Tron

Probably nothing….

Time to plan another trip to the UK.

Anyone that thinks Bitcoin is useless, doesn’t understand credit risk.

Yep….. https://www.wsj.com/articles/opec-agrees-to-biggest-oil-production-cut-since-start-of-pandemic-11664978144

Given where the VIX currently sits, 2% daily volatility is to be expected. There will be no pivot this year for sure..regardless of the UN and IMF begging for one. This week I'll be adding back some of the short positions I covered on Friday. Also adding more put spreads out to December on SPY and QQQ.

This is NOT a run of the mill bear market. You can think of every single global risk asset’s risk as being priced off the US long bond (sometimes referred to as the “risk free rate”). Due to QE, the long bond was wrongly priced. Now it is normalizing. Every single global risk asset (equities, real estate, whatever) should have a risk premium on top of the US long bond. Due to QE this risk premium became effectively zero, or close to zero, over the last few years. Due to the suspension of QE, every single global risk asset is now being repriced against a normalizing US bond yield and normalizing risk premium. This, in effect, means that the discount rate for each and every global risk asset is rising by between 2% and 10%. The effect of raising the discount rate for a risk asset from low single digits to mid- to high-single digits/low double digits will cut the value of every single global risk asset (beyond short-term credit) by 20% to 50%, or more. Should inflation remain sticky, this downward repricing will not be reversed, unlike after the dot com bubble and GFC of ‘08. We are at the beginning of a likely permanent, once-in-a-generation, downward repricing of every single global risk asset after a likely permanent, once-in-a-generation, upward repricing of the discount rate for all risk assets. Despite the year-to-date decline in global risk asset prices, many investors still haven't really grasped that 1) the repricing still has a long way to go and 2) there will be no rebound at the other end until we have some sort of Plaza Accord 2.0 / new global monetary system. The petrodollar is dead. Globalization is dead.

Real estate has been, and always will be local..however, some of the reasons for that may be changing. Prices usually went up and remained stable in places that had good paying job opportunities. The pandemic changed much of that with a big shift to “work from home”: Many companies are never going back to the office. This means people with high paying jobs in tech can go live in Omaha Nebraska, rather than in overpriced Seattle/SF etc. These dynamics are going to result in some variations in the real estate market we have never before seen.

Credit Suisse CDS (credit default swaps) not looking too good. Thinking we’re gonna have another Bear Sterns / Lehman moment very soon when a large investment bank goes under.

This is a great summary of what’s happening in the UK for those interested.

Bwahahahaha You couldn’t even make this shit up. The Bank of England is about to show the world what it looks like to run QE while also raising interest rates. It should now be painfully obvious that this situation is well and truly fucked.

This will not be “temporary”. Now we get to watch countries debase their currency to buy energy and government debt. Got bitcoin? Be careful trading stocks when major developed market bonds are trading like this. There is NOTHING more dangerous, than academics who have NEVER taken a professional risk, never actually sat in a risk-taking seat - but now sitting on trillions of pounds and dollars of risk.

@SammyReal estate, like most things, is subject to the laws of supply and demand. The pandemic kicked off a major supply shock in housing, which combined with ultra low interest rates, resulted in a step function move up in prices. In the US, we currently have about 39% of homes owned by people with no mortgage, and the rest have rates of 2.5%-3.5% on average…given the current rates of 6.5% and likely heading higher, most people that have a mortgage are pretty much “stuck” unless some external force makes them move. Why would anyone want to make a “move up” house purchase if they have to give up a 2.5% loan and replace it with a 7% one? Well, if they don’t have to, they won’t. Downsizing has the same problems. On the other side of the supply coin, we are likely now heading into a global recession. If this happens, we will see many job losses which will in turn increase forced selling and along with it supply. It will be interesting to see how this all plays out. Home builders have started to cut prices and are adding rate buy downs to lure people in…this will put pressure on the resale market. Given that overall America has actually been short on constructing new housing units to meet our needs ever since the GFC of ‘08…there still could be an overall supply shortage and help put a floor under prices at some point…where that floor is is anyone’s guess. I know if something happens in my life that forces me to move, I’m never giving up my 2.5% mortgage as we head into a hyper-inflationary world. I’d convert my current home to a rental. Good luck whatever you decide to do. If it were me, I’d get the hell out of CA as soon as possible, before they try and pass some sort of exit tax

DANGER WILL ROBINSON: CTA flow balances are *enormously* skewed to the downside here. If we arrive at 3:30 with the S&P down 2-3%, the selling in the last 20mins is going to be very serious. And if that forces us down -4-5% on the day, we are going to CRASH on Monday.

What falls faster, a pound of feathers or a pound of sterling?

Major dislocations in bond markets around the world. UK announced largest tax cut since 1972…results in bond market crash. Probability of a major equity market crash increasing by the minute. Good luck…winter is coming.

Live image of the US Treasury market today

The market is now pricing in 200 bps of rate increases between now and the end of the year.

This 6 min video does a good job of explaining why the US Dollar is acting as a wrecking ball across the world, and is ultimately likely to lead to a sovereign debt crisis globally.

https://www.zerohedge.com/markets/jay-powell-breathing-weapon-mass-destruction

Expect big market moves today. Global bonds selling off, US10Y on cusp of new highs. FedEx -20% after hours yesterday, global shipping volumes falling hard. JGB's still hitting the .25% YCC limit China -New property data Gold dumping I have only covered about 20% of my short positions. The last time the 2yr was this high, national debt was about $8 trillion…..we now have $31 trillion. The Fed is playing with fire. When tax receipts begin to plummet, the debt death spiral I talked about when I first started writing these posts becomes a foregone conclusion. Tighten your chin straps.

Yep https://www.bloomberg.com/news/articles/2022-09-13/bofa-s-cabana-says-fed-likely-to-overdo-it-and-cause-a-recession?leadSource=uverify wall