Macro - A Calamity

30 Eyl 2021

Idea for DXY:
- Had forecasted the DXY reversal in May:

- A DXY over 95 will be a calamity for markets.

Explanation:

GLHF
- DPT

30 Eyl 2021

Not

Since 1821, 98% of countries that hit 130% debt/GDP have defaulted on their sovereign debt. The US crossed 130% late last year. Govt monetary policy is no longer sustainable. - Hirshman Capital

11 Eki 2021

Not

Liquidity from the Yen Carry Trade is spent. Not so useful as a timing indicator but we know what's coming. The bear always follows, simply because the liquidity is spent:

13 Eki 2021

Not

"Today I’m announcing that the Port of LA will begin operating around the clock 24/7 to make sure Americans can get the goods they need.

My Administration is working around the clock to move more goods faster and strengthen the resiliency of our supply chains." - Joe Biden

Wage inflation spiral has yet to begin, and supply chain shortages suddenly being resolved will lead to a glut and full blown deflation. This will be a boon for the dollar and Treasury bonds, and would be the most damaging fakeout for the inflation narrative.

30 Eki 2021

Not

As expected, shipping rates collapsed, UK Natural Gas collapsed, 5-Year Forward Inflation Expectation Rates collapsed. Is something "real" if it only exists in your mind but reality contradicts this belief?

There was a collapse in liquidity in the rates markets last week. Specifically Euribor, Eurodollar, 2 year UST's, as well as AU 2 year seeing a >10 sigma move. Dollar also skyrocketed. Bond market volatility remains elevated and is breaking out, while there remains a historic disconnect between China HY and US Credit.

Keep in mind that systemic liquidity flows first through the credit markets before affecting currencies, then equities.

The World Bank's Debt Service Suspension Initiative is set to expire at the end of the year, as well as the US debt ceiling suspension. Volatility in credit markets is expected as LIBOR comes to an end and a potential operational cliff approaches, as trillions worth of products rely on fallbacks.

China signaling a collateral shortage with their credit derivatives market crash. This is as Uncleared Margin Rules take effect (UMR) which will conclude at the end of 2022.

It is clear that the credit crunch is now affecting liquidity, and the shortage will be of collateral in 2022. IMO there will be a historic volatility event regarding the collateral crunch, but will make a separate post on this after I collect my thoughts further.

16 Kas 2021

Not

We are now at levels of the dollar where the UST market last broke:


US Government Securities Liquidity Index is at the lowest point since March 2020:
Bloomberg’s U.S. Government Securities Liquidity Index

MOVE is at levels where VIX had previously been 50+

The Dollar is not likely to stop its ascent. In fact it is likely that it will reach the opposite regression extreme, by Hagopian's Rule:


By Dalio's Principles, the short term debt cycle is controlled by central banks, and interest rates... yet interest rates cannot be lowered anymore! When this happens, governments can reduce spending, reduce debt (default), redistribute wealth, or print money.
We have approached the period where the negative outflows of falling balance sheet expansion of central banks will affect the market, There is a fiscal cliff in 2022:


The printing money option has been utilized, but the problem is that the dollar is rising faster than inflation, making debt burdens actually grow.

Dalio stated that the short debt cycle occurs in a period of about 8 years, and the big debt cycle about 40. The time between 1929 and 1980 is the same as 1980 to 2021, and they are about 40 years.

If interest rates can no longer be lowered and printing money no longer reduces the debt burden, doesn't it follow that a turn of the big debt cycle is imminent?

Now we wait and see if this thesis will be proven right.

30 Kas 2021

İşlem kapandı: hedefe ulaştı

Now time for risk parity