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@dampedspring Theres also a scenario where oil stays high but hormuz activity partially normalises and so markets trades as if oil is falling via extrapolation of activity normalisation. (ie. I'm surprised your list doesn't have anything about iran beyond oil)

I just went max bearish equities. However plenty of bull cases exist. The six big things that can make me wrong 1) Collapse of long term oil prices back to the low's 2) The passage of a highly stimulative fiscal package or reconcilliation 3) Manipulation of the Treasury Issuance such that they issue less duration and more bills, and Fed Balance sheet manipulation - These things are really bad for USD 4) AI ROI for all spenders on picks and shovels surprises on the upside vs already lofty earnings expectations AND margin doesnt come from firing workers. 5) Fed cuts short rates more than expected 6) Investors, companies, and banks lever up more than expected to invest and consume (Animal spirits accelerate and persist.) Which absorbs the massive overhang of issuance of government bonds, corporate bonds, IPO's etc which elevated growth expectations depend without a decline in prices, rise in yields.

@Ksidiii Markets are faster than they've ever been.... why is that a surprise?

When we talk about evolving markets this is a real dynamic that is happening before our eyes. The rate of change of de-leveraging and re-leveraging effects across a bunch of different tactical end users is the fastest it’s ever been in market history imo.

@DannyDayan5 Buy less. So your points hold. But the rotation can take us back into 'sideways chop' regime

@string223 Do they sell or just buy less going forward

The setup is now clear. It is impossible to be short stocks until/if bonds revolt. If Bonds price inflation and not hopes and dreams -> dollar strengthens -> stocks fall. Otherwise, forget about it. We're in an FCI regime now for cross asset portfolios.

@BenKizemchuk @InvariantPersp1

I haven't said the decline was due to deleveraging, so perhaps you're getting me confused with someone else? The degross / short cover is responsible for the April rally -- essentially the opposite of what you wrote. Secondly, econ slowing is a symptom / concurrent with a contraction in market liquidity -- it removes the flow of assets from private sector, amplifying moves. I'm just not a big "story" guy. Been that way since watching chomsky manufacturing consent at age 14.

Been front office for nearly 20years this nov. Every bit of that experience is saying vibe is way off. Uncanny.

@topdowncharts Amazing how the scale stopped working when people started posting the chart. Happens a lot

The global economy is not only NOT dumping over, but reaccelerating. The reason is we have maximum monetary tailwinds kicking in right now (from previous easing, given the leads/lags). Very important dynamic...

@AndreasSteno Only if that drives an actual end to the war

My best guess is that we have bottomed now. At least it is typically peak fears when WSJ finally catch up on an angle that FinTwit (and I) have been talking about for a month

@rev_cap The moment stuff like this gets posted it stops working. Goodharts law

@Geo_papic Have you changed your de-escalation stance? Trump messed up yesterday no?

I am trying to milk our human dominance for everything it has... while we have it. (Anyone catch the reference?)

@VKMacro Worth doing now in limited loss format

The reality now is pricing for every CB seems too hawkish but there’s nothing to force it lower while energy prices are doing thi

@ojblanchard1 Mearsheimer's israel lobby....

You know me, I am no conspiracy theorist. But it surely looks like the Trump administration is trying to prove Larry right about his 2023 forecast. Or, alternatively, that Larry knew in 2023 that Trump would win the election and go to war against Iran. Or even, that Larry is behind the election of Trump and the Iran war just in order for his forecast to be right.

@Frencheconomics What about heating oil package?

There were 217,000 people who meet the eligibility criteria for the Youth Jobs Grant, set to be announced later today. For someone 18-24 moving onto the NLW & doing 36h/week then that saves the employer £2,836 - so more than a full offset by the YJG. Builds on the Chancellor's view at TSC last week that the labour demand hit from recent NICs changes is a "valid argument". Looks like policy is chasing its tail here.

@MichaelKantro Surely energy shock derails this?

This makes sense - manufacturing PMIs corroborate EPS breadth as it’s the beta of the business cycle. Thanks for bringing back the 📙!

@AndreasSteno TSMC uses 10% of taiwans energy consumption

This app is one big fake news story

@BenKizemchuk Its the opposite. Narrowing US deficit contributes to declining stock of global savings which means less flow into US assets and a weaker dollar. Recall the last 20 years has been the reverse (bernanke's savings glut). Not now of course because energy crisis due to iran.

As U.S. imports decline, fewer dollars are being supplied abroad, since the U.S. normally injects USD into exporter economies when it purchases their goods and services. Many exporter countries operate USD econ-ecosystems that rely on this steady inflow of dollars to facilitate trade, finance, and local liquidity. With that USD flow reduced, these economies face tightening dollar supply, which puts pressure on their local financial systems and increases their demand for USD, contributing to upward pressure on the U.S. dollar.

@ArchieHall @BenKizemchuk

On that re-acceeleration...

@donnelly_brent @nicholaschong21 Or just use options?

Long post -- TRADING FAST MARKETS, excerpt from Alpha Trader. Super relevant right now. 1. Correct position size is the difference between winning and losing in a crisis. Too big is not OK; you might blow up or get fired. Too small is not OK either; you need to seize the moment. Trading in fast markets is when the most money gets made and Alpha Traders emerge. I remember as volatility went to the moon in 2008, I changed my normal trade size in USDMXN from 20 million to 3 million and I was still amazed (scared) by the volatility of my P&L. If you can size dynamically using forward-looking estimates of volatility, that is ideal. Look at what options markets are pricing for 1-week volatility. If you can’t do that, look at the average daily range over the past five days. 2. Keep an open mind and use your imagination. When COVID-19 hit, the market took oil from $65 to $50 as concerns about consumer demand knocked a market that was already bulled up on “cheap” energy stocks. Then the OPEC meeting in early March crumbled and crude plummeted from $50 to $27 in a week. The pressure from COVID-19 started the ball rolling then the Saudi pledge to pump like crazy broke the back of the oil market. Anyone watching oil go from $65 to $50 might have thought that was enough of a move. “It’s a big move! I’m going the other way!” Not a good plan. Which leads to the next point about crisis markets. 3. In crisis markets, there is no such thing as overbought and oversold. Don’t be the person that fades the whole bear market all the way down. In a crisis, stocks can stay oversold for ages and then get wildly overbought days later. You need to differentiate between run-of-the-mill sentiment driven risk aversion and crisis risk aversion. Most risky asset sell-offs are routine affairs that should be traded using sentiment and overbought and oversold signals. When you see put/call ratios or the Greed & Fear Index or DSI or whatever positioning indicators flashing a reversal signal, it is normally time to pounce. But in a real economic or financial crisis, these signals are useless. 4. Have courage. Insane markets are the reason you got into this business. Don’t hide under your desk and hope for the tornado to pass. Get involved and trade like you know you can. Don’t put yourself in a position where you look back years later with regret. It is better to try and fail than to forever wonder what might have been. By the time the 2008/2009 Global Financial Crisis was over, careers were made and lost. Some of those lost were not people that blew themselves up but just traders that sat there doing nothing while their peers extracted insane P&L out of thin air. Most of my best trading memories are from crisis periods because these periods deliver fast, volatile and exciting markets. Like any high stress profession (pro sports, jet fighter pilot, professional poker...), trading success comes down to how you respond in the periods of extreme stress. Don’t be shy, get involved.

@MichaelKantro @BenKizemchuk

And it's about turn up for the first time in 4 years. Cyclical data dominate the LEI (housing, manufacturing, etc.) which have been the weaker part of the K-shaped economy. It's only a *leading* economic indicator when the economy is synchronized, which it hasn't been.

@BenKizemchuk To your q, funds haven't grossed back up because there are other things going on besides sofr trading a few bps above rrp. By the way... EM equities are at all time highs. Guess its a meme though right. The PnL isn't a meme

The rapidly escalating funding cost was large enough to cause massive degrossing, not dissimilar to 07 TED spread quant quake and degross. Evidently not brief per below, though potentially SOFR> RRP is a new kind of normal. In any case, if this is normal and everything is fine, do you find it curious that funds haven't grossed back up?

Unpopular opinion: “Iran escalation” and “AI ends the world” are just memes. That doesn’t make them false. It just means they’re narratives. Markets move on plumbing and flow. What’s happening now started in September when funding costs increased into record leverage. That destabilized things enough to cause large multi-strats to de-gross. That pressure cascaded down the market cap, factor and liquidity stack, and is now bleeding into banks and credit, the heart of the U.S. financial system. Iran may resolve or not. It’s secondary to markets. Flows make contagion spread until the mechanics and plumbing force buying. We’re not there yet. Far far away in my opinion. Conditions determine. Catalysts trigger.