebine have to fall. Simplistically, that means:

1) Tariffs cause imports to rise in price. Let's say 15% of GDP is imports. Add 20% to prices. Imports drop 20%, so the price of 12% of GDP rises 20%. That's 2.4% inflation.
2) 3% of GDP which used to be imports are now American, and

Not to worry. Scott Bessent - whom a lot of you thought smart - told us tariffs don't cause inflation because when prices on tariffed goods go up, prices on non-tariffed goods go down. So no inflation.

That must mean the prices of 100% made-in-America goods and services go down. And the nominee for the Chairman of the Council of Economic Advisors said, "Tariffs provide revenue, and if offset by currency adjustments, present minimal inflationary or otherwise adverse side effects, consistent with the experience in 2018-2019."

I admire the heck out of @michaelxpettis here but he has some of this thread a bit wrong.

He starts by quoting the Chinese commerce ministry. I'll let you read that.

Next he says the context here is to "force households as consumers to subsidize production of ships at home."

https://twitter.com/michaelxpettis/status/1895310086194766332

That math doesn't math.

The new US policy is to charge a large amount of money per Chinese vessel operated by a Chinese shipping company, or a smaller/larger amount to a non-Chinese shipper with Chinese vessels in its fleet or with vessels on order from Chinese shipyards.

Kids, don't do this at home. Chart crime doesn't pay.

1) Don't do TotRtn of *yield* on 10yr vs other 10yr, calling it "related to cross-currency swap" when one yield is 8x the other at the start 🤷‍♂️
2) IF "JPY carry trade leverage" (i.e. "funding"?) is getting more expensive and you happen to be short JGB 10yr vs UST10, you are making not losing money. You couldn't possibly tell it from the 2yr chart above but assuming GC borrow, the now 8yr JGB you shorted 2yrs ago is ~92.5 and your now 8yr UST long is 96.50-ish. You've made 7.0-7.5% in carry, 4% on the

I'll admit I am not sure what @riteshmjn's (or Luke's) "second derivative" is here.

I will, however, point out that if the USG suddenly stops paying X% of GDP into the economy, it does not mean the US GDP is instantly and permanently downsized X%.

https://twitter.com/riteshmjn/status/1890799641622388953

We can look at it from a different perspective - one easier to think about.

The USG fires one person. USG spending goes down by the salary and other related payroll items of that one person. GDP goes down, ceteris paribus by the total reduction of spending of that person?

No.

The Wall of Shame: A 🧵

Scott Bessent: "The U.S. has a strong dollar policy, but because we have a strong dollar policy, it doesn't mean that other countries get to have a weak currency policy."

reuters.com/markets/us-loo… Hike input costs by $1trln, and consumption stays the same. Trump gets $1trln of tariff revenue.

And as Scott Bessent told us, there's no inflation because consumption/prices of other goods (the non-imported US-produced ones) go down.

An interesting thread by @Geo_papic . Worth reading.

I found the @Stevemiran piece odd. Weirdly judgmental. And at odds with its own arguments.

Some of the cognitive dissonance within is just Trump-following.

Trump wants a weaker dollar, and lower trade deficit, but also

https://twitter.com/Geo_papic/status/1875408338714042848

wants foreign countries (which will be "taxed" and "paying" tariffs) to maintain their pace of using the USD as a reserve ccy.

This doesn't make a lot of sense. One cannot have foreign countries "profiting less" but then reinvesting the same USD amount.

The Trump concept is

Some MORE comments about index construction.

1) Generically speaking, there are VERY few large US stocks which issue large amounts of new equity in order to buy something. It happens from time to time, but it is reasonably rare.

When a company like MSTR issues new shares to buy BTC, it gets a little complicated. The MSTR issuance was not a large block. It was an at-the-money offering which means the brokers doing the offering sell shares bit by bit in the market. At a certain point, the share count of newly issued shares will become 10% of TSO.

Some comments on index construction.

Whenever I discuss index construction, there are a few tautologies and a few misconceptions which arise.

When a stock like MSTR or SMCI or TSLA go into a big index, lots of people comment. It's worthwhile going through the mechanics. To start with NASDAQ said on Friday that PLTR, MSTR, and AXON will go into the NASDAQ 100 as of the open of Monday 23 Dec, replacing SMCI, MRNA, and ILMN.

That means there's buying and selling to do on 20 Dec at the close.

.nasdaq.com/articles/nasda…