David Daglio

@BigTicket2330 @robin_j_brooks Yuan

@DaglioDavid @robin_j_brooks Raise your hand if you want Iranian Rial over USD? Or EUR? Or GBP? 😄

After Russia's invasion of Ukraine, Putin got portrayed in Western media as running circles around the West. Same now for Iran. Western journalists spend tons of time criticizing the US blockade and talking up Iran. Not true for Russia. Not true for Iran. robinjbrooks.substack.com/p/physical-sho…

@Handre 100 percent. This also explains why gold has beaten every market since 1999.

The Bank of Japan owns 7% of the entire Japanese stock market. The Swiss National Bank holds $200 billion in US equities - Apple, Microsoft, Amazon. Central banks buying stocks directly destroys price discovery. When you purchase Toyota shares, you compete against a institution that creates yen from nothing. The SNB prints francs to buy dollars to buy Facebook stock (they're literally a hedge fund with a printing press). Stock prices no longer reflect company fundamentals or investor sentiment - they reflect central bank balance sheet expansion. This is wealth redistribution to asset holders. Currency debasement funds it. Every Swiss franc created to buy Nvidia stock dilutes the purchasing power of workers holding cash savings.

You say potato i say potato, my thought here is that they allowed 100 companies to compete in cars now they have 4 or 5 global companies that will dominate the globe. BYD has the highest returns/margins in the globe, I don't know seems like a win. Batteries they are rationing their leading edge batteries to rest of world so that their home grown industries can win. It's not our brand of capitalism, but it's working sometimes.

For the last 10 years it seems China has way over-invested in its targeted industries. Housing and automobiles being prime examples. I saw an article in the last week or two, that they are pulling back from batteries to keep the same over-investment from happening. It is too late for automobiles. It seems the good options for massive investment have all been satisfied. Time for a new model?

Whenever I post something suggesting that the Chinese economy is not much different from other (aging) economies, a lot of people feel the need to explain to me that China is super productive and is a true growth miracle. The straightforward reality is that China is not super productive nor a GDP growth wonder. China’s population is aging and shrinking like no other. In the coming decades, the Chinese population will shrink by hundreds of millions. More importantly, so will China’s labor force, meaning China's primary source of GDP growth is outright negative. Connecting the dots: China’s debt accumulation is way above that of the United States and other aging countries, while its money supply has exploded. With a total unrealistic GDP growth target of 5% per year, China is a debt economy on steroids. And since debt and money supply are increasingly the same, China’s extraordinary money supply growth is easily explained. No productivity boom, no miracle. Final piece of the puzzle. This is why China has no alternative but to keep buying unprecedented amounts of gold if it wants a shot at ditching US dollar hegemony.

@BigTicket2330 @robin_j_brooks ? No one is running out of money, they have lowest borrow rates in the G7, maybe the bond market is wrong, but it appears no one in capital markets sees risk yet.

@DaglioDavid @robin_j_brooks Running out of revenue and having to print money is not great for a currency.

It's hard to know and yes Pettis has been a hammer on this issue. Their "investment" has led to them leading industries from pharma, to autos, to solar, to complex PCBs used in every product we consume. They have more degrees of freedom than the US as we have zero consumer "savings". The housing market explains most of Pettis's conclusions. What if that is actually a good thing, meaning affordable housing is a good idea.

@DaglioDavid @jsblokland "Productive" is doing a lot of heavy lifting in that sentence. Economist Michael Pettis is well known and lives in China. China has run out of clearly productive ways to re-invest savings. Thus, the re-investment has often gone into unproductive investments.

@robin_j_brooks Thanks fine, that said the reason Iran's currency is down has more to do with blowing up their country for a month than anything else.

@DaglioDavid The issue is the counterfactual. If the West had blockaded Russia in 2022, that would have spiked oil prices, but it would also have caused Russia's export revenues to collapse and the Ruble would have gone into freefall. That didn't happen but it's now being done for Iran...

@KASDad That's it and as u mentioned in 1999 the same thing happened.

@DaglioDavid Blame the vortex of momentum that increases optimism. Analysts are 'forced' to not let their estimates fall behind the stock price. The trend in earnings is real though.

The optimism reflected in earnings estimates is, to a large degree, driven by fundamental analysis. However, it is hard to ignore the tendency of widespread optimism to further inflate analysts’ estimates. You saw that in spades in the late 1990s.

@RogueMacro_ @jsblokland There is some of that, but majority of their investment has brought incredible commerce. Also cheap housing isn't a bad thing, it's a good thing.

@DaglioDavid @jsblokland Yes, bridges to nowhere and falling apart ghost cities, . Great investment.

@infraa_ Gold about 7 percent, almost like the M2 math is flawed but directionally correct.

Average annual rate of change over the past 50 yrs: -Avg Hourly Wage= 4.8% -Government Debt= 9.1% -Broad Money Supply (M2)= 6.6% -S&P 500 (price return only)= 11.3%

@cherrygarciafan Agree, isn't that concerning, eg price of gold is telling you that it is awfully high.

Alan Greenspan admitted in the 1990’s that the Fed couldn’t accurately account for the money supply due to the proliferation of products aka the Eurodollar system. Somehow though ppl on this app with a double digit IQ think they can. Fascinating

One of my “go to” lines for years has been that the sign of success for a country isn’t that poor people drive cars, but that rich people ride the subway…

@SantiagoAuFund @LawrenceLepard @Sorenthek Really gold has out performed the markets since 1999, seems like a pretty take that it mattered.

@LawrenceLepard @Sorenthek Deficits have not mattered for either of our entire lifetimes. What changed and why is it different this time?

Sunday Book review

@robin_j_brooks @paulkrugman That's because it isn't a blockade, seems a bit disingenuous to take a victory lap here.

Here's my discussion with @paulkrugman from March 19 where I argued oil prices won't go to $150 or $200 and recommended the US blockade Iran. It's as relevant to global oil markets today as it was back then. The blockade is working and Iran is in trouble. substack.com/home/post/p-19…

@DaglioDavid The yield curve read is probably right. But clumsy bond management and Gulf actors extracting institutional elevation aren't mutually exclusive; one side stumbles into it, the other capitalizes deliberately.

@michaelxpettis Yes. Yes. Thanks for this.

It may be easier to measure currency intervention and reserve accumulation as something that only occurs through central banks, but it is increasingly unhelpful to do so. In many countries it is not just the central bank that executes exchange rate policy. Sovereign wealth funds, state banks, and other state-controlled financial institutions can be even more interventionist.

Struggling company who couldn't get a life line from any other company or capital markets turns to government. Not surprising it went up, but this is not your grandmothers capitalism or what made the US capital markets the envy of the world. The US would have been better off if their assets were sold to better operators.

The US government, on paper, made $27 billion on its 9.9% Intel stake since last August. Once again, economic text book teaching of reflexive negative take on state capitalism is turned on its head.

@SanderTordoir Desperate times call for desperate actions. thanks for highlighting.

A lot of commentary on Chinese investmeint in the EU miss the most importat observation. Chinese FDI in the EU is tiny, a fraction of what it was 10 years ago. But EU's trade deficit with China is ballooning, up another 30% this year. The implications should be obvious. 1/