1/3

Breaking news Saturday night ... just as Biden arrives at the Hamptons fundraiser.

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President Joe Biden is expected to discuss the future of his re-election campaign with family at Camp David on Sunday, following a nationally televised debate Thursday that left many fellow Democrats worried about his ability to beat former President Donald Trump in November, according to five people familiar with the matter.

nbcnews.com/politics/2024-… 2/3

Betting market reaction to this news ....

Notice who moved ahead of Gavin Newsom into second place for the Democrat nomination.

1/4

Last week, BlackRock Admitted:

For now, about 80% of bitcoin ETF purchases have likely been coming from “self-directed investors who have made their own allocation, often through an online brokerage account."

cnbc.com/2024/06/16/adv… 2/4

The following chart shows that the average size of a Spot BTC ETF trade (blue) is just $14.6k, far less than any other ETFs that are very popular with Tradfi ... and about one-tenth the size of a SPY trade.

This is exactly what you'd expect if they buyer is retail Degens.

1/8

Consumer Confidence came out today and contained a message for everyone interested in markets and the economy.

tl:dr - Consumer confidence came in much worse than expected. Driving this was Democrats turning sour on the economy. Behind this seems to be a big worry they are going to lose the election this fall.

Since so much of economic data is opinion surveys, like consumer confidence, economists will look at this data and conclude that it means the economy is worsening, not that these surveys are really political, not economic, opinions.

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The University of Michigan put out its June estimate for Consumer Sentiment. It declined to 65.6, the lowest reading of 2024. 2/8

Bloomberg surveyed 50 economists, and they predicted Consumer Sentiment would rise from May's 69.1 to 72 in June. Instead, as shown above, it fell to 65.6.

Only one of the 50 economists had it this low. So, a big surprise.

1/5

What I'm looking for at the FOMC meeting today.

tl:dr - The long-term dot or their estimate of the neutral funds rate.
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This FOMC releases a new Dot Plot every quarter (M/J/S/D). Here is March.

Every dot is an FOMC participant forecast. The orange line is the median.

The Street's focus is the 2024 dots. The median (red line) was for 3 cuts. Will that come down to 1 or 2? 2/5

Instead, I'm looking at the long-term dot. As noted above, it is 2.56%

Here are all the long-term dots back to 2018. It was steady at 2.50% until a slight increase at the March meeting to 2.56%.

It has not moved for years, so it has been forgotten. But it might be ready to move now, and that matters.

1/4

Lots of talk about an economic slowdown, but what exactly is slowing down?

tl:dr, surveys of opinions, not actual or "hard" data.
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Start with the Bloomberg Surprise Index. It is an index of economic releases measured against the consensus forecast for each release.

How to read it?

A number above zero means the economic data is coming in above expectations, and a number below zero means worse than expectations. The trend matters as it shows whether things are improving or deteriorating (again relative to expectations).

What does it say?

The economy has turned sharply lower (steep downtrend) and, since the beginning of April, coming in much worse than forecasted (below zero).

Sound ominous. However .... 2/4

The chart above can be broken into two broad categories, shown below:

* Hard data (blue), which are actual measures of economic performance. Think retail sales, durable goods, auto sales (number of cars sold), international trade, etc.

* Soft data (orange) that measures surveys of how various economic actors think the economy is doing. Think consumer confidence, the Institute of Supply Management report of manufacturing (it is a survey of purchasing managers' opinions, not an actual measure of activity), the regional Fed Reserve surveys of activity, and the Conference Board Index of Leading Economic Indicators.

What does it say?

The soft data (orange) is falling apart fast and well below zero. This is the so-called "vibecession." People feel lousy about the economy.

But the hard data (blue), in this case, the measures of the labor market, are holding up reasonably well. This measure is still above zero and generally moves sideways in the better-than-expected range.

1/4

Lately, many are souring on the yield curve as a recession signal.

🧵on why the yield curve might still work.

tl:dr, it was never the inversion but the “uninversion” of the yield curve that signaled an impending recession.
@camharvey 2/4

As the table below shows, the curve inverts for an average of 275 days (“Days Inverted” column). This is, on average, 333 days before the next recession (“Calendar Days Inversion Date” column).

However, the time between the "uninversion" and a recession is just 66 days (last column).

The current inversion is 557 days (red), as of June 1 days and shows no signs of uninverting.

1/8

@joebiden sent the repost below five months ago, and it immediately received a community note. Falling inflation means prices rise at a slower pace, not decline.

This economic ignorance is not limited to the White House but also to respondents to inflation surveys like the University of Michigan.

Respondents seemingly do not know (or understand) the difference between "prices" (a level) and "inflation" (a rate of change).

🧵

https://x.com/JoeBiden/status/1730247565537390998

2/8

The Fed pays close attention to "inflation expectations" and believes this to be critical in setting monetary policy.

If everyone "expects" more inflation, then it becomes "unanchored" and runs wild. If not, it "remains "well anchored," and policy can be less aggressive.

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Powell from his May 1 Presser (our emphasis)



Although some measures of short-term inflation expectations have increased in recent months, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.federalreserve.gov/mediacenter/fi…

1/8

The bond market is comatose. What will wake it up?

🧵

Spoiler ... higher rates??? (But note this is a low conviction call). 2/n

The iShares 20+ Year Treasury Bond ETF ($TLT) has ~$50B in assets, making it a good proxy for overall bond market sentiment.

As the blue bars in the bottom panel below show, yesterday’s volume was just 15.33 million, the lowest since June 26, 2023.

1/8

🧵on what I see in the Spot BTC 13F filings

Conclusions

I feared the Spot BTC ETFs were effectively "orange FOMO poker chips." The Q1 13F filings only further convinced me this was the case. Only ~3% of the outstanding ETF mkt Cap was held by Investment Advisors, completely blowing up the narrative that "the Boomers are coming." They might over time (as in years) but did not in Q1.

~10% is held by hedge funds, and ~85% by non-institutional investors (read: retail).

I was concerned that the substantial volume in the Spot ETF could cannibalize on-chain volume. The Q1 earnings of $COIN indicated that this concern might be a reality.

Pulling money off-chain into the Tradfi world in the form of an orange FOMO poker chip will not get digital assets to the promised land of a new decentralized financial system. If anything, it is getting in the way of this goal.

Understand I have been a long cryptos for over seven years and have been an advocate for them. But, in my opinion, the way these instruments are being traded and promoted, is not going to help build a new financial system. At best, it happens in spite of them. At worst, they get in the way.

@EricBalchunas @JSeyff @MattHougan_ @NateGeraci @profplum99 @TrustlessState @RyanSAdams @LynAldenContact @nlw @APompliano @nic__carter @JuliaLaRoche 2/8

Anyone with over 5% beneficial ownership or at least $100 million in assets must file a 13F within 45 days of the end of the quarter. This was May 15. ~7,000 were filed.

What did we learn from the Spot BTC ETF filings? The table below shows some top-line results.

The shaded blue area shows the Investment Advisors' holdings. They are very small, between 2.5% and 4% (and 8.81% for $GBTC). A recent Citi report says the AVERAGE ETF is about 35% owned by investment advisors.

Throughout the quarter, we were confidently told boomers were calling their wealth managers and telling them to get into BTC. This is not the case for 95+% of the Spot BTC ETF holdings.

What was a surprise was the size of the hedge fund holdings. They were larger than anticipated. But here they were very concentrated in two or three very large HFs accounting for about half the total 13F holdings.

Why these funds are trading this massive size is anyone's guess.

* Arbitraging the funds or on-chain to ETF?
* Directional Degen bets?
* Or they bought into the long-term narrative in Q1.

My guess is a combination of the first two and very little of the last.

1/7

Interesting argument by @RickRieder.

🧵on why he might not want to be correct.

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Americans are earning more than they have in years from fixed-income investments, given that benchmark rates remain on hold at their highest level in a generation, according to Rieder, BlackRock’s chief investment officer of global fixed income.

“I’m not certain that raising interest rates actually brings down inflation,” Rieder told Bloomberg’s David Westin for an upcoming episode of Wall Street Week airing Friday.

“In fact, I would lay out an argument that actually if you cut interest rates, you bring down inflation.” Middle- to higher-income Americans “are getting a big benefit from these interest rates,” he said. 2/7

Rick Rieder argues the classic Modern Monetary Theory (MMT) idea that interest income causes a “wealth effect” that leads to more spending/demand and, thus, higher prices.

So, if the Fed cuts rates and reduces this wealth effect, spending (demand) would cool, and inflation would moderate.
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The chart below breaks down all government and municipal securities holdings by the owner’s income. The top 1% of households by income own almost 40% of all these bonds, and the top 50% of income owns 99% of these bonds.

Reider is correct. Most interest income goes to the top earners.

1/9

I've been asked about my stance on yields. Do I still think the 10-year yield is going to 5.00%—5.50%?

Yes

But I also took a neutral stance a few weeks ago.

75% of the move is over.

🧵 2/9

Where did 5.00% - 5.50% come from.

The belief is that the 40-year bond bull market is over (in 2020), and a multi-year bond bear market is continuing.

So, 5.00% - 5.50% is a higher high than the 5% peak of last October, as would be expected in a bear market.

1/6

A great piece by @EconTodd and James Carter about how the US Treasury messed up the last 15 years ago. (h/t @judyshel)
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Rather than issuing 50- or 100-year bonds when interest rates were at rock-bottom, the US Treasury dismissed this option and simply continued to borrow on a short-term basis. Now that US interest payments are ballooning, the scale of this blunder has become apparent, as have the implications for future generations.

project-syndicate.org/commentary/sup… 2/6

This almost triggered me to read as I have been arguing the same thing.
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April 29, 2012

“I don’t get why the Treasury thinks floaters are a good idea with short-term rates at zero percent, as they only have one way to go, and that’s up,” said James Bianco, president of Bianco Research LLC in Chicago in an interview on April 24.

“They should be lessening the cost of financing the United States government for the taxpayers,” Bianco said. “The Treasury should be issuing 100 year or perpetual bonds until the market can’t stand it anymore to lock in these rates.”

bloomberg.com/news/articles/…

1/6

As this chart shows, the current BTC price is the average purchase price of the Spot BTC ETF buyers. ~$57K to ~$58K 2/6

So, about $37 billion in Spot BTC assets (x-GBTC) now have no profits and maybe a small loss.

1/11

The more data we get, the more I worry about the risks involved with Spot ETF.

🧵to update
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Investment Advisors hold about 35% of all ETFs. However, they hold less than 1% of the new Spot BTC ETF.

"Here come the boomers" was/is a myth.

https://x.com/DylanLeClair_/status/1782749793510478215

2/11

Why does this matter?

It confirms my fear that the Spot BTC ETFs are effectively "orange FOMO poker chips" for paper-handed small-time traders (degens).

These degens are getting close to their breakeven, which could turn them in big-time sellers.

Let's dig in.

1/6

The deficit as a % of GDP (bottom), now 5.93%, is higher than in any period except the Great Recession (2007 - 2009) and the 2020 COVID shutdown (dotted line).

The government is borrowing to spend money like the economy is trying to recover from a recession. 2/6

This separates Federal revenues (orange) and spending (blue).

The difference is the deficit (middle panel).

The bottom panel (black) shows that taxes only cover 73% of federal spending. The other 27% has to be borrowed.

1/7

Happy Bitcoin halving day Degens!

A 🧵on

The flows peaked in a frenzy in Mid-March.

The 13Fs are a disappointment. Very little wealth manager adoption so far (like 1%).

Unrealized gains are shrinking fast.

Why I've been skeptical of Spot BTC ETFs. 2/7

* March 11 = only $1B inflow day.

* March 12 = Brokerage report saying $220B of inflows over the next 3 years (effectively predicting constant inflows, forever).

* March 13, all-time high close (5PM ET price)

Since the mid-March frenzy, inflows peaked (top panel).

1/15

What's going on with the bond market?

It is not pretty.

And if the bond market is ugly, everyone else suffers.

🧵 2/15

First, let's remember how this year started.

On December 18, 2023, BofA published its December 2023 Global Fund Manager Survey.

This graphic shows that these managers were the most bullish on rates since they started asking the question 20 years ago (2003).

1/13

The street has had a tough 24 hours.

Rallied bonds/stocks into CPI, thinking they would miss the consensus (below). Instead, they beat the consensus (above).

This morning, they sold off stocks/bonds into PPI, thinking they would beat. Instead, they missed.

🧵 2/13

We need to ask why getting a handle on inflation is so hard.

My take ....

* Inflation is incredibly hard to predict. It might be the hardest of all economic indicators.

* Everyone believes inflation is the easiest to predict.

1/8

Late afternoon🧵on the bond market

1-Day tick chart of the 10-year yield

The 10-year yield sold off back to the day's high yield, closing at 4.40%. 2/8

The 10-year yield closed on the 50% retracement (cyan line, 4.40%), the highest since Nov 27.

Will it hold?

Ultimately, I don't think it does.

For months, I have been in the camp since the 10-year trades 5.00% (last year's high) to 5.50% later this year.

Still there

1/5

Payroll Report Preview 🧵

Economists’ median estimate for tomorrow’s payroll release is 215k. Estimates range from 150k to 250k.

Note that February was initially reported as 275k. So, every one of the 61 forecasts has payrolls declining from last month. 2/5

Since the beginning of 2022, economists have often underestimated the actual payroll release.

During these 26 months, economists underestimated payrolls 22 times.

1/10

Grant Williams (@ttmygh) said we are a "Society of Speculators."

He is 100% correct, ir maybe more than 100%.

And if you understand this, many things start to make sense ... from TV viewership to markets.

🧵 2/10

Sports gambling is booming! And it is changing culture.

statista.com/chart/29332/gr…