Tarek Mansour
@mansourtarek_
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ceo @Kalshi . ex MIT, Citadel, Palantir. I like markets.
New York
Joined February 2021
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Pinned Tweet
Today marks a pivotal moment for
@kalshi
and prediction markets:
Susquehanna (SIG), becomes the 1st institutional market maker to commit to Kalshi.
Prediction markets have (finally) surmounted their most elusive challenge: liquidity.
With ~$2 Trillion in yearly volume, SIG is…
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Tomorrow’s Federal Reserve meeting might be the single most critical event in determining the future of the economy.
Here’s a breakdown of why it’s so important (and why you should care):
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Inflation numbers are coming out tomorrow. It’s expected to be the highest we’ve seen in 40 years.
Here’s a brief history of inflation and why it matters:
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The ultimate warning sign of a recession: yield curve inversion.
Here’s a breakdown of what it means and why you should care:
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The Federal Reserve is about to make a decision that may determine the future of the economy.
But why does the Fed have such significant power?
Let’s dive into how the Fed works and why we need it:
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Russia’s economy is melting in a way that we haven’t seen in recent history.
This is uncharted territory for economic policy.
Here’s what’s happening:
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Stagflation is an economist’s worst nightmare.
Well, we might be headed there…
Here’s what it is and why you should care:
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Russia has invaded Ukraine. What does it mean for the US economy?
Let’s go through the risks (from most likely to least):
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Financial markets exist for all important aspects of the economy, including stocks, agriculture, metals, and banking.
Today, Kalshi launched the first regulated financial markets for an increasingly massive aspect of the economy…
Taylor Swift 🧵
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The inflation print yesterday was another massive shock.
But what if I told you that DEFLATION should be one of the main concerns right now? It sounds crazy, but stick with me.
Let’s talk about the Bullwhip Effect:
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When it comes to movies, everyone’s a critic. But only the lucky few actually get paid for it.
Or at least that used to be the case.
Kalshi just launched Rotten Tomatoes markets.
Now, anyone can make money being a movie critic🧵
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“History teaches that wars begin when governments believe the price of aggression is cheap.” - Reagan
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For anyone who trades or invests in Tesla, there is one reason why you would not look at Kalshi’s forecasts: you like losing money.
Tesla’s performance was abysmal… who could have seen that coming?
Both Kalshi and
@TroyTeslike
saw it coming. Most banks and “expert analysts”…
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You can map the state of every major economy across a simple 2x2 matrix of growth and inflation…
Let’s look at where some of the world’s largest economies sit:
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Oh my god... TikTok Ban odds just jumped to 75%.
Is it actually the end of TikTok in the US?
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Inflation numbers coming out on Monday. You know the drill:
If our market forecast is wrong, I’ll randomly pick someone and give you $4044.
Like and retweet to enter.
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I received the best job application I've ever received in the mail:
- a printed cover letter and resume on incredibly high-quality paper
- one of my favorite books, Skin in the Game by Nassim Taleb
- a beautiful Kalshi-branded leather envelope
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An overheating economy is an economy that is expanding at a rate that is unsustainable in the long term.
There are various flags for an overheating. The main one: high inflation.
As you all know, we have been witnessing dangerously high inflation rates in the past few months.
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GDP PRINT:
Expected: 1.0%
Actual: -1.4%
Ladies and gentlemen, welcome to hell.
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Will BTC hit 100k this year?
You can now bet directly on this without buying Bitcoin.
Kalshi just launched the first regulated market to trade directly on Crypto prices and various crypto events.
Instead of listening to pundits, you can now look at a market forecast for when…
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A 75bps rate hike hasn’t happened since 1994, but the probability of it happening this week just shot up dramatically.
With a stock market in chaos, the Fed has few good options:
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We are on the front page of
@business
week today!
A thread on the untold story of our regulatory journey:
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2021 was a year of crazy growth. The economy boomed and everything went up, from stocks to crypto.
Economic boom? Sounds great!
Unless… we take it too far and the economy overheats.
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In short, if Powell signals that a series of aggressive interest rate hikes is coming, a recession becomes likely.
End of 2022: “I guess all bubbles have to burst at some point.”
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And inflation keeps ripping: bread more expensive, gas more expensive, cars more expensive, everything more expensive!
End of 2022: “Remember when $100 used to be worth something?”
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2. Raise interest rates.
Raising interest rates is an effective way to slow the economy down.
The problem: it will deepen this dip and probably cause a recession.
Here’s why:
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1. Do not raise interest rates.
The engine keeps running and keeps overheating. More record highs for the S&P, stocks keep ballooning, asset prices keep going up…
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The Fed is now faced with a critical decision: increase interest rates or keep them largely the same.
On Wednesday, Fed Chair Powell is expected to signal to the markets which way the Fed is leaning.
This decision will be the fork between two entirely different futures:
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Historically, a soft landing has been impossible once inflation has gone crazy (ie. once an overheating already happened).
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Economists often talk about a “soft landing”. It means a slow down of the economy, without a crash.
A soft landing is easier when inflation is controlled.
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Let’s use a car engine analogy.
When you’re going at top speed, there’s a chance that your car engine overheats.
A good driver will press the brakes well before the engine overheats and balance between throttle and brakes to keep going at high speed, without overheating.
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I will be posting an update to this after the press conference, so stay on the lookout!
Follow live forecasts about what is going to happen with the economy on .
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Why did I put "pricing in" in quotation markets?
Cause everyone is pricing everything in these days (Salute
@kylascan
for this legendary tweet):
it's already priced in, everything, all of it, past, present, future, the infinite expanse of the universe,
you're priced, i'm priced, we are all priced, in
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If the driver screws up and the engine does overheat, just hitting the brakes won’t do it: they will need to stop the car.
Stop the car = stop the economy (or severely slow it down) = recession.
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Note before I continue this post: nothing compares to the tragedy of human loss.
This post is strictly about Russian economic consequences. I do not feel like I have a unique insight on the non-economic, tragic consequences of this war.
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The inflation number is the highest we’ve seen since 1982… this is the fastest pace in *40 years*.
And it does not even account for the recent rise in oil and gas prices.
Here’s why things are getting really concerning:
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Kalshi’s markets are pricing a rate hike by March at 25%.
It will be very interesting to see how this changes after Wednesday’s press conference.
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Stagflation is when the economy ranks really poorly on the most important rubrics:
GDP growth ❌
Inflation ❌
It’s the "worst of both worlds" - Macleod
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Crypto has lived through its 2008 moment. Different people, different (and more funky) asset names, but same underlying economics:
Take something risky and treat it as safe.
Here’s how crypto imploded and how it’s actually pretty simple:
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It was incredible hosting Charles Schwab in the office this morning!
On how he built
@CharlesSchwab
into the enduring institution it is today:
"Inch by inch, day by day."
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Bottom line: the “Western Bank” is telling Russia that its assets set side for a crisis, went from 600 Billion to 0… overnight… during a crisis.
World 2 - 0 Russia.
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@Kalshi
, the first federally regulated exchange dedicated to trading on events, is now in public Beta at . This is a momentous event, one that marks a “new horizon” for the derivatives market. 1/
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Russia could print money to keep things running:
If printing money in the US has led to our current levels of inflation, imagine what printing money in Russia while the ruble is eating dust would do…
We might be talking “children flying Kites made out of money” type inflation
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"Tesla's Terrible Quarter Catches Some Analysts at Asleep at the Wheel"
The
@WSJ
uses Kalshi markets to forecast important company metrics, like $TSLA deliveries.
We launched the Tesla market less than 2m ago, and it is already the most accurate.
Analysts out. Markets in.
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The economic block that Russia is facing is rough. Its consequences are already clear.
The ruble is trading like rubble (I cringed at this pun, but whatever, I’ll leave it in).
I won’t quote a % decline because it’s basically in free fall: %s are rounding errors at this point
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The latest inflation numbers just hit this morning. It’s been above 8% over the last year.
Here’s why it can feel so much higher:
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Let’s start with the “Great Seclusion”.
Note: I just coined this phrase, so don’t take it too seriously.
I’m calling it "great" because we’re witnessing a sudden economic isolation never seen before in modern history.
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War is happening in 2 separate battlefields.
The 1st: Ukraine, a land that Russia is destroying with bombs, missiles, and tanks... visceral and painful.
The 2nd: the Economic Stadium. The space of relationships and trade between people, companies, banks, and countries.
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There’s a lot of talk about the Fed causing a recession.
One of the main factors is their Forward Guidance.
What is forward guidance and why is it so important:
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Omicron, the new COVID variant, appears to be rattling markets.
Here's what you can do to stay ahead of the curve this time:
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Actually, Russia has been (justifiably) trying to control inflation.
It raised its interest rate to 20%. I repeat: 20%.
We’ve never seen that in the US… like ever.
World 3 - 0 Russia
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Basically, inflation tells us that money is going to become worthless over time, and we are going to have to keep re-indexing.
Every once in a while, the unit of currency will become so worthless that the benchmark needs to move:
$1 in the 1900s is the same as ~$35 today.
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Are you sick of inflation?
Here's how you can trade directly against it:
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Today,
@Kalshi
filed a lawsuit against the federal government.
Polls suck. Fake news sucks. The world is drowning in noise.
We need some truth, and it’s about time we get a trustworthy election forecast.
Let people put their money where their mouth is:
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2. The ECB and the US Treasury decided to freeze all Russian reserves kept in foreign countries.
How big is the impact? Russia’s central banks holds ~600 Billion dollars in foreign reserves.
I'll let it sink in: 600 Billion dollars.
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Let's start with the basics. What is Stagflation?
Like all things in economics that have fancy names, it’s super simple:
low growth + high inflation
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Russia might be strong in the first war, but it definitely isn’t in the second one.
It is losing the second war because it is fighting on many economic fronts, all extremely difficult and all extremely painful:
1. Widespread seclusion 2. Internal crisis
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3. No one wants to play with the bully (Russia) at recess anymore
Major countries and major companies have completely stopped doing business with Russia.
Even major international sporting events like soccer are disqualifying the country for lack of fair play.
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There's a trader on Kalshi who correctly predicted the last 6 months of inflation print (both headline and core) with 100% accuracy.
They have made ~$90,000 in 6 months.
This is the ultimate inflation hedge.
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Demand for 2y is down -> price down -> yield up.
Demand for 10y is up -> price up -> yield down.
The age-old economic chorus. Sing it with me: Supply & Demand!
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Why do we focus on these 3 rates? It took me a while to fully grasp this and I sometimes still don’t.
2y = indicator for current and short-term economic situation (ish).
10y = indicator for long-term economic situation (ish).
30y = indicator for me when I’m a grandpa.
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How high will inflation go? Forecasting it is an age-old problem.
Prediction markets have forecasted inflation correctly 85% of the time. Far better than any other method.
Here’s why it works and how you can take advantage:
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High inflation and high unemployment could also lead to a massive brain drain… that’s if Russians can fly to other countries with all the travel bans.
Rising unemployment is yet another example of the people suffering the consequences of decisions made by their leaders.
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Riddle:
How do you trade on Nasdaq, without returns that are correlated to Nasdaq?
$2,500 worth of QQQ if you guess correctly.
I'll pick one person with a correct guess at random. Like/quote tweet to enter.
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… unless lenders think you are more likely to repay later than in the near future.
They think you are going to get into tons of shenanigans in the short term.
You probably guessed: shenanigans = recession.
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A quote from the letter:
"I wasn't born into money, Tarek, but I've made it my business to make money, solve problems, add value... Sending this book and letter isn't just about sharing a good read - it's a demonstration that I'm persistent, committed, and I get shit done."
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Let’s start with the ultra basics. What is inflation?
Inflation is the continuous increase in the price of goods and services over time.
Basically, as prices rise over time, each unit of currency (dollar) buys less and less stuff.
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The yield curve is super close to inverting. The spread on the 2s10s is currently at 11bps...
... or 0.11% if you’re not a man of finánce.
Here’s what the graph looks like as of Monday:
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Now, most Russian banks can’t trade high volumes, which makes them highly unattractive for your deposits.
What do you do? You flock to withdraw your money and investments from Russian banks.
World 1 - 0 Russia
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I hope we avoid stagflation because that would be bad. But we really need to stop the shenanigans and focus on what’s ahead of us.
At some point, the party will end… and the hangover won’t be fun.
“We have to act now!” - Michael Burry, the Big Short.
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Let’s start by explaining what the yield is, before talking about its inversion.
The yield is the interest rate at which bonds are being issued.
When people refer to the “yield”, they’re referring to the US Treasury Yield: the effective rate at which the US gov is borrowing $.
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So...
@sama
built like 95% of AI startups I've heard of in the last year in a grand total of 4 minutes?
We apparently needed this to remember that moats are important.
Madness,
@sama
builds a custom GPT using private knowledge in just under 4 minutes.
Then he goes on to share it.
There will be millions of GPTs.
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The Fed was established in 1913 by the Federal Reserve Act.
Before 1913, there were over 30K currencies floating around.
Anyone could issue currency: convenience stores, random guy on the street… sound familiar my Dogecoin friends?
This lead to many issues:
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In the last week, the West has declared a barrage of economic and financial sanctions.
1. The US and Europe cut off a number of Russian banks from SWIFT.
This is major because SWIFT is a piece of infrastructure that is critical to global money flows:
With the rapid deterioration of the Russia/Ukraine situation, you’re going to hear a lot about SWIFT in the coming days…
Here’s a quick breakdown of what it is and why it matters:
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What just happened here?
You started with 1 gold bar, and ended up with 1-x gold bar.
The gov started with 0 gold bar, and ended up with x gold bar.
Government 1 - 0 you.
"Seignorage" - the nobles whispered, as they counted their riches.
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Now, onto the next one: the destruction from within.
Russia’s body is failing, as it gears up towards a big fight in the economic arena.
Its internal economy is at the brink of collapse.
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With lack of reserves and the ruble falling hard, bank runs have started and people don’t have access to their money.
To make things worse, with the current economic damage, unemployment will rise heavily…
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These measures clearly have had disastrous consequences already, and the ripple effects could be far and wide on the rest of the world (we’ll talk about these another day).
We hope that these sanctions and pressure points bring Putin to sit on the negotiating table:
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Kalshi forecasts have found a new home: the Bloomberg Terminal.
Accurate forecasting is imperative to alpha. This partnership with Bloomberg allows traders to use our CPI and Fed forecasts when formulating their trading strategies.
More on this Bloomberg x Kalshi partnership:
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Yield inversions have been a phenomenal leading indicator of recessions over the last few decades.
Since 1956, a yield inversion has preceded every recession.
Did a recession follow every yield inversion? Yes (except for once in 98’... and arguably 2020 when Covid hit).
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Today: 1 money = 1 good
In one year: 1 money = (1+X)/(1+Y) so 1 money < 1 good
Money becomes less valuable over time.
I'll go in more depth in a later post, but you can read more here:
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Misery index = inflation + unemployment. Literally, it just adds up the two numbers.
It’s basically a measure of how sh*tty people are feeling.
No job and prices rising 10% every year = pretty sad.
TDLR: stagflation is misery.
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The current target rate is at 0.25%.
Our markets are expecting two rate hikes tomorrow, or a target rate of 75bps.
This would be the first time that the Fed raises the target by more than one hike since the Dot-com bubble in 2000.
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How about long term? It looks decent:
Even if there’s a recession, we’ll probably get our shit together within 10 years, and if we don’t, then who cares... we’re screwed anyways.
Longer-term looks good.
Invest in 10y treasuries ✅
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Biden’s decision on student loan forgiveness will impact 40 million people.
Here’s what to expect and how can you protect yourself (or profit):
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People talk about a variety of spreads: 1y10y, 3m10y, 2y10y (most common), etc.
We’ll use 2y10y spread here: 10y rate - 2y rate.
At Citadel, we used to call it “2s10s spread” cause we're cool.
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Russian stocks have halved on foreign exchanges… in the good case. Trading on those stocks has been halted… in the bad case.
Stop losses have been hit and the Russian stock market has halted trading as a mitigating factor:
Losses will be hard when it reopens.
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Then they came up with a genius idea: “how about we forget about the gold, and just make the coins 100% garbage!”.
Enters paper money, or the “non-gold” standard.
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Said another way: inflation is the decrease of the purchasing power of the dollar.
When we talk about "inflation", we usually mean inflation rate: the rate at which the price of stuff is increasing.
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Kalshi odds for more layoffs:
Amazon ✅
Alphabet 93%
Tesla 88%
Microsoft 83%
Meta 74%
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Gonna put money where my mouth is.
Inflation numbers are coming out Wednesday. If the Kalshi inflation market’s prediction is incorrect, I’ll give $4,206.9 to a random person who retweets this.
Quote Retweet this post with
@Kalshi
to enter to win. /1
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...as to me, I am not going to ignore this red flag.
Is a recession 100% certain? Nothing is. Is it probable? Sorry Mr. Powell, but the answer is yes.
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