Paulo Macro
@PauloMacro
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Speculation is the search for truth in price and time. Not investment advice - just personal views. Blog at
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Nothing I say should be construed as investment advice. I do not know your circumstance and so please treat my tweets as nothing more than what my thoughts are & what I’m doing with my own money. Please do your own work and consult your own financial advisor.
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Prediction: what is happening in Shanghai is about to go from being the most underreported story in the world to the focus of the world’s attention.
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I’m sorry but someone please tell me this isn’t fuking real.
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A lot of people weren’t there in 2008 or otherwise forget or misremember, but the Fed caught a lot of shit for Bear Stearns because they guaranteed $30bln of the worst pile of MBS sht you can imagine in exchange for JPM $2/sh bid — the BSC Madison Ave HQ alone was worth more. 1/8
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“A portfolio manager at one of Germany’s largest insurance companies said, “It’s a global margin call. I hope we survive.”
JFC.
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The first countertrend rally in The Bear always take us to a max stupid point. It becomes an echo of the prior top.
Cloudbear calls this the All Clear Echo. 🧵
Spoiler - This is why you are seeing HKD happen 18mths after GME/Spac madness.
1/15
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China is beginning to export inflation to the rest of the world in the worst possible ways, after 20yrs of exporting deflation.
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Ok quickly on the Fed:
No pause coming
Higher terminal (4-handle is off the table sorry bros)
Harder landing likely is what was said among many other things
What was unsaid:
1/
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Correlation.
There have been 2 regime shifts in correlation since Covid response broke the world as we know it:
1) USD up = cmdtys down. This broke.
Since Dec2020, both can trend together.
2) Equities down = UST bonds up.
This broke. Now both circle the bowl together.
1/14
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Lot of people assuming commodities can’t rally in recession, and everybody knows that everybody knows this. But that is a failure of imagination + recency bias. Look at 1973, 1980, 1990 commodity-induced recessions.
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If you are short oil going into this, you are about to have a religious experience
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A thread on where the US stands in its ongoing desire to learn Portuguese🧵
My bro
@hkuppy
has flagged an interesting development that I hadn’t fully appreciated in the context of
#bigflip
(hattip
@INArteCarloDoss
) until this weekend.
Namely, the US is now a 2-speed economy.
1/
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As we focus on our families, I thought I would relay some thoughts I put together after speaking for a few hours with an old friend today. Framework time - a thread.
1/19
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Friends tell me Blackstone already walked out on Trafi. Capital and LOCs is exceedingly hard to come by in this space and part of the reason you saw oil pricing blow out to $130 and then collapse back below $100. A thread 1/n
1/ Commodity trading houses have had to manage liquidity at current price by re-entering the market and upsizing their facilities. They are obviously under pressure and the bond market is repricing. Here you have the CDS of Louis Dreyfus, a trading house active in the agri space.
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Let me walk you through what the nature of this quant quake really was. HFs have been grossing up but keeping nets low. The gross leverage is a function of the decline in both rate vol and eqty realized vol (as well as implieds, lower vix - (for portfolio margin haircuts).
1/10
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At this point you honestly have to wonder if a group of foreign agents isn’t running around America setting nat gas and food plants on fire. Can’t happen? Really?
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Commodities are the fukiest assets in the world right now. On the one hand we have a near term demand shock as the world enters a synchronized IP slowdown and the 50% buyer China cold-stopped. OTOH depletion now a real issue after years of underinvestment/regulatory/ESG etc
1/14
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A thread on oil and curve structure.
You may have seen me write before how “the curve always tells the truth” as part of my view going back several months of a growing divergence between physical and derivative commodity markets that has now been widely acknowledged.
1/
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I am not sure I have ever seen a divergence in commodity markets to this degree, where the physical is undergoing extreme and growing tightness while related financial instruments are undergoing wholesale unrelated liquidation related to tightening financial conditions.
1/6
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Where systemic risk breeds crash risk - brief 🧵
GS flagging how 43% of options being traded expire in less than 24 hours. The market is now a toy for options daytraders.
1/7
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This is happening across the emerging world now
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Oil. Consider this a bottle-of-wine-deep (but hopefully polite and classy) contribution to fintwit’s ongoing thinking on the oil outlook.
Here’s the problem with focusing one’s time on modeling oil demand (and energy demand):
It is all theoretical ivory tower.
1/14
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The US is becoming Brazil…
Brazil is becoming Argentina…
Argentina is becoming Venezuela…
…and Venezuela is becoming Zimbabwe.
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US equities didn’t get the memo, and most people are not paying attention to this, but financial system contagion is starting to turn up, and areas of the market are beginning to sense that this Financial World War currently underway = stress in the financial system. 1/n
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I am going to warn you up front that most people are going to hate this post, but only because it goes in a direction you don’t expect. Brace yourself.
First: We are getting very very close to All Clear Echo being done.
1/
The CBOE equity put-call ratio hit 0.39 today, the lowest level since November of 2021
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"Germany’s strategy up to this point was to outsource their military to the US, their financial management to the EU, their energy supply to Russia, and their end market to China. This was the complete globalization of an economy…
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I am breaking a self-imposed 1-week twitter exile for this (no, to clarify, I am not on vacation, just trying to take a break from here), but the development with Xi and Hu requires immediate context.
Disclaimer: Remember nobody actually understands China, myself included.
1/
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My friends, I am going to walk you down memory lane in 2001 because as I wrote earlier today and over many months:
Bears are a process, one that takes time, and will drive you crazy without context and some distance.
1/6
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I am normally the first to respect the market and refrain from buying one that is no longer rising on bull news, but in the oil market’s case I will make an exception. Despite the parade of positive catalysts over the past few days (Libya, Caspian, Europe) we got a big smash.
1/7
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This was the most hawkish conference of the year. If you didn’t get the memo and are long equity risk (especially of the duration kind), you are dancing on a cliff’s edge juggling chainsaws without a net or gloves. /FIN
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Did israel just hit fricking everything iranian? This is wild
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The probability of a Federal shutdown is high if a temporary limit extension can’t be reached. Put simply, this is *not* one of those “overhyped” debt dramas like 2011. In fact, nobody cares (they should). No, these don’t happen every year. I have been vocal - here is why.
1/
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BoE doing QE with CPI at 10%.
Greenlight for parity.
LOOOOOLL. These people are insane.
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Asia/EM equity/global macro 🧵
The Indian rupee explosion tonight is hands down the most important move in Asia happening and nobody seems to notice. This is an ENORMOUS development if you know how the RBI operates.
1/10
The RBI’s vigorous defense of the 80 barrier on USDINR has been a valiant fight, but they are not bigger than the market. The next phase of rolling devaluations in Asia will involve India as well.
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If there are two things I can leave you with today:
The curve always tells the truth.
When the real physical world and paper/financial world diverge, the physical world *always* wins.
/FIN
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Lot of folks wondering what is going on with oil. Pretty simple. Shell Zydeco pipeline outage means more crude heading for Cushing. This starts liquidation in the front. TI timespreads that specs are long (playing widening backwardation from China reopening) begin stopout. 1/4
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Let me translate the last 5 seconds of this video for you guys:
“Daly, Brainard, wheoever been calling up Nikileaks with the doveshit…look at me…LOOK AT ME.
I am the fuking captain now.”
The pivotal moment in
#Fed
press conference:
When (incorrectly) told the market had reacted positively, Jerome Powell seems frustrated and lists ONLY reasons why this is the wrong interpretation.
Very telling for
#stocks
.
$QQQ $SPY
#macro
#inflation
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The big one - potentially as soon as this week - is CNY. If that one blows, really all bets are off. That’s UST blows through 4%, eqtys crater, oil $60, copper 2-handle trade. I have loads of downside, but yes unfortunately I have loads of oil, copper, wheat etc. 1/5
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Anybody else notice USD and gold going up at the same time?
What does that tell ya??
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In central banking terms, this is what’s known as Crossing the Rubicon. Or like Cortes when he arrived and burned his ships. No going back. Hope you got gold cuz it’s primetime — bigtime.
@hkuppy
⚡️ The US House of Representatives approves a bill allowing the transfer of frozen Russian assets to Ukraine
Ukraine could receive almost $8 billion under this procedure. Now the bill must be approved by the US Senate.
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Look here’s the problem with the recession crew owning long-dated USTs and duration (these include several i know and respect). 🧵
You can’t have it both ways. US is running 6-8% deficits *right now* into a slowdown. This blows out to over 10% in recession even with…
1/17
For those betting past/current disinflation trends in the US translate to future disinflation/deflation trends… your view is more crowded than you maybe appreciate.
So sorry… this is not 2001 or 2008.
H/t
@hkuppy
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The consensus Bear in base metals and especially copper has gotten to a point that I feel a need to knock out a counterpoint, with the disclosure that my money as of the past few weeks is *heavily* where my mouth is, so yes I am talking my book - bias galore.
A thread 🧵
1/
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Oil 🧵
Something occurred to me this morning watching the oil smash and bounce that I am still fleshing out.
I remembered how bros used to say in 2H06 that an oil price correction was like a tax cut for consumers that would extend the economic cycle. Oil went $75->$50 then. 1/
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I am beginning a new chapter in my life.
As a recently released “free agent” (nothing to do with this account), I now find myself at a crossroads for what comes next.
A thread 🧵(but worth reading to the end for NY buysiders!)
1/
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Ok friends, adding more thoughts to this.
The 0DTE options as a % volume has grown from ~10% in 2019 to 20% post covid, to ~30% in 2Q of this year, to >40% in the past 3 months. It is an *accelerating* issue.
1/5
Where systemic risk breeds crash risk - brief 🧵
GS flagging how 43% of options being traded expire in less than 24 hours. The market is now a toy for options daytraders.
1/7
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I’m not sure I have it in me to keep pumping out these framework threads anymore, but I will drop another historical comparison here for you friends to keep an eye on. 🧵
1/18
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I wish all my friends here a merry christmas, happy hanukah, happy and healthy holidays with your families, and a truly prosperous 2023. Thank you for all your exchanges and constructive interactions this year. It has been one for the books. 🙏
/FIN
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No I am not letting this go. Just stare at this. Ok? Marinate on its meaning.
There is oil product inventory globally. It’s in the wrong places, and China will draw theirs down eventually. But what there isn’t much of especially on a stock:flow basis is base metal inventory… especially copper where visible and off exchange stocks are critically low.
6/
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Macro 🧵…
I have been saying the US is speaking Portuguese and doesn’t even realize it yet.
Warning to those looking to pick bottoms in longer term US rates and equities: U R NGMI.
1/n
So just to get it on the record again and elaborate a bit:
The US is speaking Portuguese and doesn’t even know it.
The US is approx 2-3 qtrs behind Brazil in terms of stagflationary roadmap. Today’s window of US vulnerability/soft patch is where Bz was back in the fall.
1/15
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Wouldn’t it be ironic that while everyone watches CS or DB, it turns out the real problem might lie in Swiss Re or Munich Re or a fellow insurer?
EU/UK pension and insurance system is truly in trouble here.
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So in my experience, a flex like this (lots of these in 2006 and 1999) usually sees a drawdown of at least -80%.
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Damn. 100k followers. I know it’s just a number with a lot of zeroes on the end, but that’s an awful lot of you lovely lot that seem to find what i ramble about interesting. Just as what’s wrong with my wife, I think all of you (and she) must be nuts to pick me.
Thanks for that.
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Recession fixes this
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Fuking perfect.
If you are young and ‘woke’ fighting climate change, listen carefully to Konstantine Kisin.
#ClimateEmergency
@GretaThunberg
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Last time I remember seeing 2-3% 1hr rips on no news like this was after Lehman. Friday after LEH closed *higher* than Friday before the BK. Keep this in mind when you think about positioning and sentiment as guys get cleaned up.
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Seriously how is vix DOWN sub 20 with treasuries imploding and rate vol kiting
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Imho the oil market is coiled for a dramatic move higher and I have been aggressively positioning this week in expressing this view.
I make my share of bad calls and surely will eat plenty of crow for so visibly calling this one.
*Take NONE of this as financial advice.*
/FIN
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So here’s my issue. Everything happening lately is sort of outside the Fed’s control. This isn’t deflation where you debate print vs fiscal. It’s QT vs fiscal restraint. It’s not Alice in Wonderland’s 6 impossible things before breakfast - it’s Stranger Things’ Upside Down.
1/17
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When the market breaks, nobody will have 1 or 2 month protection. So it can be an epic meltdown.
This is the sort of instability that leads to a crash.
Point is there’s no floor beyond this short dated stuff. It is like a plastic dancefloor on the brink of collapsing.
FIN
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My opinion of
@LynAldenContact
just screamed higher.
If you like Lyn dumping on Elon here, you'll love her dumping on him on Nostr
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I am taking a self imposed time out from Twitter for at least a week and locking things up.
No specific trigger - just need a break, need to spend more time with family.
Good luck into month end everybody.
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This shirt has never been - and never will be - washed. Ever.
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On Uranium equities, I’ve had a chance to think about some mechanics and flows involved here, and I fear people need to be much more cautious in the near term.
Note I am not talking about the U3O8 spot px - everyone including utilities, CCJ, KAP are short.
$URNM $URNJ $URA
1/21
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Guys - CTA flow balances are *enormously* skewed to the downside here. If we arrive at 3:30 with SPX -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.
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Thread on UST funding and RRP.
Backdrop: US treasury debt outstanding has gone from $22.7T to $33.2T over the past four years (9/30/19 to 9/30/23), and 30.9T a year ago. So +$2.3T 1y and +$10T 4y. The -12m deficit is $1.7T per below, as of 9/30 (Treasury is on a Sept FY)
1/18
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Time for a systemic risk update thread from the Cloudbear…
US stocks just don’t seem to release, so only a matter of time until all those puts result in dealers doing their gamma jam higher right? Not so fast…
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I would like to think the threads I have dropped over the past few years have been original, even if wrong, and at least offered some value over the usual trade reco and nonsense heel digging/axe grinding. I would like to think that I have helped people to **think**
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In case you haven’t noticed, this is the part where the total lack of liquidity in global rate markets creates unprecedented chaos (and I am including a few days from March 2020 in here when I say this).
Good luck.
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So you guys remember like, what, 18 months ago — investors across the board knew that everybody knew that if the Fed ever took rates to 5% the world would literally end? We are at 4%. Sht is blowing up in the fringes of the empire, but Rome takes a while to feel it.
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This is surreal. My pal Michael Kao - formerly known as
@urbankaoboy
-has been permanently suspended from Twitter with zero explanation or correction from Twitter staff over this egregious error. As far as I can tell there is zero reason for this but Twitter refuses to fix it. 1/
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If you are CFO of a company with millions in suspended balances in a fuking basic account and you didn’t know how to set up a simple daily sweep into money market funds (which yield over 4% now btw)…
YOU DESERVE TO BE ON THE FRICKING BREADLINE, YOU MORON.
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I cannot shake the sense that we are about to get a Fed leak of +100bps on the table for November. Cannot shake it.
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I try to keep politics out of my threads but I will break my rule here as well:
The salient question here is how US leaders (political and corporate - I am looking at you Lebron and Dalio) can continue to fathom doing business or engaging China in ANY WAY.
7/
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Ok I really am going away for a week but I figured you friends deserve a proper send off. Like, a real proper Cloudbear thread. This is so we can zoom out for context. Then I am done for a little while. Here goes.
1/
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Framework 🧵
I have said 2023 is the Year of the Panics. We are currently in the upside equity panic engendered by a “not QE” Fed and fiscal stimulus running into the “next big thing” AI narrative.
1/16
2022 was the Year of the Tails. The year is almost over, so you will soon get a break from this constant refrain.
2023 will be the Year of the Panics.
What is the difference?
2/
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I encourage my friends here to grab a quiet drink and chew on what you think China looks like in a few months. They are about to export a *fukton* of inflation in the Feb-June timeframe right when economists and traders all agree that US core PCE is headed <4%.
/FIN
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Let’s just make absolutely clear what happens if US diesel/jet/gasoline exports are banned:
1) European & Latam prices explode immediately;
2) NE and CA prices explode;
3) Midwest/Gulf prices implode;
4) Gulf coast refiners reduce runs;
5) WTI crashes
Please feel free to correct
THE BIDEN GOVERNMENT IS USING ALL AVAILABLE INSTRUMENTS, INCLUDING BANNING PETROLEUM EXPORTS, TO COMBAT RISING ENERGY PRICES - SENIOR ADMINISTRATION OFFICIAL.
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Wow - they are moving fast. Next month it will be like restrictions never happened
Chinese media today. Operation Export Inflation to the West. Timing is everything.
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This needs to be read more than once. My read is basically after 2009 US banks became over capitalized, while the world’s pensions and insurers replaced them as the world’s duration buyer in levering up enormous curve trades paying short and receiving long for mere bps. 1/2
“A portfolio manager at one of Germany’s largest insurance companies said, “It’s a global margin call. I hope we survive.”
JFC.
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The amount of pushback and sht I have taken in 12hrs about the copper bull thesis have convinced me I am not big enough. And I am already really fricking long.
Very grateful to Twitter. No sarcasm in this.
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Because it is always mindblowing and exciting as it’s happening… always! And then it is over. The tide goes out. Time drifts by. Money and attentiom moves elsewhere. And memories fade.
We are close.
/Fin
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This is great Sam. Just a minor difference in view from my end (talking my book here, so a big grain of salt to go with my 2 cents):
1/22
If you are not familiar with the
#bigflip
thesis, coined by the great
@INArteCarloDoss
, the bottom line is this:
-Labor inflation is entrenched and remains very hot (holding core inflation high)
-Goods will inflect higher (leading to more volatile inflation
The consequences are:
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I have no doubt that rate bros will come after me for laying this out, but here goes a thread.🧵
“It’s our currency but it’s your problem.” Ever heard this line?
1/9
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I have a question - if you can get well over 4% on 2yr risk free money and sidestep whatever insanity comes next, why would you own stocks?
I know hedge fund managers who are buying 2yrs for their kids. Feels like 2000 when a young bearcub could get Fleet CDs for 6.5%…
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I want to wish everyone — including those who haven’t been a fan of me or particularly nice this holiday season — a very sincere, happy, healthy, and prosperous 2024 to you and your families. All the best, -Cloudbear
/Fin
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…and this is when your gold finally starts to work.
That’s it guys. That’s all I got.
Remember - please - no political insanity in the replies.
/FIN
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@DoombergT
Nothing destroys a civilization’s solidarity like a famine or cold winter without power. There are countries about to swing hard to the far right in Europe in the next two years precisely because of the insanity of a few seemingly intelligent elites who lacked any common sense.
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Boy, you wanna know what it’s like to kick over a hornets nest, write a reasoned, flows-based short-term bear thread on uranium.
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Many have asked what is next after the All Clear Echo completes (that moment is now upon us…finally). I haven’t yet made up my mind if it’s 2001, 1987, or 1998 and am open to all three (I lean towards the latter for August fwiw, then chop to Thanksgiving)…so what to do?
1/4
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Big regional top 10ish will be fine. Problem is the public is only beginning to get hip to the fact that you can buy a money market fund easily for 4%, no load. Why park balances at 0? And so balances will continue to shift from bank deposits to MMFs until banks raise rates. 5/
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Met a smart bro tonight who raised a key point: Fed can’t downshift and upshift month to month. So if they downshift to 25bps, they are married to 25’s even if inflation takes off (I know I know - crazy talk even to inflation bros, I get it - inflation will never go up again).
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Perfection 👇
The Smartest Kid in Wall Street would like to share his parting thoughts for 2022:
#EFT
@RudyHavenstein
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BIDEN: STANDBY PREDICTION FOR RATE CUT -BBG
BIDEN: WILL BE RATE CUT BEFORE THE END OF THE YEAR -BBG
Holy fcking sht
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As we think about the blowouts to come in 2023, let’s refocus and resurface a few things we all know. Liquidity is vaporizing everywhere (gates in RE, bid/offer spreads widening in futures, etc etc). 1/8
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Missed this Friday night but Spirit Airlines offered pilots 43% cumulative average pay hike over 2yrs, a mere week after Delta offered 34% cumulative pay hike over 3yrs. So 10-20% pay hike CAGR for pilots.
NO. WAGE. SPIRAL.
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From a buddy…The Fed owns 19% of this issue. I imagine banks hold some too. Marked down to 47c on the dollar…
Get ready for UK LDI all over again, except here in the US…this detonation of the long end will have consequences.
1/2
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Tell me that Swiss banks have huge lines of credit out to massively levered Swiss commodity traders that are systemically critical to the functioning of the global economy but sit entirely outside the financial system without…
I am shocked
@INArteCarloDoss
- shocked I say:
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