Comments
-
SROk, so I get your USD thesis....... BUT, what if the US markets crack much sooner than you expect, which at these levels wouldn't be a surprise? In that case, because so much of the US domestic economy is tied to the US market, this would have a major impact on consumer spending, almost immediately, especially on big ticket items. The retiring baby-boomers would just want to get out in a rush of panic?. US companies would put hiring plans on hold in an instant. (I also note many companies are actually getting their current employees to work longer hours rather than hire more employees - this makes perfect sense this late in the business cycle). If the market drop is big enough the FED would likely stop or put on hold QT and/or the next rate rise. This is turn would crush the USD (and Trump wants a lower USD). Under this scenario EM would rally strongly, along with commodities and the DM/EM divergence mean revert. This I know is a contrary view to your base case, but IMHO, it's just as likely? I'm open to constructive critique.
-
JJHi Raoul and Julian, Are there any instruments for retail to watch the CDS for US, Europe, and EMs? Thx, Namit.
-
JKJust read an article in the WSJ on the rate of repatriating profits. Seems a bit tepid in Q2. In the event of a downturn in the US could corporate cash needs be enough to exacerbate the rise in the USD? Or would tax consequences prevent this from happening in mass? Thoughts anyone?
-
MNgreat discussion. very helpful.
-
JKCurious to get your reaction to today’s events. Specifically tariffs announced and none of the expected movements. Was this priced in already? Other factors? Love to get your take.
-
RSDoes anybody know the video that Raul refers to on Rules based .., Also the date of Julien’s video on road map. Thanks.
-
NIRaoul and Julian, Speaking of a Cold War-esque escalation with China I thought you and some of the other readers (particularly anyone holding BABA) might find this to be an interesting read: https://deep-throat-ipo.blogspot.com/2018/08/the-baba-20-ffinancial-comedy-gold.html Everyone knows about the accounting discrepancies at BABA but let’s be honest, I’m sure none of us here have actively taken the time to read through BABA’s absurdly convoluted filings and reconcile the disparities. Well, this wonderful man, Bob Wittbrot — currently the owner of an insurance agency but formerly a CPA, auditor and CFO — has taken the time out of his life to do so since its IPO. He makes some assertions that may be a bit sensationalist (strong CCP involvement), however his dissection of some of the absurdities within their 20-F filings is on point. It’s hard to believe a company with a market cap as large as BABA could potentially be goosing their filings and getting away with it. Then you take a look at the 20-F and it makes Amazon’s filings look like Dollar General. Personally I think Chanos was onto something but his timing was wrong, fighting the momentum in Chinese tech names had been a losing proposition for the past few years. It will be interesting to see how this all unfolds in the next crisis. Is BABA a house of cards or do their 900 subsidiaries actually do something besides funnel money out of US investors pockets? Are the numbers entirely fabricated, are they simply goosed a bit, or are they genuine? I’d bet everything I have against the latter. The question is what is the extent of the fraud and can their organic growth allow them to sweep this under the rug for the foreseeable future, or will the trade war and potential ensuing crisis cause cracks in the shaky foundation? Also, thanks for another great video!
-
GLA USD shortage of the sort we had before in the '82 with the Latam debt crisis and in the 97/98 with the Asian financial crisis is less likely now as EMs on the whole have much more USD reserves, they have fewer structural imbalances (exceptions being Argie and Turkey), fewer currency pegs and more FX hedging. ST external debt is also mostly covered on aggregate by reserves, so implies no rush to secure USDs. On the other hand, some EM imbalances have worsened in some cases, debt/leverage has increased (mostly China) and this means more USD debt exposure. Yet, cross-currency swaps markets are not showing any unease. Nor is LOIS. Perhaps these could spike suddenly later and the USD does get out of control, but the big spanner in the works is US trade tensions. The escalation will hit the US consumer, and this is bad for stocks (camouflaged by BBs) and this could in fact be the trigger. So, not from a weaker China and weaker Europe, but a sell off in overvalued US equities that causes the Fed to ease off, arresting and reversing the USD's ascent. The USD smile is therefore a lot wider now than it has been in the past (due to QE and fiscal stimulus globally) and this means there is more space between good and bad USD rally, which means more time for the US growth narrative to deteriorate and send the USD lower.
-
AMHave European banks "hedged" some of their credit risk through credit default swaps? If yes, who are the counter parties?
-
MWJust one possibility I think of in such an uncertain and volatile world. The LTCM of now could just be the passive investing ETF owning internet and technology stocks, like FANG. When these stocks reach a reversal point like Bitcoin in Dec 2017, the stampede could be in similar scale as LTCM. Just look at the damage Tencent (700 HK) did to HOng Kong market. Another point is that foreigners have been pouring money into internet and tech stocks in US market as a carry trade, which indirectly benefited USD. If the carry trade reverse, USD will be sold.