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Interest Rates
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Christopher Moir
Maker of random charts that seem important 2 years later

Where's your fed at...?

FOMC tomorrow can we remember the stealth hike last time out? Chairman Powell managed to get the market to price in a hike simply by admitting they might have to think about thinking about interest rate hikes. As a Hedgeye subscriber, I have seen this chart many times.

The "higher than consensus" numbers keep getting higher. Many now use base effects in their vocabulary I have learnt from Keith McCullough and his former Hedgeye partner Darius Dale. This chart shows CPI inflation peaking here in Q2 at 4.85% then slowing (estimate) to 4.70% in Q3. Does this classify as "disinflation"? Of course it does the number is smaller. How is the market going to price it in? Inflation falling from a cycle peak to a number 199bps higher than the highest in the last two years.

Then we have a question from @Ross Moger Bonds are wrong? Which ones are wrong is the important question he asks. From the chart above inflation although peaking doesn't look all that transitory if the model is to be believed. Hedgeye also has rent data that has not been included here which could push the numbers above 5%.

The long end of the curve is pricing in slower growth. Now we have to be careful here it is slower growth globally. UST are the safety trade of the world, not just US citizens/companies/asset allocators. Now, this has born out recently with weakness in China and Hong Kong also Japan is starting to move in... (More)

A great article giving the Bullish Case for U.S. Bonds.

A great article giving the Bullish Case for U.S. Bonds, written by Prerequisite Capital Management (Australia), found at SCRIBD.com.  By the way website a great info source, so if you join, tell them referred by desertvince@outlook.com.  Here is the article:  https://www.scribd.com/document/294058310/Bond-Market-Overview-Prerequisite-Research

The Macro Cafe ! Ep #14 ( A market technical outlook for Bitcoin, Gold, Oil, Dollar and SP500 )

Markets are in a summer doldrum, some risks on the horizon and a re-shuffling of what's been working on the inflation trade. Will the economy continue to grow on its own or the monetary/fiscal stimulus will be back on the table. 

https://youtu.be/66xheoQ3PC8
Christopher Moir
Maker of random charts that seem important 2 years later

China (the rock) - Hong Kong - US (the hard place.)

I made a previous post on the subject here ->

https://exchange.realvision.com/post/hong-kong---will-kyle-bass-get-another-shot-60d9e37f43c4ab826c2c1c16

In a few scattered posts and comments, I have mentioned China slowing and what could anecdotally be their internal inflation issues.

https://www.grant-williams.com/podcast/the-end-game-ep-16-russell-clark/

Russell had some amazing insights during a recent podcast with Grant Williams where he discussed the control of inflation. Here in the west when we think inflation we think of CBs controlling interest rates. His position is that governments end up controlling inflation where they can to take the heat out of the inflation they cannot control.

Was the clampdown on BTC mining linked to a clear sign of inflation or capital controls or a first strike before the rollout of DCEP?

Was the communication that China would sell some of its copper reserves to curb inflation?

Chinas credit impulse has slowed and Manufacturing and Services PMIs are falling.

China is "a rock" in this equation.

Now let us discuss " and a hard place" between which Hong Kong finds itself.

On pg3 of the linked file prepared by Kyle Bass and Hayman Capital they describe the huge growth in Hong Kong "The golden years" this came on two opposing forces. China had a huge expansionary boom, double-digit GDP growth which led to massive credit expansion. At the same time through the USD-HKD currency board (pg10) they were importing "emergency" interest rate levels from the US. This meant HK could borrow at historic low levels and lend into an economy with the highest growth seen post-WWII.

Here... (More)