This week I grill the superbly combative @ToStRo A macro hedge fund manager out of London And as a side note, if you are currently running a macro account and would like to cross swords with me on the show, please DM me and make it happen. @ToStRo is an ex investment partner from my Eclectica Macro Fund, I fear I have too many exes these days... Remember, there's no insight without a full and frank discussion. Tom is more in the Fed camp. That the 40 year plus era of global wage disinflation arising from the re-entry of a huge and cheap labour pool out of China et al is over. That the mass migration from the provinces to these super effective, and heavily subsidised, global manufacturing hubs in the major Chinese conurbations has reached its zenith. That the productivity of further infra structure investments is questionable at best and the domestic labour pool is set to contract and remove the restraint on global wage growth. He sees a return of pricing power for American labour and hence believes that US and global inflation will remain uncomfortably high. That rates may remain higher for longer... That we've crossed a fiscal Rubicon, that government expenditures will allow the US economy to retain its ballast. But simultaneously, @ToStRo is massively concerned about the slip, sliding red cabbage. He would not rule out the CNH trading 10 to the $. He figures that the Chinese can pretend and extend too keep domestic property prices in check in yuan terms but would seek to devalue their property stock in $s. That $30 trillion over valuation would require something more extreme, 15 CNH to buy one buck...imagine the consequences I guess that's my attack line. That's the ultimate Mad Max Deflationary World. How would the global labour force have any chance of regaining pricing power under such circumstances. They would price themselves out of work. I was on @StreetSignsCNBC last night. I was asked for the specifics. Why is a global recession inevitable ? What indicators validate my thesis ? Everything, I responded. Everything in the global intermediate / producer data from surveys, producer prices and the alarming and vigorous decline in exports out of China, S Korea, Taiwan, Germany et al The rung below the US household sector is buckling, threatening to cave in on itself. We are being preserved by the dominance of the tight labour market narrative that supports the rates higher for longer thesis I'm not so sure. It's certain that there is no mortgage strain in the US. All of the Fed hikes have been passed onto the capital markets but the housing market is stuck in the mud. Households have the relief of decelerating price hikes for goods and services but who can afford moving house and having to reset mortgages to 7% ?? Existing US home sales fell 18% YoY and yet prices remain elevated and close to ATHs. Transactional volume is at the lows recorded in late 2008/9/10. The data series suggests prices normally fall to clear the market. That's the rates higher for longer thesis. Imagine a market clearing decline in home prices ? That seems implicit in the present narrative but rarely exposed to scrutiny The alternative scenario is that Fed pivots and rates fall to make new mortgages feasible once again. For sure, one of those two scenarios will unfold within a year. Both seem agreeable to a higher course of TiLT prices... But presently risk assets are in the ascendancy. We got a 15-20% allocation to the prancing tiger of the Qs but I'd be a seller should those rates higher for longer work begin to assert their pressure on the economy. And a risk transferred is not a risk that disappears. The US household sector has been bailed out by the financial sector. Borrowing short to lend long is their business. But a decade of lending long at rates below today's prevailing is certain to reveal more casualties. I would expect more disclosure as we speed through the 2H of the year. And the BTC ? I'd be a buyer at each 5k incremental low. BTC is just capitalised too small presently and will be boosted by the elite ranks of the money giants that need a large alternative asset to charge yet more fees. I feel it's close to becoming a reflexive impulse higher...
Thanks for bringing fun to the unbearably dry subject of financial and economic education Hugh. Can you share the details of the song you use in your intro and outro please? love it, really chilled an inspiring 🙏
A while back you discussed the 12 year Chinese cycle and your epiphany of different time scales/ lunar calendar concepts …as we approach 2024 any revisitation of those initial observations would be greatly appreciated (understanding outlier events as Taiwan concerns can throw assumptions into question )🙏
C'mon Hugh, Give the guy a break on his Rate Pass Through in U.K. A 2 yr. Lag is hardly anything. Markets would anticipate that by at least 6 months or more. You guys beat that topic to death.
Slightly more low brow than the usual. Thought it was a 101 primer on mortgages. Hugh you nailed it, the 2yr turnover will be felt dramatically. But that's pretty obvious right?
It is amazing. Patreon? Really? If you have something new to say, just say it. Why hide behind patreon when 95% of what is being said in the financial world is just bullocks.
This week I grill the superbly combative @ToStRo
A macro hedge fund manager out of London
And as a side note, if you are currently running a macro account and would like to cross swords with me on the show, please DM me and make it happen.
@ToStRo is an ex investment partner from my Eclectica Macro Fund, I fear I have too many exes these days...
Remember, there's no insight without a full and frank discussion.
Tom is more in the Fed camp. That the 40 year plus era of global wage disinflation arising from the re-entry of a huge and cheap labour pool out of China et al is over. That the mass migration from the provinces to these super effective, and heavily subsidised, global manufacturing hubs in the major Chinese conurbations has reached its zenith.
That the productivity of further infra structure investments is questionable at best and the domestic labour pool is set to contract and remove the restraint on global wage growth.
He sees a return of pricing power for American labour and hence believes that US and global inflation will remain uncomfortably high. That rates may remain higher for longer...
That we've crossed a fiscal Rubicon, that government expenditures will allow the US economy to retain its ballast.
But simultaneously, @ToStRo is massively concerned about the slip, sliding red cabbage. He would not rule out the CNH trading 10 to the $. He figures that the Chinese can pretend and extend too keep domestic property prices in check in yuan terms but would seek to devalue their property stock in $s. That $30 trillion over valuation would require something more extreme, 15 CNH to buy one buck...imagine the consequences
I guess that's my attack line. That's the ultimate Mad Max Deflationary World. How would the global labour force have any chance of regaining pricing power under such circumstances. They would price themselves out of work.
I was on @StreetSignsCNBC last night. I was asked for the specifics. Why is a global recession inevitable ? What indicators validate my thesis ?
Everything, I responded.
Everything in the global intermediate / producer data from surveys, producer prices and the alarming and vigorous decline in exports out of China, S Korea, Taiwan, Germany et al
The rung below the US household sector is buckling, threatening to cave in on itself.
We are being preserved by the dominance of the tight labour market narrative that supports the rates higher for longer thesis
I'm not so sure.
It's certain that there is no mortgage strain in the US. All of the Fed hikes have been passed onto the capital markets but the housing market is stuck in the mud. Households have the relief of decelerating price hikes for goods and services but who can afford moving house and having to reset mortgages to 7% ??
Existing US home sales fell 18% YoY and yet prices remain elevated and close to ATHs. Transactional volume is at the lows recorded in late 2008/9/10. The data series suggests prices normally fall to clear the market. That's the rates higher for longer thesis. Imagine a market clearing decline in home prices ? That seems implicit in the present narrative but rarely exposed to scrutiny
The alternative scenario is that Fed pivots and rates fall to make new mortgages feasible once again.
For sure, one of those two scenarios will unfold within a year. Both seem agreeable to a higher course of TiLT prices...
But presently risk assets are in the ascendancy. We got a 15-20% allocation to the prancing tiger of the Qs but I'd be a seller should those rates higher for longer work begin to assert their pressure on the economy.
And a risk transferred is not a risk that disappears. The US household sector has been bailed out by the financial sector. Borrowing short to lend long is their business. But a decade of lending long at rates below today's prevailing is certain to reveal more casualties. I would expect more disclosure as we speed through the 2H of the year.
And the BTC ?
I'd be a buyer at each 5k incremental low. BTC is just capitalised too small presently and will be boosted by the elite ranks of the money giants that need a large alternative asset to charge yet more fees. I feel it's close to becoming a reflexive impulse higher...
adds the drama and reality of investing and macro - love it!
Much better intro on this one. "Behind the firewall" is nicer to hear than "cheap seats" :)
Glad the English guy has subtitles. I dinny ken a word he says.
Thank you Hugh for helping me understand.
Thanks for bringing fun to the unbearably dry subject of financial and economic education Hugh.
Can you share the details of the song you use in your intro and outro please? love it, really chilled an inspiring 🙏
Starspeed - MILANO
@@anatolioskazimirov2435 nice, thanks! 🙏
A while back you discussed the 12 year Chinese cycle and your epiphany of different time scales/ lunar calendar concepts …as we approach 2024 any revisitation of those initial observations would be greatly appreciated (understanding outlier events as Taiwan concerns can throw assumptions into question )🙏
Hugh my brother why did you stop posting on Patreon. It seems like content has been removed from there as well :(
Love the content too. I see all these haters. That’s how you know something is working
C'mon Hugh, Give the guy a break on his Rate Pass Through in U.K. A 2 yr. Lag is hardly anything. Markets would anticipate that by at least 6 months or more. You guys beat that topic to death.
Stawk market is gunna crash today
Oops, it was just another day. :-/
The market is listening to AC
very prescient based on reversion to mean philosophy
with MMM TLT INTC GBTC and NOK
😊🙏
Slightly more low brow than the usual. Thought it was a 101 primer on mortgages. Hugh you nailed it, the 2yr turnover will be felt dramatically. But that's pretty obvious right?
And the war a long way from over…..gonna be a stalemate for quite sometime to come
TLT not doing so well Hugh.
Full tanks wont take care of winter if its a cold one! And if the war ends tomorrow do u really think the Russian gas will flow like before???
I think I wanna buy uk winter gas
c'mon Hugh are we really holding up BoE eco forecast sims as true counterfactuals?
It is amazing. Patreon? Really? If you have something new to say, just say it. Why hide behind patreon when 95% of what is being said in the financial world is just bullocks.
700k is not high enough? seriously?
The DAX 🇩🇪 🌈 is super duper strong 💪💪😎✌️
Hugh is not a good interviewer
Define good?
Serious denial
tom y are soy boy
Nikola 🚜🚃🚃🚃 😎✌️