Random citizen

It is January 2028. While geniuses (like Elon, AWG etc.) had been forecasting double digit GDP growth in early 2026, 2027 ended up being the worst year since the GFC despite a multitude of AI related scientific breakthroughs that drive a wave of innovation & entrepreneurship. It is now clear that the US economy is in controlled demolition mode while the world economy is just collapsing. Trump avoided impeachment with a narrow victory at the midterms despite the fallout from the Iran war. With the first "AI election" ahead, a massively stimulatory bill is/about to be passed that resolves the AI tension in a way that seems to favor labor over capital: a temporary fix while the rules of a new post-labour economics world of abundance are being negotiated. Other countries try various legislation in the same direction but don't have the fiscal room to stimulate enough to avoid imminent cascades of economic failures and riots. UK and EU leadership are further unmasked to be fully authoritarian, desperately trying to cling to the pretense of democracy while employing ever-drastic measures to contain the fallout. A systemic reset looms over the horizon. It will be agreed on US, China and Russia's terms.

A man expresses love through duty.

@BenBrey @SquirrelMacro Hey Ben. Don't you think the passive flows can carry the market for a while more despite the drain?

I have partcipated in over 1000 IPOs in my career on the buyside roughly for a "context window".. SpaceX is in a league of its own in terms of "Idiocracy". The Squirrel (@SquirrelMacro) and I are back out with more thoughts post S-1 filing - TLDR: Still Bearish. Just remember all the public bulls you are going to hear in deafening volume in the next two weeks most likely are long at 5% cost basis vs deal price. AKA "Show me the incentive and I'll show you the outcome."

@PeterBerezinBCA The difference this time is demographics - no way there's a 30 fold increase in gdp without massive fiscal stimulus. Reality right now is declining real incomes.

One usually doesn’t sees the terms “Doomsday Argument”, “instrumental convergence”, “computational irreducibility”, and the “Many-worlds interpretation of quantum mechanics” in a Wall Street research report. But I decided to do something different this week: Clients can read the whole thing here: bcaresearch.com/reports/boom-d…

Revive shrinkflation.. but for AI this time

Nah. This would mean 2y above 5% at least. No way. Mini inflationary wave for a few months followed by true deflationary collapse next year. 2Y below 2% by the next presidential election.

@conksresearch as if.

Fed’s gotta hike innit

@Andercot It's also interesting beauty can emerge from both entropy and anti-entropy.

Interesting that there is such a thing as "anti-entropic force" and it is basically "whatever intelligent life is trying to do" and that this is somehow fundamentally connected to the forwards arrow of time.

To those saying this time is different from 1999, I wholeheartedly agree. And I am a secular AI bull too. The cable and dot-com era produced the largest IT job gains in history. The AI era, so far, is showing signs of being the exact opposite. It is 100% different this time.

@alexwg I'm sure anthropic will overtake US gov revenue...

@EffMktHype is your heart even made of stone

Watched Project Hail Mary. Amaze amaze amaze! Two thumbs down

Moonshots episode #246 is out. youtube.com/watch?v=cFI-Sq…

“pay Asian sovereign debt investors a decent yield”

@EffMktHype @acrossthespread

YoY comparison for USTs, Japan Holdings of UST and JPYUSD (down = yen weaker) Trend suggest holdings likely fell in the last two months and weekly flows through feb/mar back that up. Setup reminds me of 2012 where abenomics/3 arrows plus foreign energy demand (fukushima disaster, crude demand compensated) kept pushing yen weaker. Yet outside of the Hormuz situation, AI supply chain supercycle has driven massive demand for components out of Japan and contributed to the trade deficit recovering while the CA surplus continues rising. The missing piece continues to be the BOJ and its adherence to having the patience of a sloth climbing an interest rate tree. If that flips, or Fed finally turns dovish, that will likely be the trigger for yen to strengthen again.

@profplum99 Add to that the medium term deflationary effect of layoffs due to margin compression - especially impactful considering where we are on the beveridge curve..

Remember the CPI is a one year fixed basket, which by definition ignores demand destruction in categories that rise in price (gasoline) and demand substitution in areas with falling prices. By definition this leads to an overstated CPI vs actual consumption basket that is exacerbated by volatility in prices. Truflation is picking up the deflationary impact of high gasoline prices that bonds (front end) are now also sniffing out.

Early Wednesday morning we shared a high conviction macro pair trade in our subscriber chat that probably still has upside from here, long SFRH7 @ 96.20, which we averaged down on Thursday, paired with short ES @ 6660. Here’s the reasoning:

They must not expand base money to deal with a dollar funding squeeze caused by a) collapsing trade; b) a recessionary credit impulse; c) fiscal austerity; and of course, 4) acute oil squeeze on both real economy spending and asset flows. To be clear, the oil squeeze is biblical, but all of the below would've happened exactly now regardless of war or no war. There was already enough brewing to cause this. These aligned forces are why the market is weak, yields are blowing out, vix and spreads are rising, yields are backing up in a bear flattener, the basis spread is blowing out, cross-currency swaps are moving, and the dollar is rising. They need to let this happen. They have lost the reserve currency luxury of being able to ease into recessions and bear markets. They have lost it because they have caused their biggest creditors to blow up financially (and now in many cases literally). They are now up against a global sudden stop in capital flows, prompted by a physical energy squeeze and a related collase in both global demand and global current account surpluses. This squeeze will cause accelerating selling of US assets by foreigners. They must not accomodate that dollar pressure by easing, or it will create a self-reinforcing spiral of currency weakness and inflation. They have put themselves in this position.

This is one of the best short clip segments I’ve heard all year. It’s a message I try to urge my friends and family to internalize. In today’s world, everyone is so conditioned to believe that all you do is “buy stocks on every small dip.” It’s almost a Pavlovian cultural response. But what many people don’t realize is that you can go decades with no real nominal return and that’s when sequence risk becomes very real. People don’t believe it because they haven’t experienced it. On the flip side, I’m not even entirely sure the economy could sustain a 3 year period where the market is down 40% and simply remains there. So many 401(k)s, savings accounts, and target-date programs would be absolutely obliterated, given the embedded leverage that is naturally baked into the overreliance on US equities. In addition to that, there are now money managers stepping into roles where they are responsible for real risk, yet haven’t actually traded through a true event in which market volatility is both sustained and recurring. I’m not trying to sound like a perma-bear, because that mindset can be just as flawed. But when you really dig into the data, you realize there are many periods where markets pull back and don’t just immediately recover. But everyone has become so used to the last 10 years, it’s not even a consideration that it can occur.

@TotemMacro Is there a resource to track what percentage has been pulled-in dollar/euro terms across the us and europe?

That makes it worse because so far many funds have been satisfying investor redemptions with bank borrowing instead of cutting or selling loans. But since the collateral value of the loans is down and banks have been defrauded in many PC bankruptcies now, they are also pulling those lines.

The problem with private credit investors fleeing is the funds are, in turn, forced to cut loans. But if their borrowers are loss-making and require new borrowing to repay old borrowing, cutting them off simply turns the loans bad. You can see how this easily spirals...