Why The Macro Is Still Bullish Liquidity | Weekly Roundup
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Something, everybody, welcome back to another round up petition of four guidance. We ve got the trio back once again. What's gone on? guys? Hi and good.

good. I'm sport. Like throw back koby. J .

dh, you know.

i'm not at like fan, but I like kobe in the doubts, you know, had to shut out to their Victory.

You even living lately like those guns.

No dead. I am weak. I have A, I have a couple month stretch. I'm done to travel on.

I'm been looking in bids been. But I had to buy low. So hi, nice.

I like that. Yeah, my buddies. And I think it's O, N, D. A. It's a, it's cool on a clothing brand.

He's got, well, look, we are recording on friday morning. We just got the job support. We're about to go into one of the biggest weeks of our lifetimes until the next most important week of our lifetime.

S no. But IT actually is going to be a pretty important fundamental. We got the jaws report this morning. We got the election coming next week. We got that the meeting the day after there is a lot going on.

Um obviously that the main the point that we got this morning draw supports some a few slides and just get everybody level set on what we actually saw. So if you just remember back to, we recorded a live edition of the round up at permission less. Unfortunately, Tyler was not there.

Mike stepped in. And then, of course, clinton hour there. And during that time was right when all the elite, what all the hurt ines, were starting to occur.

And we had mentioned that IT was highly likely that the next month was going to be a pretty significant, mister, the downside on the job report, it's going to come in pretty soft. And also that you know that the previous draws apart, which was a premature blow, one I think was an outlier outside of the mean treat. So IT was quite likely there about to see some sort of a mean reversion um so far that most of what happens.

So i'll just go through couple tracks here. So the first thing that off is talk about the actual jobs support itself. So the five papers came in at two thousand thousand jobs. Um the consents forecasts was one hundred and thirteen thousand. Shout out anaya from bloomberg SHE was the most correct on this um SHE actually had forecasting a negative jobs print which um really tight to what's on this chart which is just when you baking revisions. We probably just saw negative jobs support today.

Um I tweet about this this morning but just based on how the initial practice calculate in terms of like a ninety percent confidence in the range is basically one hundred thousand jobs plus or minus um and considering the fact they were in this trend of of negative downside revisions, we probably decide the print. So looking back at the last couple months, we saw some negative revisions to the previous prince August went from um we side decreases of eighty one thousand, so from one hundred and fifty nine thousand and seven eight thousand and last month we saw a decrease of thirty one thousand revision from two fifty four to two twenty three. Um again, this is something i've been happened on a lot of IT.

It's it's quite lennar this this decrease in revisions. Um it's quite predictable. So you can create much just like big analysis, move on with your life, you don't need to get upset and you know throw of IT about revisions.

It's it's fairly predictable. That's what we've seen here and that's what we're probably going to see today. And that's i'm pretty confident that is great. Um the other of note is the unemployment ke.

When you look at the unring and numbers, um you know just the set stage, if you know the official print was four point one percent, which was flat, but when we actually look at the on rounded number, we actually increased from four point eight five percent to four point one four percent. So almost like a ten ten basis point increase. Again, there is a lot of noise um due to hurricane, you can see here five hundred and two thousand people are employed but absent from work due to weather.

And then the other one is, well, setting aside from hurricanes is the strike. Um there is some significant strike, especially from boeing. And that LED a pretty negative print in durable goods manufacturing where we saw a forty seven thousand job decrease because of that.

This is something that was really interesting. And this is this is a print that would not be affected by some of these dynamics they were talking about is looking at the unemployment by cause. And if you look at the black line here, the permanent layoff s IT was actually just hit a cycle high.

So this is permanent layoff IT has nothing to do with point with temporary layoffs, hurricanes from strikes, anything like that um that has nothing to do with with new increases in immigration. This is a this is a very substate metric. And to see a break out on on a cycle high is of note. You know it's it's not skyrocket but IT be noted that is hitting a new yo here.

We actually last month that if you use the rounded role, reverse um I just wanted that the flag that using the official like four point one percent number, we've officially seen that reverse, which is really interesting that we can get into couple other ones here is just looking at where the job growth was. Once again, you know, people, harper, on a lot is that most of the job gains are coming from the public sector. So so private, private education, health services, government, that's what all the job gains are.

And if you look at the bottom, manufacturing, professional, business services, that's what all the job losses are. And again, digg in a little bit deeper, you can see just terms of the change and full time jobs you over year. If you look at the private sector, it's it's not great.

Um you know you do have to admit that a lot of the the positive jobs, a million tum that we seen has been because of the public sector. And then that should be noted. And based on that, we actually just saw for the first time since december twenty twenty that we saw the first uh negative print in private uh northern areas jobs growth. So that's also notable.

Um and then to wrap at all up, we saw earlier in the week is that the jobs report came out the job openings, which saw pretty significant miss um a seven point four four three million versus of conscience of seven point nine nine, which really just signify is like this is why the fed is so king on cutting rates right now as they don't have the slack and drop openings anymore that they used to. So that's why they're able to just let things kind of build up. But now we're going into the point where yeah there's like a ratio of basically for each.

So um that's unemployed there. There's one job opening which is very different from you know twenty, twenty two years, pretty much to double that. So taking all that together, what are the main takeaway? There's a lot of noise um but there is some significant those of weaknesses that we can see setting aside the noisiness.

But of course, when you look at the negative jawing that we got today, a lot of that is attributable to these temporarily off dynamics that we flag you know back in that live recording a few weeks ago. So based on all of that, um you know to me he feels like twenty five bps cut in november next week is is a lock. Um I would even say that december is a luck and with that one, open up to you guys and hear what you're what your big takeaway are from from this mornings data.

Yeah I think the funny thing that IT reminds you is when the fed now started to have different sorts of readings on inflation back in twenty twenty two or twenty twenty one, when they are kind of see it's transat. It's like inflation x this and then every month report we got an extra x like x you know then it's is like down to like super, super, super card which is like something like yeah yeah as always zero and I I feel like we're going down that path, right? X hurricanes.

X uh strikes x government jobs that are fake x this and you're like were at zero growth for so I just think IT like you said, it's so noisy and um there's the revisions is probably the the most interesting thing because when you think about minus one hundred plus bag of revisions and the B L S you know the fed has said they believe there is a good you know that eight hundred k negative annual revision no divided by twelve for each month. Um you know they kind of apply that to the frame of thinking. So yeah, I just IT doesn't alter the path at all, I think, from what they set out in september. And yeah, I think we're going to get get fifty more bibs and maybe a pause in january, but it's going to be dated dependent. And I think this is kind of setting up perfectly for .

for the fed more concentrated on potential policy changes in the election. But the because I can really change a lot faster than what our jobs number does. But with the I think is a ninety eight percent chance now the market is pricing in for a cut next week. So it's a it's pretty big dinner at this point.

Polar is repeated for multiple meetings now that they do not view any inflationary pressures coming from the labor market. And so as as you're predicting the path forward, you know, post september, we've had you know inflations just kind of been made it's kind of continue to stumble lower flash. And we've had a couple readings of hoder jobs and now a reading of lower jobs.

So like nothings actually change for some temple. They still are going. This report is not going to a change their mind that um there's potentially now inflation coming from the labor market.

And they also talk about jolts quits leading wage growth, write that that slack intention. And so E C I as well thursday came in line and continues to to look forward as probably falling. So yeah, there's just nothing in these reports that would that would deter the feds projective path from september.

in my view. Yeah, things the point of really emphasize just how not worried the fed is about inflation right now. And and you know some justified like we ve got the PC prince this week and and people were thrown a fit about core PC being elevated and yeah for sure IT is elevated.

And you know the vast majority the reason for that is shelter inflation, which just has to do with the way the leg nature and how we calculated. It's the way we calculated is a flaw metric that was created back when we barely had computers. Um so we've just had to do our best guess.

But like we can get real time rent data, just go look up zero o yeah the vast majority the core PC is just shelter efficient. Then you look at everything else. You know, when I really pretty good spot, I, I, I posted that you okay, the fed officially targets P, C, D.

They've said in moment, oh, we look at core P C O. We look at super core PC. But if you go to their website, they target PC, and they target a year over year percentage of two percent. After this week, data were at two point one percent.

Know you look at that, you look at oil that just on the floor sub seventy dollars, you look at these wage genna s you just talk about terms of you know just potential like wage growth concerns. Um there's none of that like the the big three prong issues are just on the floor. So you know why would they start to care about stickiness and shelter at this juncture versus what we're seeing in the jaws market? Again, like we saw pretty bigness.

And the drill support there is some like you know somewhat you know I don't want to say concerning issues in today's jobs report. But obviously, we like glass, are increasing. It's just you know not at a very concerning pace yet.

Um we've seen the sam reverse. That's a lot of momentum there is in IT, but still there. There's really no reason for for fed funds rates to be as high they are right now.

Yeah, I kind of with you on on december likely being a lock as well with this report.

The contrary is everyone's probably saying all the markets near alternate high is swell holiday cutting, which I I think is got a fair. But you know, that's always seeing, not the metric are looking at, no.

they don't want. Yes, if inflation was at six percent and the marker was raping, then they would care. But inflation not so.

So what was really interesting about this morning though is that we got the jaw support and and yields were crushed um especially the two years just came to just crashing down. The long bond was was coming down.

But then you know we got IT looked like what triggered IT was we got like an ash manufacturing ing Price of paid print that came in like fifty four point eight verses that could send this with forty eight point five, the previous months of forty eight. So feels like that I was good people. But we are talking about this like, I don't know. The ism is so noisy, like talk about noisy bulshed.

you know I don't know, is that to me what what's happening is if you are a giant sober n your national owner of fixed income, the election really can change a lot. And what I thinks happening is their pricing in some sort of trump win. And if you're japan and on some treasuries, you're probably taken some off the table. And because trust policies, just I don't know, this is really not. But no income tax would be like the biggest grow.

It's not gonna happen.

I'm just saying like if he if he has a lot of these like crazy ideas where you can change the dynamic so the economy pretty fast, then yield skyrocket and you're seeing stocks actually still up today. So in a sky work and there are up set something .

in .

since on the tenure. So the yellow curve is deepening maybe on progress th policies and in a trump win is sort of what i'm in using. And a closer, you know, we get to the election, I thought that yellow would come crashing down because IT seems like an overreaction just if you look at the move index and volatility, people are really getting head of themselves here.

Yeah I think time to your point, like so much of the moves right now, we're just this democratic like ball stuff that you keep type track of that like know the the more traditional fundamental lives. So why is a yellow surging right now on a soft N F. P? So maybe that's a good set way to some of the rest that you got going on in terms of just what you're seeing in like significant heating and volatility right now?

Yeah, well, let's do a little cross at measure. Um maybe i'll hit you with the side forty three. So this is this is the I always look at the high ye ld market for the proxy of like what's going on in credit.

And if you look, this is the the double b spread, the b spread in the triple c spreads, they've come in like there, they're at the loss. So all of the stuff is is at the southern level right now. Go the next chart.

The move is insane. Yeah that's partly.

I think, sync racy from like the ditch network or something, the update OK yeah so um and then the number of this is agreement. The number of bond issues has decreased by eighty three or eight percent, the big in of twenty twenty two to nine hundred and ten, which is the low since obvious twenty twenty and comparable to one thousand eight ninety nine des historic peak of one thousand one hundred thirty three.

This is the third consecutive year of the number of high field issues are declining. Basically saying there's less supply in high iee. So credit on the corporate side, especially in like the risk st, your trench of credit is pretty good.

Now the next side, this is leverage loans. This is a good queens' old world. I think you did leverage loans, but the coupon on leverage loans is coming down because the fed lowing rates get this in terms of injuries expense. Loan borrowers have saved roughly two point nine billion of annual interest costs via repricing. So there costs the capital is dropping on the leverage loan market as well.

And that doesn't even count one hundred bips, you know fifty and past in twenty five, twenty five ahead in in the floating rate.

exactly. So this is the new there's a new credit cycle actually happening on the corporate side is sort of what i'm saying. You know corporate bonds are selling off a little bit because of this destination thing, but spreads are in like credit spreads are in, which basically means, you know, credit on the hole is fine.

It's just on the treasury side is where everyone's kind of freezing out right now. Now go to the next one. This is probably a charge crime because I know this is a five forty six.

This is the move index. This, you know we talked about this last week. It's U.

S. Treasury, a volatility inverse C, D, X on high yields, which is the orange line. And so you're seeing basically the implied move of U. S.

Treasury interest rates like skyrocket, but C, D, X on high iee, which is the insurance on high yld or create spreads essentially, uh, this is this allows so the highest markets not really budging at all. This is just A U. S. Treasury, you know, red pheno. yeah. So basically .

what you're showing here is that like we can see bond losses from two reasons, either increase like credit risk or increased duration risk. And the credit side of things is like a as it's ever been really like we are in a very good stop. Yes, it's more about duration. It's more about higher than expected economic growth. What's Price into .

the corporate interesting phenomenon like you'd you see this move in treasury's and you'd expect spends to be blowing out and you know everyone's calling for credit crisis, but it's really maybe it's what I think treasurer are saying is trump is gonna win and maybe there is going to be growth is going to a lot Better than expected. I think that sort of what the market is trying to tell us right now.

Yeah, I mean, like like this is how we talked about before when we talk about the stock camera. But just comparing if you want to look at this simply, if you look at H Y G vers H Y G H, so H Y G is higher credit um and it's down point um is down twenty two basis points today. But then when you look at H Y G H, which is duration hedge, so it's purely credit risk.

It's up making basis points. That's like that. Everything that's a signal shocking, right?

Like you wouldn't expect to see that credit firming on the the hail side of things. And you can see a lot of companies like I watch eyes heart radio, which is that kind of a high o this year is kind of breaking out from a bottom here. So there's there's a lot of weird, funky stuff happening, but you want to get an equity volatility.

Now the point i'm trying to make years, if you look at where everyone's kind of getting ahead of this election and making bets on certain asi classes, and that's why the move indexes is really high. And then if you go to equity of all, let's see, good. We wash this last week, five, fifty.

You know, this is where I was wrong last week I thought we would, people overprotected their books, and, you know, the fix would slowly drift lower heading into election. But, and I actually got IT got worse because of a couple things. But so the dicks, the White line, this is from our boys at pipers, and we want danny curse on at some point to walk us through.

He's got the best stuff.

You'll come on some point. But uh, the White line is the vex and then the the orange line is the realized voluntier ity, the S N P. So on the spread of these two things, which is the line below is is high, meaning the employ wall is higher than realized volatility markets not treating that crazy, but implied wall is.

And that's because everyone tedda and you of your systematic buyers, when the vicks goes up, they deliver you know, their stocks. There's all these interesting phenomenon, but where we're basically setting up for a crazy event and then go inside de four eight, this is really interesting if you there's someone out in the market making a huge bet that the vix smashes down. So look at these top three lines.

This is the vx november sixteen put yesterday. Someone bought one hundred and twenty six thousand contracts of the sixteen puts in november, and they bought one hundred and twelve thousand of dix fifteen inputs. And then they bought, you know one hundred ten of the fixed twenty puts. So essentially after the election, they're anticipating in the vows going to roll off really hard here. And you you can see .

like the eighteen percent increase in open interest.

Yeah yes. So are lots of games with volatility happening here. And I don't know, generally, when you get to such extreme levels, the only wave all stays this high. Meaning you know the stays as high is if we don't get a winner of the election.

I think that otherwise you are in the seasonally really advice ous point where bybee kick in, trading volumes drop, lots of stuff starts kicking in, an earnings have come out actually Better than expected minus, you know, like mo soft met. So I mean that I know that's where I think this is headed, but things can get wanky here. We're going to see some wicky .

stuff in the next year. But but for all to stay this elevated, to your point, like IT needs to be really wacky and stay wacky because the vx, like I was constructed, is they call a moga burning. I'm not a good enough planted to you know make the distinction between mean median mode reverting.

But it's mode reverting which generally makes IT so that you know we basically need to see the consistent black swans effectively keep rolling to keep evolve this elevated. So you know you're. You're kind of on the losing side if you're thinking of going long .

while at this junction right now, IT pays to sell insurance. If you think about volatility as insurance, you you're Better off selling the insurance rather than buying the insurance. No one should be blind buying options here as the implied moves are are very large.

I fashion say no wants to me but you know you're your risk reward for buying volatility right now or buying insurance is is rescued poorly and just giving your sense, you hit hit side forty nine. This is, this is how far the wall has moved just in the past. Let's see last week.

Okay, so the White line is where we currently are. So, so basically were inverted, right? The spot fixes up huge. And then last week was the blue line, so you can see how far we've moved on spot Prices and how bad the inversion is.

Now you longer you go out, look how IT drops the vics jobs, you know right now in december, its Price that what? Nineteen or nineteen thirty six or something. So it's there's just a massive inversion right now, which is why, you know, yesterday we saw and these are all market structure things, but the vicks imported really hard.

And now today's the markets up in the fixes down what percent the mix is downing seven percent today. And that's why a lot of these protections rolling off again. So these are all just kind of market search things in the set up is I think I think it's good for evolve match and probably a relevant ing if if the election turns out there to actually he's S A winter does matter.

everyone. This subset sponsored by leger. For the past decade, letter has been the global leader in digital asset security, trusted to secure more than twenty percent of the world's cyp to assets.

Celebrating ten years of innovation. Letter is making digital ownership more secure and accessibility with their latest products, ledger stacks and letter. These violence feature the world's first secure touch Greens. Simplifying your digital transactions while ensuring uncompromising security through is leger's security chip and proprietary O S plus. With the leger's security key y APP, you can say goodbye to traditional passwords and step up your digital protection.

Your entire cyp to experience got a whole lot easier ready to protect your assets, choose the most trusted name in hardware wallets leger, and take control of your digital security today at the dog right to the show. So yeah, I mean, to your point, like the biggest of driving markets right now is just like pricing and touch pricing out of right now. Trump t right because he's the leader in in bedding markets.

When I want to pass her to you and hear a bit about what you're seeing in there because he feels like we kind of went to this over the last week since we last. After that, we went quite a bit Price and truck trade, you know, D, J, T was soaring and now we've come back lower. What are you seeing in that perspective?

So Tyler laid out that what's happening in the market right now is maximum here. This is incredible amount of hedging in equities with the you know the vicks and imply stock volatility and the fixed income market with the move. So know the move is possible.

Bly correlate with yields Normally when yields Spike because it's an inflation scare or some other sort of scare, it's a most Spike with the yellow Spike. And we've seen that. And the thing is, is there's so much baked into this event and I I disagree. I feel like this reminds me of the time in college at at school before these big finance exams, I would feel very prepared, usually ask them. But one time I went to the library before the exam, and IT was packed, like, because everyone's cramming.

And you could just feel this enormous amount of anxiety when you stepped into that room, because everyone is freaking out because they're unprepared and and then you're start questioning in yourself, you're like, then should I be like a lot more scared than I am? Like everyone is freaking out. Like in this, like anxiety is palpable.

That's like right now with next tuesday, like you walk down the street and you're like, i'm an optimist, unlike if trump winds of combines, everything is going to be moving on and you walked on the street and like you can even talk to people. I mean, it's like this this incredible anxiety and you're seeing IT in the market. So okay, that's the that's what IT is. The reason I think it's unfounded is and and a lot of like narrative is too fold one when you compare twenty sixteen, twenty twenty and twenty twenty four polls and the result from twenty sixteen and twenty twenty, you know at this junction in twenty sixteen, trump was down by four five and I one at this point in twenty twenty he was down by six or seven and he lost by one whatever was two, one or two uh, and today he's its flat or he's up by half point or something yeah .

just quite show the Alice polling, which I believe was the most accurate in trump up in the national polls right now, further closing polling here. So just to feel like what you're saying.

So my point is out of the last three presidential elections, you know removing this information of the the last three months kind of siap attempt that has gone on to, you know, concoct this narrative that it's way closer than IT is.

This is when you just look at what the polls said before and what the outcome was, and you just assume you know, you can assume differences and the pollsters updated the methodology, but I don't give them that much credit because there are still a clear media bias. Uh, it's it's shaping up to be the more side in one direction than the previous two. okay.

So if you believe that the pollsters to have that view, you have to believe that the polls have not fully corrected the mistakes from sixteen and twenty, which I don't think they have on top of that. Historically, ten percent of elections have been contested, right? It's not a big number I think eight seven to one hundred to whatever elections in the U S.

History and only ten percent of been contested. So it's a very um you know right long tail, left tail, a long tail uh probability of of IT being contested um and thirdly, don't forget joe bines in the White house, right like this guy is you know describe with the policies whatever he's he's a moral guy. He believes in the values of the U.

S. Constitution, the electoral college, upholding the integrity of the U. S. He will be mark my words, it's going to be ten, eleven, twelve P M, E, stern, you know, at night night of the election. If tom is gonna SE, he will be the first to caller and say you have to conceive and no funny business. People are forgetting, like in all this hoop law, that there's like a lot of rational people here and similarly on trump side, right.

like there's a lot of I heard concede pretty quick if if he was obvious he's .

surrounded like his team is some of the smartest people in the world like elon musk. You like disagree with their views but like this like there are so many rational people despite what the scare tactics of everything like either side, there's a lot of rational intelligent people in know in in around this event um so the combination of that I have faith interesting you know despite all the the who blood in the system know this part of the system. And I think actually it's shaping up to be more websites.

So I think this fears, I understand why you had I understand all these things, but I just feel that a lot of this is unfit. And then on top of that, I fundamentally disagree with the commonly talk about narrative of if trump wins, let's assume me because he's had the poles let's assume me wins um because if he doesn't, then obvious yield he wins obvious y yields are onna fall, probably the dollar week things like that. But I think it's actually key wins over a montorio on that.

Say I sell the news in yields. I think it's to sell the news in the dollar because let's talk about why everyone is super scared about about his election for yields is the deficits and people assume spending okay, let's start with energy policy, whose energy policy is more deflationary? Drill, baby drill or prevent fracking like that's pretty straight forward.

Number two, geo geopolitics and global war versus peace and negotiation and a business deal versus shooting guns and and bombs. We have four years to see which was more peaceful and which was more kind of war hockey. And I think it's trumps was just he doesn't want to get involved like and that's that's less spending, that's deflationary.

And in the last thing would be I don't know why no is talking about the elan and lattix department of government efficiency thing. There is only one side here even talking about cutting costs. And IT doesn't get any attention in the media and people are saying, oh, he's going to be horrible for deficits, even be horrible deficits if deficits are bad for markets.

And trump, getting advice from all market guys, see you of a large investment bank. bep. You know, most successful capitalists in the history of the U.

S. J, D. Vans ventures. Like, he wakes up, he tweet about, S, M, P.

I want a new highs. Goes plays golf. trump. Like if there's something I E deficits that are causing yields to blow out in the market to boss he like he is a marked guy.

So anyways, there's just a lot of things I think are completely misunderstood around reality of like looking at history and obviously both sides are saying twenty five thousand more free house payment and you know cut taxes on this. But I I just really strongly disagree with like where these not kind effects are being perceived. And so for that for these reasons, i'm a big fator of the election wall, the election contested risk.

And in either case, you know crypto particularly people are very, very focused thinking it's over if he wins and it's it's a million dollar big coin if he wins. But in reality, the mro improves. Just removing this like, okay, say he does win and h shoot, you know, we don't have the IT first big coin, president.

Well, yields are gonna the dollars going to you're going to look at oil Price. It's low. You're going to look at the fed.

They're about to cut another two times and you're like, well, biton went from twenty five to seventy five last for the january march on great maco you know none of this other trump stuff uh into the macro s pristine and then if he wins again, I still think IT to sell the news in yields and the dollar and you have that so anyway, ways long rant I just think that like this this hysteria a in the market like I just can't wait for the action be done. Obviously there's terrorist. Obviously if it's two A M, you know it's .

necking the tailor sk is .

so bid up right now like you and i'm not saying go till long and um you know short of this all these things, you know you got to struct your portfolio to benefit in you know either outcomes. But I just I am fading all of this stereo like maybe maybe i'm too yeah .

i'm just like .

saying Green about IT I don't know, but I just i'm trying to block out the noise and stick to just what my process tell me the process saying if if the election we're not this crazy wall inducing scaring out in horizon that like the macro is so primary right now.

Yeah, that's where to take me regardless you know like I pretty strong in the x camp for maker right now. And whoever went swonk change that.

Look, look at this. You go to slide thirty eight. This is a great you know reminder here. This is a jp more in U. S, Q.

3 reporting season。 So so far, fifty five percent of companies in the S, A P reported seventy five percent of beat estimates, albeit those estimates dropped. E P S year of your growth has been nine percent, which is pretty damn good.

Um and you know you could do IT by by sector energy materials. Those are actually missing which is good for inflation, right? Uh, industrials, uh, seventy five percent have been beating estimates.

But lets see what else we got here. I T, seventy nine percent beating estimates. This one's really interesting financials. If you look at Carry to break out to the upside. That wouldn't happen if the economy was really, really crappy a taller .

I thought the unrealized losses are going to send us to the fucked in ground here.

Yeah I mean, so so this is just a good gut check that I don't know after earnings, you're gonna get any incremental you info. Uh, so the only thing we really have to worry about is like a sothern bond market blow up, which David servers had a great one today. I know maybe I could just say this is a great step ID from errs.

The recent run up in treasure yield has indicated, as injected, some adjunta into the never ending parade of that n deficit alarmists cos of fortune five hundred companies, cio of thirty billion dollar investment portfolios, ivory tower academics, leaders of mult, national government agencies, leading central bankers and of course, elected officials, continuously warns about the risks of unsustainable deficit spending. And when long term industry rise a smidge, they start to APP up with the louder. That's just the first paragraph. But basically he just rose all the the people saying, you know, deficit spending is gona cause this sort of spiral and yields are going to go to the moon and the ones going bankrupt, the markets telling you, the bone markets telling you that the corporate world market, not the treasury market, is telling you that everything is kind of fine here, relatively. This is just a free gout in in treasury yields in servers basically says, you know don't anticipate this like super spiral heels to keep happening.

Yeah, I agree and took that point. Maybe we can we can entertain a little bit of the the debt, do mor treasury stuff. I promise I will go over this this week, but we got the Q R A this week that the treasury, that borrowing ing adviser community, accordingly, funding announcement is active. Time is according time is from me, the nerd out of retailer, to talk above controllers.

We were actually like a couple of another one next week.

We need new facilities.

We get some more .

for um okay, so this is something that became very popular um when deaths start to we got you know a whole Harry for long narrative and suddenly ly everybody decided to become Q R experts. And basically what this shows is every quarter we get to learn two key things. Things we get to learn how much does the treasure plan to borrow um and how much does the plan is he did and how is IT going to issue that that um in terms of the composition.

So what do we learn? We learn that this this coming quarter um the T G A baLance, which is basically the treasury's tracking account and basically what they do is try to target to have about five days or so of of Operational liquidity and there at all times um depending on on what's needed in rest of our so we learn that um and then we also learned that they plan to borrow um let is make sure I got the the right number here. They point the bar of five hundred and forty six billion dollars this coming corner.

And then the next quarter, january to march twenty twenty five, they planned to bar eight hundred and twenty three billion dollars. So it's a two hundred and seventy seven billion dollars and increase in in dead borrowin. Big reason for that is what we're seeing here in just the change in the T G.

A account movement. So right now, right about like a hundred and eighty billion dollars there um is the planned in the drought down to seven hundred and billion dollars over the next quarter, but then they want to bring you back up to eight hundred fifty billion dollars. So roughly hundred fifty billion dollars of that two hundred and seventy seven billion dollar increase is attributable to the dynamics that's gonna agreeing from the T G account.

Um and so what does that look like? So basically to take that up and in one important caveat here is that anything after january obviously is going to be dependent on whether you know right now this is yellow and the democrats administration in the treasury, so for this that actually OCR, they would have to be reelected. We won't know who's gona run treasury for trump if he wins or or what their plans will be there. Um IT could be different. But as the stands right now, what we're seeing here is that there is in a substantial increase in the percentage of treasury assurance that would be to so whereas this coming quarter, it's gonna at roughly you thirteen percent um of total issurance being bills, the next quarter there that begin increase that were seeing is up to forty five percent.

Um and the reason for this is, is because we live in this weird in the world where and this is what we showing the next short here um we live in this world of now we have ford guidance for treasury debt issuance, which is just the most same thing i've ever heard but that's the world we live in now and and part of that forever guidance men that Allen has decided to take up is basically saying that we don't plan to issue any new duration onto the market. So what that means in simple speak, is that, you know, we decide to issue a certain amount. And you can see that here in this chart is that every quarter, we're going to issue the same amount of dollar value of, say, tender bonds are.

We're not onna change IT. So if we need to borrow more money, bills are going to take up the mental. And you know there's a variety of reasons you could attribute that too. You know you you can make the argument that you know nobody wants on long bonds like we've been talking about this whole show is that you know these bonds are are pretty much cked in this current circumstance.

So you if for the going to start a loading more supply on the market, you can make the argument that the long bond is not going to do to bone in that situation. Um you can make the also of the argument that yellow is is trying to play games where he is trying to wait out um for lower rates to this will refinance. Um the issue with that is, is part of the cost of waiting after lower long bond rates before you basically switching out that that is that bills have a highest yield than long ones right now.

The curve is in bernet. So what I mean is that there are actually paying up more interest, all not short bond, not short bills in the long bond. Um you can make the third argument that this is all political games, you know as as long as they don't issue that much duration on the long end, they can at least keep a long one yids somewhat manageable.

Um there's a ton of demand for bills. You can make the argument that issuing t bills like they are here is effectively money printing. Um i'd probably agree with that. So you can also make the argument that yellow is is producing liquidity inducing markets. But the fact is, as you can see here, i'm going from this corner, the next corner, there's a very substantial increase.

And to be fair, this is you something that a you know the great cary expert to andy constant has has has noted here in some forecasts um is to put the next following quarter after that during the martian is taxes and there would be tax, we d probably see negative bill issuance so that would reverse um quite recently you can see in his forecasts that goes from like A A forty three percent composition of of tbs being issued down till a negative seventy five percent because negative delicious dynamic but again I I one of the walter just let should explain this. But um to the point of of what color just mentioned in terms of just like fade in the fear around this is no less than less people are talking about the cura. It's it's back to being mostly just nods like myself that you know kick out on IT. It's maybe you can make the argument that is driving markets, but it's not as much in the common narrative that I was a year ago.

I I think the issue on the bills side is really fascinating because now they're all these plans like the government, not stupid. In the yesterday, the treasury released a report on how stable coins increase the demand for U. S.

debt. If you have, you know, if you're trying to kind of create new buyers of debt, stable coin are the one of the largest buyers of us treasured. This is tether.

How holds, let's see, eighty billion in in debt alone on A U. S. Treasury bills, which is kind of nuts. Um so if you grow the stable coin industry, you grow the demand for treasury bills. And I think that the issuing on the front end, you've got ta figure out funky ways to to create the demand because a lot .

of that demand has come from reverse repos, but that's gonna be running out soon. So there is this can be if someone of .

across her soon yeah so I don't know something. I mac .

other I think you've .

laid out the Q R A stuff. Well, I think the biggest take away is just we're continuing to see increases quarter of a quarter in the amount of that they need to borrow. And that's not new to anyone that's function, the deaf sites.

But the point is they have they have proven they have ways to deal with that, which is one draining the T G. A, especially if there's any issues around the dead ceiling. On january one, we saw that tactic in twenty twenty three.

They they just drain that down while they were negotiating um and then two front load of the bills and they're still a two hundred billion in the reverse rebo that that soft and that below and and releases last duration market. So you know they have these tools. The tools are not as uh the tool shed as not as full as IT was a couple years ago, but they're still there.

I think just tip really read at this move. The the bond volatile point is I feel personally that I mean, aside from whose present and in what we often see when there's a new what is there's kind of a month or two or three months of a movement in assets that or correlate to what people think, what the common narrative is around that new elects policies. And then we see what reality happens years after, for example, under under trump, yield skyrocketed and on progress eeta and the dollar along with IT.

And then the dollar was weaker, pretty mastro al his old presidency and would buy in twenty twenty quite upset actually. The dollars is actually struggle through most of iden's presidency and in yields kind of rising. So it's there's this like we talked about, kind of expect a lot of funky stuff um but also just be scape scape to go and open night because I feel that the ford policy path for the fed is as kind of straightforward it's been in many, many months.

And alongside that, I feel that the market is a more the most appropriately Price for fed ford rate cuts and policy as IT has been in many, many months. So on that notion alone, you're thinking plus oil is at the bottom of the range and can't met sustain a bid and wage inflation pressures falling um you know how inflation pressure fine like no inflation volatility. So you're saying that you're like this seems like it's kind of the least unknown forward rate environment we bent in, in a while.

And so why is the move so elevated? And you look at every election and it's an election thing twenty, twenty, twenty sixteen and in both those kids we have different x different policies. Twenty sixteen was red sweet twenty twenty was I don't win with a spot congress or maybe I I don't think is blue sweep um but in both cases the move created yeah and I just think like outside again harping on this. But outside the election, not like unknown is out there are not that high in my opinion, relative to where we bend in this whole year.

Basically yeah, the fed path is a lock like a special today's print like that is no matter what happens with the election next week, the fees going to cut twenty five. They're probably going to cut twenty five in december again like that is that is pretty solid. And there so I totally .

agree in the rolling off of these volatility metrics. S when there is an outcome of the election, are typically some of the most liquidity positive market moves you can have obviously falling yields very liquidity positive, falling dollars liquidity positive, but even more so than that, falling vollar, tilly and unknown in the market is one the most liquidity positive movement you can have. And so I just think, let's see, let's get through tuesday and wednesday a hand bio IT is just incredible amount of of fear Price in well.

maybe we can wrap up here are just doing a little Victory lap for a clin on microstrip gy. And um with respect to a compliance and that color, china, where you can where you can not or just stand there yeah yeah you just stand there smiling. I want to up shout give a quick cap of what you mention last in terms of microstrip gy and then what actually occurred um in the earnings because I think because is really interesting um i'm actually going to be intervening deal in the Clair in an hour, which is going to be really great for nursing, really deep on this. But just want to get to your take on on what you saw, how you know how somewhere was IT to .

what you expected happening yeah you just so summarized you had the most aggressive run up in the premium of microstrip gies enterprise value and equity value share Price relative to its big on holdings that we had seen in many, many months. And IT was an aggressive fifty percent plus move in the premium over bitcoin in in a bottle month since its last convert issue in mid september.

And you had this event sitting on the rise and with earnings, you know where there were the black out roll off off where they can announce capital marked transactions. And with a premium like that, there's just incredible invent of for for them that how they grow bitcoin per share, that's how they increase the value to their shareholders is issuing equity at a premium because the volatility in the stock at a premium to its book value, buying bitcoin at fair value and IT grows book value per share or bitcoin per share over time. That's what they talk about this yield metric.

And so you just had this incredible incentive to hit the capital markets. And so yeah, honestly, I wasn't expecting just peer straight quality. I kind of imagined they would throw convert in there.

But what this does is instead of having to go back to the market every time the premium get tie the issue billion and a convert, knock the prem down, wait a month. And it's a super lumpy way of accumulating bitcoin that also coincides with pops. And bitcoin Price are pops in the share premium.

They're always buying the top. This kind of allows IT to be more smoothed over time, where day to day they can be kind of tea wapping shares and tea shopping in a bitcoin. And yeah, I mean, it's it's like one of the biggest kind of equity A T M.

Offering, you know in recent history, and it's obviously a huge percentage of market cap. But I just the crazy thing is the shares were down twelve percent after market. Would you to expect you know a hit? And then yesterday I was trading Green and you're like, so the yeah, there's a lot of we could go deep, deep down the rabbit le and about why that is.

And it's kind of there's a lot unknowns and you're trying to forecast people's propensity or demand for the shares of microscopy of a bitcoin is not unknowns, but the the moral the story is the premium remains aggressively high and the incentive to issue shares in bibi un. Remains high. And so I kind of wrote in that thread, you remove the left tail because a bitcoin right now where the premium so elevated because he has a lot of room issue equity and therefore by B T.

C, I just not sure that something that can be Priced into the market because he's not gna go out in dump five billion. I was joking when you I got questions for dull and I like, why can you just do this in one market order and you know he's going to be method ally slowly, not trying to you cause big, big movements in in the market. So yeah, it's kind of like a multiple T, O, P that kicks off. When is blackouts over which I think is like monday, you know usually one to two days after earnings so pretty bullish yeah.

I think the big one is like, you know, people were kind of losing their minds over the last two days seeing this. And you know just a really contrast that I said pretty funny tweet like, okay, great day announces like a party significant back and the stock is down pretty significantly where as h microstrip gy, just you know, based golf. D yeah twenty one billion and equity issuance um the stock is up and I just drew people insane. E and like my big question is, at what point does this go from all this is the most speculate of irrational bubble of all time. People don't understand, you know capital structure um you know they don't understand what they're buying to oh shit I was actually wrong um and this is actually like I knew you like capital treasure mechanism that we're seeing unfold here like I wonder .

what point of changes for .

people you know yeah .

probably sell that's the cause .

specifically that but in general, like meta planet. Guess what? The best performing stock meta planet is up one thousand, one hundred and fifty one. Talk to doing .

about this .

yeah and that's far up. So this this is an arb that's gonna bear when you have the sovereign looting your currency base by fiscal or monetary means. And IT won't let credit spreads wide.

Generally speaking, because of this giant dilution, this will this r will be there is a generational arbitrage. And more, more and more companies will be forced to do this as this generation arbitrage keeps going because of the giant liabilities of baby bores. That's all, that's all is this is pretty frequent. Simply generation before has basically put the wall controllers have stifled volatility so that they can put giant gates up with their monopoly and then they can't let the the debt defaults because they have to pay themselves out all the liabilities on the public side of things like medicare, medicare, social security. Ta that's i'm probably going down too much of A A macro o rabbit hole here, but that's the reason why this arb exists and IT will continue to exist.

Look guys also good up. So um I personally cannot wait to get through the next week or so. We will be chatted next week, next friday after the election um if if what we think is all going to happen, which is that everything is going to be OK, you know maybe we can start the show with the mean that just like that that nothing ever happens mean um I would love for that to happen um I think it's pretty likely but yeah it's gonna a big week IT has been a big week. Um will see what happens .

if there's no winner. The vics is get got to fifty. We will get a got voluntier ity guy on here next week if that's the case yeah .

yeah I guess thanks again. Have a week week.