1/16. Jeremy Grantham. Surely the greatest historian of bubbles wrote this article ("Waiting for the Last Dance") in Jan 2021 amidst the pandemic's monetary & fiscal stimulus euphoria. Nasdaq was at 1400, Apple at $128 and the meme stocks "to the moon".

gmo.com/europe/researc… 2/16. Wow, what a bubble! Wouldn't see that again? But we have: 4 yrs on, Nasdaq at 2,000+, Apple at $228 & meme stocks? Well, aren't they all meme now? Rocket Lab at 20X sales (earnings? 'forgetaboutit'), Palintir at 45X, Apple at 10X. Back in the day, these were P/E ratios.

1/13. Some comments about Japan and the carry trade. First point to note: back in 2021 there was no inflation. so BOJ could monetise the Japanese government debt with no consequences. 2/13. I go through the dynamics here. In short, government spending > taxation, so government borrows to fill the gap. The BoJ monetises the debt.

https://x.com/shortl2021/status/1586366953882808321

1/16. The word here is "nominal". So, OK, you didn't get a housing crash in the 1978 to 1985 period, but you also got a huge jump in nominal incomes. Mortgages got inflated to nothingness (my dear-departed dad's mortgage in the UK included).

https://x.com/LoganMohtashami/status/1818406405923332128

2/16. Like stocks, houses are currently wrongly priced. The discount rate has gone up (oh my f*cking God, it is actually a non-negative discount rate in real terms) and the implicit rent generated from the value of the house is low.

1/25. Apologies for the lack of tweets since the start of 2023. As with most people, I've been reflecting on what I want to achieve in 2023. This Twitter handle has been a labour of love and I never really expected to garner 18k followers or so in 18 months. But..... 2/25 ....it was really a "passion born in a time of Covid" where few people could get out much and were forced to sit in front of screens all day.

1/10. For weeks I've been reading books on both the French Mississippi & English South Sea bubbles of 1719/20. @ProfJohnTurner @wquinn05 compare & contrasts these bubbles in a chapter entitled "1720 & the Invention of the Bubble". 2/10. This period of financial history in France and England is so rich that I find it difficult to do justice in tweet threads. But the 2 authors give us the chart below to contrast & compare.

1/4. Market continues to call the Fed's bluff. The Dec & Sep dot plots show this starkly. For Dec, the most dovish 2023 projections are the (only) 2 below the 5% target range (just below it at that).

federalreserve.gov/monetarypolicy… 2/4. Three months ago, not one hawk was above the 5% target line for 2023! Note that the most dovish 2023 projection in Sep (Brainhard?) has moved up by 100 bps between the 2 meeting from 3.75 to 4.75!

federalreserve.gov/monetarypolicy…

1/7. Danielle @DiMartinoBooth was absolutely on fire in this interview with @JackFarley96 (yet again proving he is one of best interviewers out there). Too much to do justice to on a tweet thread, but jump in at 58 mins for discussion of private markets.

2/7. Anyone who has followed me over time will know that I am a huge skeptic as regards the private equity model. Are PE market guys smarter than public market guys or has the PE juggernaut just been an extension of free money & debt for a decade or two? You know my view.

1/7. Interesting report out from the IEA today setting out how Europe can cope with the Russian energy shock going into 2023. But, first, some perspective. In 2021, EU was supplied with 361 bcm of natural gas, of which 72 bcm was LNG using IMF figures.

imf.org/en/Publication… 2/7. For 2023, IEA see baseline demand of 395 bcm, and a shortfall of supply of 57 bcm. 30 bcm should be covered by existing initiatives, while the IEA suggests a further set of initiatives to close the final 27 bcm gap.

iea.blob.core.windows.net/assets/96ce64c…

1/19. I flagged the BIS report on $60 trillion off-balance sheet USD liabilities a few days ago, & @FedGuy12 made the comment that any discussion of this issue doesn't really make sense unless you take into account the offsetting assets on these trades.

https://twitter.com/shortl2021/status/1599790138866880512?s=20&t=W7BOuqSLhkeDHoDd-5uzgg

2/19. Now, @macroalf has done a nice little dive into the composition of these trades. First 9 minutes tackles how these trades arise, & from then onward he looks at the risk these trades pose.

1/9. As an old git, I was a teenager in the 1970s but was an econ nerd kid who read The Economist in my school classroom breaks. My experience then was that to control inflation you needed to get unemployment up & wage growth down.

atlantafed.org/chcs/wage-grow… 2/9. Michael Howell @crossbordercap, who I have huge respect for, suggests that the liquidity spigot is now being turned back on,....

1/4. The dot plot will be the main focus for the 14 Dec FOMC. @johnauthers highlights a piece today that emphases the wide dispersion in forecasts at the last meeting.

bloomberg.com/opinion/articl… 2/4. "For 2024 and 2025 there is almost as little consensus as there could possibly be. With the economic scene complicating further (energy prices are coming under control in a way that seemed unlikely three months ago;..."

1/12. Today I'm meeting up with some Imperial College grad students at St George's (marked in pink at bottom) and we are going to have a lot of fun doing a long walk from Southwark & through the City of London. Points of interest from this 1746 map.

knowyourlondon.wordpress.com/2021/03/17/bor… 2/12. Move up slightly from St George's, and to the right you can see an area called "The Kings Bench". You can get a larger image if you go to the link below and click on the map image.

knowyourlondon.wordpress.com/2021/03/17/bor…

1/9. Reading about the life and times of John Law, a central preoccupation of his thinking was the relationship between the monetary and real economies. 2/9. Read this passage from Janet Gleeson's "The Moneymaker":

"The problems of the country (France), he promised, all stemmed from a lack of available money. 'Trade and money,' he had written in Scotland, 'depend mutually on one another; when trade decays, money lessens;

1/16. Spent the morning listening to the latest @TheMarketHuddle with @kevinmuir & @PatrickCeresna with guest @stevehouf. Steve is in the structural inflation camp along with the likes of @VincentDeluard & @biancoresearch & like.

2/16. Steve's slide deck can be found at the link below. So the macro backdrop slide is here. But from then onward he goes on to unpack the quant factor implications for different inflation regimes, with the higher inflation regimes prominent.

markethuddle.com/wp-content/upl…

Gloomy UK Confederation of British Industry update gathering lot of media attention today:

Tony Danker, CBI Director-General, said:

“Britain is in stagflation – with rocketing inflation, negative growth, falling productivity and business investment..."

cbi.org.uk/media-centre/a… ".....Firms see potential growth opportunities but a lack of “reasons to believe” in the face of headwinds are causing them to pause investing in 2023. Government can change this....."

1/4. So let's see:

politico.eu/article/german…

"In a sign of what may be coming, chemical giant BASF — a pillar of German industry founded 157 years ago — announced at end of October that it would be "permanently" downsizing its operations in Europe to escape high energy costs." 2/4. German DAX YTD:

1/4. A couple of sites now part of my morning routine. @HarksterHQ I've mentioned before. But I also now regularly listen in on the @saxomarketcall. Cover macro/micro, perfect length & have great quirky slide pack every day. Couple of examples from today's call: 2/4. US crude inventories way down, while US becomes world's swing producer and market balancer via its surging exports. How long can this go on?

1/5. Listening to Powell's speech today, was like a reverse Jackson Hole. Delivery showed total indifference to financial conditions easing and ongoing risk asset melt-up.

https://twitter.com/biancoresearch/status/1598054857138921472?s=20&t=xn8unUAQ3MU_hQ2AoyNV6g

2/5. I'm a bit perplexed. As @biancoresearch points out, he did give a nod to the impact that elevated asset prices has on labour participation rate, but then chose his wording such as to turbo-charge risk asset price
rises even further.

1/8. Sometimes, I sit there thinking that I am occupying a different universe from the dominant investment community. At such times I read @hussmanjp:

"Despite year-to-date market losses, a further decline of roughly 58% would still be required to reach ordinary valuation norms. 2/8. ....That’s a loss of about 35%, from here, followed by yet another loss that wipes out 35% of what’s left. You know I’m not kidding.

hussmanfunds.com/comment/mc2211…

1/15. James Bullard, in a Nov 17 speech, roiled markets (for about 5 mins before they reverted to Dr Pangloss mode of "all is for the best, in the best of all possible worlds") with this chart suggesting terminal rate should come to rest between 5 to 7%.

stlouisfed.org/from-the-presi… 2/15. That was viewed as hawkish. But what jumped out at me was his dovish view of R*: the natural real (inflation-adjusted) interest rate, which he places as plus or minus 0.5%. This contrasts with Edward Chancellor's study of this rate through history.

1/11. Mandatory weekend reading: "Why Won't Energy Companies Drill?" Important since:

"US shale production growth (the only source of non-OPEC supply growth over the last decade) will likely remain muted for longer than most investors expect."

info.gorozen.com/q3-2022-why-wo… 2/11. Goehring & Rozencwajg posit 3 reasons:

1) Lack of government incentives
2) Low valuations that promote share buybacks rather than the needed CapX outlays for drill rigs
3) Shale oil and gas field depletion