Quinn Thompson

U.S. crude export restrictions are becoming a real policy risk. @qthomp lays out why an export ban could suppress WTI, spike Brent, pressure China, and distort SPR refills. The tradeoff: lower domestic prices now, but weaker incentives for future U.S. production.

Global bond yields...

Global policymakers are staring down the barrel of an uncontrollable situation. They are simultaneously attempting to devalue the dollar, suppress bond yields and manipulate commodity prices lower. They have succeeded in the short-term and it has felt like crack cocaine for global equity markets. The stock market strength has masqueraded behind the "AI singularity" narrative as there has been no other obvious reason for such a large equity move amidst the background of such a worsening supply chain backdrop. This is leaving most market participants unaware of what is really going on under the hood. Why it is about to become uncontrollable, however, is due to the nature of the beast. All of the government interventionist tactics I listed above are economically stimulative and financial condition loosening. 1. Suppressing the dollar eases global liquidity (on top of already ~$500B in ongoing Fed QE disguised as 'RMPs') and sends stocks higher, creating a positive wealth effect, reinforcing growth and inflation. 2. Suppressing bond yields makes financing costs cheaper all else equal for businesses and consumers, reinforcing growth and inflation. 3. Manipulating commodity prices lower provides stimulus for businesses and consumers, avoiding the higher prices required to force demand destruction and bring on more production, reinforcing growth and inflation. All of this is occurring during a man made commodity supply shock. This is like putting your car into cruise control at 100 mph into a brick wall and has justifiable comparisons to COVID. The incredible amount they are 'pushing on a string' has become so extreme that it would not surprise me to see escalation in the war very soon as a means to reintroduce economic uncertainty and ensure physical commodity shortages in an attempt to dampen economic demand to try to stymie growth and inflation in the short-term. For all of the criticisms this administration has laid upon predecessors, they are setting new records for market intervention, manipulation and suppression of free market forces, particularly a a time when the economy is consistently growing >5% nominal GDP and asset prices make new all-time highs. They are purposefully and knowingly blowing a massive financial market bubble in an attempt to smooth over cracks elsewhere in geopolitical and approval/ratings problems. This is extremely dangerous and inappropriate behavior and policy that will come back to bite much harder than it would if they took the pain now. It is such a nuanced corner of the economy and markets that even most investors, traders and participants will either 1) not know what I'm talking about or 2) dismiss it, however that should not stop people from speaking up about what is happening. Global policymakers need to either 1) stop recklessly juicing liquidity and stimulating markets, manipulating the cost of capital and suppressing free market commodity prices or 2) face a 1970s style inflation resurgence. This is exactly what was done in 2020/2021 so it should be a surprise to no one when the 2022 repercussions present themselves again. We are on the precipice of a new and highly eventful chapter of economic history.

As of today, SOFR curve is pricing in ~ 8 bps of cuts in 2027 and ~2 bps of cuts in 2028. Cuts have finally been priced out as there is very little basis for them. Policymakers are using more covert stimulative tools via ATI/YCC, RMPs and USD suppression, instead of traditional channels. This is worsening the inflation picture and improving growth, thus eliminating the need for cuts.

Ahead of next week's QRA, feels like a good time to recirculate this piece from February. lekkercapital.com/p/fed-treasury…

Warsh, Miran and Bessent say they want to shrink the Fed's footprint. But the Fed's balance sheet started growing again in December. Reserve Management Purchases of 40B/month are de facto QE. And they're using the same ATI playbook they criticized Yellen for. Watch what they do, not what they say. This week's QRA is important.

Everything leads to higher yields in the new inflation regime. 🧵Summary of our latest roundup with @Tyler_Neville_ @qthomp @fejau_inc

“There’s really no path to the Fed cutting in ’26 without a crisis.” @qthomp argues commodity pass-through, QRA mechanics, and long-end support make inflation stickier than markets want. The policy mix points to steadier growth, higher inflation, and fewer clean exits for the Fed.

Despite some curious sartorial choices and the occasional questionable hair cut, @ForwardGuidance is one of my go to macro podcasts. This week’s episode was particularly good. I learn something every week. @Tyler_Neville_ @qthomp @fejau_inc podcasts.apple.com/us/podcast/for…

There was and is massive ongoing government stim, just via atypical covert ways - globally coordinated dollar, bond yield and commodity price suppression abnormally loosened financial conditions to an extremity. They either let the lid come off of bond yields soon or face a 1970s inflation problem later.

Truly remarkable move -3 std dev to just shy of +2 on the 180 d 4 hr chart A first for me without gov stim in 40 yrs of trading AA

ICYMI NEW ROUNDUP: Central Bank Control Is Breaking We Cover: 🔸 Most Fed dissents since 1992 🔸 1970s-style inflation spike 🔸 U.S. export ban risk 🔸 Yen breaking point & more! @Tyler_Neville_ @qthomp @fejau_inc TIMESTAMPS: 00:00 Intro 03:08 Fed Dissents And Warsh 08:45 No Cuts Without Crisis 11:04 End Of The Powell Era 14:03 Ads (Fidelity Crypto) 15:01 Global Yields Break Higher 17:23 Inflationary Growth Regime 20:11 Oil Shock Hits Markets 23:25 Export Ban Risk 28:26 Late Cycle Boom 36:34 Japan’s Breaking Point 48:24 Carry Trade Lose Lose 53:08 The Yield Smile 57:05 Inflation Wave Baked In 01:00:25 Hard Assets Win

@infraa_ @ForwardGuidance “Just”…6 months of net interest income spent in 30 minutes…interest income that is printed by their left pocket and put in their right pocket…

@qthomp @ForwardGuidance But just half of their annual net interest income x.com/infraa_/status…

From our latest @ForwardGuidance…”throwing good money after bad”… BOJ intervention >2x the size of recent Yen purchases with minimal impact.

So far tied for the largest intervention in history by volume. And least effective

Policymakers are running the economy so unbelievably hot right now that I am starting to think it has approached or surpassed recklessness. The Treasury has completely taken over control of the money supply and financial conditions with their ongoing ATI/YCC actions and most recently manipulation of the dollar lower which dramatically loosens financial conditions. While most of these actions are occurring out of the normal spotlight because the Fed is trapped with an inflation problem and cannot reasonably cut rates, they are not innocent. They are effectively running QE with stock markets at all-time highs with their RMPs that Powell did not discuss at all in yesterday's FOMC, despite their own guidance that the purchases would subside in April after tax day. This QE, labeled as 'reserves management' allows the Treasury to continue irresponsible issuance policies. I characterize these actions as potentially reckless because they put substantial upward pressure on both inflation and economic growth at a time when nominal GDP is already consistently printing >5%. These actions are typically seen coming out of crises, not pre-emptively. With global bond markets already twitchy and the most fragile and overleveraged they've ever been, these policies are like throwing gasoline on a fire. Lost in the shuffle of today's Yen intervention is the fact that this is yet another loosening of financial conditions in the US and more inflationary tinder. Global sovereign bonds get uglier by the day. Notice Japan's yields calling bluff today.