Most Americans assume a strong dollar is automatically a good thing

They view currencies like a scoreboard of how “good” or “bad” a country is doing

This is dumb, here’s why 👇🏼 If you’re an American who spends most of your money traveling abroad, then yes, it feels amazing when the dollar is strong

It’s pretty fun to go to Japan right now, where everything is 33% cheaper than it was a few years ago

The only chart you need to understand macro economics and personal finance for the next 30 yrs 👇 Coming out of WW2, the US federal debt hit a whopping 120% of GDP

Which was a problem, because of the next thing:

There's a law of nature when it comes to taxes

No government has ever been able to sustainably collect more than ~20% of it's GDP as tax revenue

Regardless of what it tries to do with taxes rates

There are only 4 metrics that matter in any business:

1) profit per hour (of YOUR time)⏳

2) profit per employee 👥

3) market share 🥧

4) moat 🏰

These are the Golden Metrics 👑 The Golden Metrics are equally valid for companies of every size, in every industry

Whether you’re a sole proprietor, or a Fortune 500 CEO

If you fail to measure them, you will work way too hard, for way too long

And you will give up years of your life in exchange for mediocre outcomes

Still relevant 👇 https://t.co/cl6kYVzqup

https://twitter.com/maxjanderson/status/1588039111973257221

If rates stay at 5.5%

The cost to service America’s $33 trillies of debt

grows to $1.8 trillies per year

Which sounds like a lot of fun coupons

But unless you’re a mouthbreathing giga🧠 turbo nerd

trillies are a silly concept

So to translate for the midwits like me…

Massive $120bn drawdown in Reverse Repo yesterday, atop no significant change in TGA, and flat Fed Bal Sheet week-over-week.

Strong bid for Treasuries across the curve for everything 6mo+ duration coming out of yday's FOMC

$SPX ~200pts above fair value, while $BTC has reverted… twitter.com/i/web/status/1… Watch RRP closely over the coming days. If RRP continues drawing down aggressively (esp by more than what's required to fill the TGA) it may indicate the time has finally come for that sidelined $2T to re-enter the game

fred.stlouisfed.org/series/RRPONTS…

Updates at 2pm EST daily

$SPX is ~100pts above fair value based on USD Liquidity, looking forward 1-2 wks

$BTC is ~$500 above fair value based on same model

Neither divergence is significant on a coincident basis

But both are exceedingly offsides on a 3-4mo forward basis Based on most recent TBAC recommendations:

⚠️ Treasury should issue $733bn of net-new debt between now & end of Sep

✅ Of this, ~75% ($554bn) will be in the form of short-dated T-Bills, which can be mostly funded by pulling funds from RRP (liquidity neutral, this is good)

I share this chart periodically

The media & most of FinTwit tend to focus on 2 main factors:

⚪️ Fed Bal Sheet
🟢 Net Liqudity

Recently w/ debt ceiling on horizon, there’s been a lot of talk around TGA 🔴 too

But none of that matters relative to what happens with RRP 🟡

👇 There’s $2tn of excess liquidity still trapped in RRP

Which will come back out eventually

And unfortunately, despite our gov’s best efforts to make the 💵 worth as much as 🧻

two trillion united states dollars

still happens to be an economy-incinerating fuckload of money

The most unpopular truth in business: It’s better to own the only company in a $10mm / yr market

Than to have competition in a $10bn / yr market

Sharing in case helpful for anyone

Critique welcome as well

Personal portfolio update. NFA 👇 Traditional ETF Portfolio (80% of liquid NW):

10% Non-US Equities $VXUS
5% US Small Cap Value $VBR / $IJS
5% US Large Cap $VOO / $VTI

10% Precious Metals
5% Energy
5% Commodities

35% Floating Rate Treasuries $TFLO $USFR
5% Medium Duration Treasuries $IEI $IEF
5% Long Duration… twitter.com/i/web/status/1…

Cool visualization

⚪ Today's yield curve

vs.

Yield curve @ point of max. f*ckery heading into prior recessions:

🔴 Sep '19
🟠 Feb '07
🟡 Oct '00
🟢 Jun '89
🔵 May '81
🟣 Oct '79

vs.

"Normal" yield curve (for comparison) You'll hear a lot of talk about the 2y/10y and 3m/10yr both being *technically* inverted right now

However, a closer look shows that yield curve inversion aren't binary

They're a gradual, rolling process

And move on a gradient from not bad to VERY bad

https://twitter.com/maxjanderson/status/1587653110117371904

For anyone who still believes the narrative that this inflation was an accident

Or some kind of "policy error"

Here's a brief reminder about how sovereign debt bubbles work 👇 First, a yucky situation:

🚨 Debt/GDP > 100%

The Fed just gave *big* guidance

They plan to take rates to 5%+

And hold them there for most of next year, until they've "defeated" inflation

Here's why this won't work

(according to basic math) 👇 In 2019, pre-pandemic, debt service accounted for 13% of our federal budget

#4 biggest line item

2019 Budget:

🏥 Healthcare: $1,240bn
🧓🏼 Pensions: $1,100bn
🪖 Defense: $940bn
❌ Debt Service: $580bn ⚠️
👪 Welfare: $370bn
📚 Education: $150bn
🚀 NASA: $22bn

@JLCap1 Start w/ completely flat YC

As a bond investor, say I believe things will get steadily better every yr for next 30 yrs

If someone wants to borrow $ from me, the longer they want to borrow it for, the higher my oppty cost will be on making that loan (so I demand a higher rate) @JLCap1 As such, an up-sloping YC means bond investors in aggregate believe that things are going to get steadily better over time

Same works in reverse

Downsloping YC means bond investors in aggregate believe things will get worse over time

What a normal (bull market) yield curve looks like:

🔵 10yr
🟢 5yr
🟡 2yr
🟠 1yr
🔴 3mo What a f*cked yield curve looks like:

🔴 3mo
🟠 1yr
🟡 2yr
🟢 5yr
🔵 10yr

This is fascinating

Visualization of all yield curve inversions vs. total US stock market since 1980: Zoomed in to highlight past few recessions:

I currently generate ~1.5-2% on my cash every week (80-100% annualized) with cash-covered puts.

Yes - you read that right.

It comes with some risks one must be aware of & comfortable with, but those numbers are real.

Here's how 👇 First off, you need to have 2 things to get started:

1. have a particular stock in mind you want to own more of

2. Enough cash to purchase at least 100 shares of that stock

Now let's look at a real world example available right now:

Max bearishness = high premium for puts

Have cash on sidelines + a particular stock you’ve been eyeing for a long-term hold?

Cash-covered puts = your best friend in this environment:

✅ generate up to ~10% on your cash annually
✅ buy a stock you want at below current price

https://twitter.com/michaelaarouet/status/1583846218664357888

How?

➡️ Sell put w/ strike below current price
➡️ Collect premium instantly
➡️ Wait for option to expire

One of two things will happen:

How to spot the perfect entry point to short $SPX

This formula caught 3 of the best short oppty's of 2020, to the day, with 1 day's advance warning:

➡️ Jan 3
➡️ Apr 20
➡️ Aug 15

Here's how it works and how you can use it too

👇 If you're not familiar with Net Liquidity 💦, and $SPX's remarkable correlation to it, take a moment to read this thread:

https://twitter.com/maxjanderson/status/1546472693234470912?s=20&t=hMSYqKQcn2-Nnmx_aKQV8g

⚡ Math quiz:

Two portfolios start with $1000 each

Portfolio #1 earns a steady 10% per year

Portfolio #2 alternates between a 30% gain and 10% loss every other year

Both have the same average annual return of 10%

After 100 years, which portfolio is bigger? 🤔

👇 Answer: after 100 yrs...

Portfolio #1 = $13,780,612
Portfolio #2 = $2,566,215

The portfolio with steady returns (i.e. lower volatility) performs more than 5X BETTER 🤯

Despite IDENTICAL average annual returns

$SPX remains pinned near fair value based on Net Liquidity, while fair value continues to steadily decline towards a year-end target of 3500-3600 No obvious moves here, but if $SPX drifts above ~4050 (>200pts above fair value), I will likely put on an unlevered short via $SH to hold through EOY or retest of June lows, whichever comes sooner

Sized just to hedge my underlying long term holds, not trying to profit on shorts

After today's selloff, $SPX is back near fair value of 3800-3900, looking forward 1-2 wks

Zooming out, Liquidity continues to gently roll down, in line with our expectations for accelerated QT beginning in September

EOY targets remains around 3600 Looking ahead, one major potential downside catalyst to be aware of:

Deadline for 2021 tax extension coming up mid Oct

Any individuals + corporates who filed an extension for 2021 taxes have to pay the Treasury in Oct

🔴 TGA ⬆️
🟢 Liquidity ⬇️