Inflation Is Coming!

Some say: Inflation didn’t rise after 2008-2015 Fed QE, so it won’t rise this time. Here are the problems with that argument.

1) From 2008-2015 regulators hammered the banks, so while the Fed’s balance sheet expanded, M2 did not accelerate.

1/x The market continues to try & shake out weak hands from overextended positioning by both HF & Retail...After a strong Vanna run up overnight, as expected, retail exuberance exploded on the open in the form of retail call buying, this fragility, paired w/a)Mean reverting flows

2/x from pinned Index Vol b) well documented, risk parity rebalancing flows & c) selling flows tied to bank EOY liquidity constraints. In combination, these flows have together have amounted to substantive selling pressures, strong enough to counteract the positive vanna/ charm

3/x flows, & point to continued likely index RVol an IVol pinning...Historically, the week of quarterly OpEx markets are notoriously volatile intraday, but also mean reverting like we saw today. I think it is fair to expect continued IVol compression & more of the same underlying

4/x chop. Vanna/Charm flows will lose their oomph after Wed 12/16 vixperation morning. There’s a window of weakness which I’ve spoken to for a month that falls 12/16-12/23. That could open a brief window that could lead to revaluation of the real risk & short interest,post 1/6...

5/x but the overwhelming 10k 🦍 of index Vol compression should still hold any correction in time & price in check in the shortterm and it’ll be hard to have anything blow up too bad in SPX land given how cheap & abundant Xmas Vol is 12/23-12/24. NTM, a stim deal & potential Fed

I keep hearing people complain that the ‘mainstream media’ does not understand economics and that we’re talked down to as if everything must be explained as if the economy is a household. In this thread I explain all you (and they) need to know. Economics in one thread then....

Very few people seem to understand how money is created. Mainly that’s because when they’re told it seems so simple that they can’t believe something that’s so important that we’re willing to pay a lot to get it is created so easily. This thread explains how money is created.

What this thread also explains is that if we understand money we can completely reimagine how the economy really works, which is the pathway to rebuilding from the mess we are in. Which makes this a pretty big deal. I make no apology for its length as a result.

Let’s start at the very beginning. A person goes into a bank and asks for a £1,000 loan. The bank checks them out, and agrees. And that is all that it takes to create new money. Money is just a promise to pay. That simple exchange of promises is all it takes to create it.

Most people think there must be something that backs up the value of money. Gold, most likely. But there isn’t. Money is just a promise to pay, and has been for almost 50 years now. Mutual promises to pay creates all the money we have.

Re: Fannie/Freddie-The Path Is Actually Clearer NOW. On its face, this claim may sound ludicrous off the back of a precipitous drop in valuations due to what some interpret as SM losing his nerve and punting to a hostile Admin. In this thread, I posit the exact opposite.

First, the economic realities: 1) GSEs are the bedrock behind our housing market which in turn is the bedrock behind our economy, 2) after 12 years and $300 bn, gov has thus far squandered the opportunity to recap, 3) this economy recovery is VERY long in the tooth.

When Trump took office, we all hoped that he would usher in a regime change from the Admins that enacted conservatorship and then the Net Worth Sweep. Well, he actually did that with the appointments of SM and MC.

Yet, what always bothered me about SM was his perfect poker-face. For those of you following me for awhile, you know I’ve been saying that I couldn’t tell whether he was just playing bad cop or really was Darth Vader incarnate.

The primary consensus exit preconditions were: 1) there has to be a demonstrable path to meeting cap reqs, 2) the SPS needs to be forgiven, 3) court cases need to be settled.

Why do we track institutional footprints? 🐘 (Thread)

Large institutions like mutual funds, hedge funds, banks, insurance companies, trusts, etc. amount for over 75% of all volume. These institutions move the market, not you and I.

It makes sense that if these guys are moving the markets, we would ideally want to buy the same stocks they are buying, but before they buy them? Right?

So, let’s get a clear understanding of how and why this is so important and what this might look like behind the scenes.

For starters, let’s discuss what we mean by a large institution. In this case, we are referring to the many funds, pensions, trusts, etc. that are responsible for managing tens, if not hundreds of billions of dollars.

Hence, they easily attract and can afford to retain the planet’s top talent, not to mention, their research budgets are enormous.

They have access to information and resources that the retail crowd simply does not, and if they did, it would likely be extremely unaffordable.