YouSaid · the spoken record

Darius Dale

lines on the record: 74
first: 2023-01-19
most recent: 2023-01-19
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Appreciate you, Jack, man. Always a pleasure. And come check us out 42macro.com. If you want to see all the analysis in our portfolio construction process, which takes all this analysis and helps investors make and save money with actual ideas, risk manage ideas.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“No, no, no. This is not where we are. Transitory Goldilocks is not consistent with VIX above 20. Goldilocks is not consistent with VIX above 20. But again, I want to keep saying, I want to make sure everyone hears transitory Godilocks. We are not in Godilocks. It's just that the probability of Godilocks is accelerating in the US and global economies, at least according to our models. And that was the least position for outcome if you look at investor positioning. And so markets had to move aggressively in recent weeks to try to price that in. And they may continue to move aggressively to price that in. I just think it has a cap to it. We're not rallying the 4,500 or back to 4,800 on the S&P because, again, we still have this liquidity cycle overhang. We still have a business cycle overhang in terms of likelihooding a recession in the back end of this year. Again, our expectation is Q4 is the commencement of that could be as late as Q1 of next year.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“No, no, no. I think the Vicks could easily break into the teens, you know, maybe trade between, I don't know eighteen. Yeah, lower.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Stories of 2023, particularly when you get into the back half of 2023, where it's not like, you know, right now everyone's kind of benefiting from a higher than expected probability Goldilocks, which by the way, our model is always called the entire time. We always thought this period of the spring between December and the spring was going to be a reasonable chance of achieving Goldilocks economically, but that's going to dissipate. It's going to dissipate in the U.S. It's going to dissipate in Europe, going to dissipate across both swathes of the global economy, and China's going to increasingly be left alone in terms of maybe even having ability to continue accelerating. I'm not so sure, but I don't have to answer that today. A lot of data to analyze between now and then.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“I don't see a legitimate reason why Chinese stocks have to inflect negatively in that second half process that we see coming down the pike. I think they could probably, you know, China's not going to do this while everything else is doing this. But I do believe Chinese stocks can probably continue to grind higher in that environment because, again, from an institutional capital allocator standpoint, everyone pretty much got sucked out of China. You basically had the US and China threatening to splinter apart from a regulatory standpoint, which ultimately made it uninvestable for a lot of investors. And I think the fact that Zhi seems to be kowtowing to the West in terms of some of this regulatory policy initiatives that they're changing, three red lines and the real estate sector is getting pulled back a little bit. I think at the margins, you could see persistent institutional flows into the Chinese equities because, again, people just haven't been there for a while and it's going to be one of the real legitimate bulls.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, I mean, they got a ton of upside from here. I mean, they're not as cheap as you would think they are. I did a bunch of valuation work earlier today on Chinese stocks relative to their global counterparts, but they're still relatively cheap versus things like US equities, Japanese equities. So it's not, you know, Chinese equities definitely have upside. In fact,”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“As well. They could take that from 0.5% to zero or even negative by the June FOMC. I think that combination of all those different dynamics on top of the debt-selling issues that we could have politically, the inflection in the liquidity cycle on the other side of passing the debt ceiling, and oh, by the way, the inflection and growth, both from an expectations and realized perspective once the China impulse runs out and we're left with kind of everyone's left swimming naked, I think by the middle of the year, the market's going to really start to look at the second half of this year and say a lot of bad stuff happening and there's not a lot of good from the perspective of liquidity provision.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, yeah, everyone's duration is different, right? But again, what I'm trying to outline is I think we can be in similar type of market dynamics that we've experienced year to date between at least through the March FOMC. And if the March FOMC is not the catalyst and I don't really see another catalyst to get us to inflect out of this particular market, this market narrative, this market activity in terms of market leadership, et cetera, until we get to the June FOMC. I think by the time we get to the June FOMC, not only will it become increasingly clear to market participants that the Fed has already done more than is currently priced in today, but they're less likely to pivot when the going gets tough. So they're going to hike more by the June FOMC than what's currently priced in today, which is a problem relative to the business cycle. But they're also via their summary of economic projections coming back to those core PC unemployment rate forecasts that we highlighted earlier and maybe even their GDP forecast.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“I mean, Bitcoin is doing exactly what you would expect to do. I mean, the annualized return, by the way, we've backtested all this stuff. The annualized return of Bitcoin in Goldilocks is 400%. Four hundred percent on an annualized basis is data going back to the history of the entire Bitcoin time series. When the US economy or the global economy are in grit, in the Goldilocks and the GRID, Goldilocks is the Goldilocks, the annualized expected return is 400%. Bitcoin is finally waking up and realizing that this probability of Goldilocks is A, rising, but B, much higher than it was from a probability standpoint a few months ago. Now, again,”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“The technical term environment sounds like a good environment has risen to a market significant degree that market participants need the price in.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, I mean, if you can buy a copper miner or a piece of copper, you can buy a high value tech stock. But again, to me, as an investor, that doesn't make sense in terms of with the broader asset allocate, with the broader sort of distribution of outcomes. Will it work? Yeah, these things are all correlated, right? S&P goes up. All that stuff goes up. S&P goes down. All that stuff goes down. So they're not going to decouple, but from the perspective of what I think has the most risk reward to the upside, and let's call it the first quarter to maybe even the first half of this year, I think it's the cyclical sectors and style factors because, again, we have a weak dollar. What does weak dollar do? It inflates emerging markets relative to developed markets. It inflates cyclicals relative to defensives. It inflates commodity physical assets relative to digital assets. Why would you fight weak dollar when you can just go make it's easier to make money and weak dollar in those types of trades as opposed to the stuff that Kathy Wood's been bonding to dip in a whole way down?”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“This recovery and cyclical insect sectors and stuff, actors in cyclical sectors and fixed income relative to the defensive counterparts. That to me is an easier call to make them kind of just be long or short beta because again, to me, that depends on where you are in that choppy violent rage.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“If you go back to the January 2021 low in the dollar to the, I want to say September, October high in the dollar, we are breaking past that 50% FID retracement level. And bull markets or bear markets don't correct beyond the 50% retracement level. And so in my opinion, that might be a pretty significant signal that this global dollar credit machine is actually getting activated here could potentially be transitory. Now, why is that the case? Well, the world's second largest economy is reopening and stimulating. If you go back and look at the past 15 years of Chinese monetary and fiscal policy, in 10 of those 15 years, monetary and fiscal policy in terms of the impulses both peaked in Q1. And so, you know, China, they tend to like the jam, you know, come out the gate swinging, come out of the, you know, come out of the round swinging. And, you know, they want to jam it in here. And so I think we're going to see a ton of monetary stimulus in Q1 out of China, a ton of fiscal stimulus in Q1 out of China. And I think that's what's supporting things like copper.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, but yeah, so like, you know, we run a variety of quantitative tool signaling tools at 42 macro and on our volatility adjustment momentum signal, base metals broke out a few weeks ago. And it's one of those things that did make a ton of sense then, but once you start seeing China stimulus headlines, you're like, oh, no, wait, somebody do something or at the bare minimum was willing to bet on that something developing. And so I do believe, again, it's dollar down, which I can't believe. Hour-long interview haven't talked about the US dollar, which is the dominant feature in any macro model you can, the dollar. The way I think about the US dollar, it is the residual of the supply and demand of global credit. Jeff Schneider obviously has been the kind of a thought leader in terms of the euro dollar system, which in our opinion is the dominant system of how credit is created and destroyed across borders. The dollar is breaking down, which, by the way, it's breaking a very significant Fibonacci retracement level here, right?”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“I don't know about copper because I don't know anything specifically about copper, but I do believe that copper is probably going to work. I mean, base metals are breaking out.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“And this stuff, you know, I talk to with our buy side clients all the time. Our model started calling out a rotation in the cyclicals, I want to say at the beginning of last week. And that's obviously been very much augmented by these developments from a Goldilock signaling standpoint, USCBI, and FIB data we got a couple days ago, China stimulus. And I think that is durable in terms of the first half of the year because, again, right now, the markets are comfortable pricing in better than expected growth globally, and there's no reason for them to be concerned about that until, again, we get into the back half of the year where that liquidity cycle inflects, and ultimately that growth cycle inflex.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Well, so it'll depend on where we are in that range. I'm using the S&P as a catch-all proxy that we all understand. At 4100 on the S&P, it's time to go short. 3800 on the SP, it's probably time to go long as long as we're in this kind of regime where we're debating where the distribution is very flat. It's basically what I've been trying to say for the past 45 minutes is that the distribution is very flat. The right tail risk is probably just as probable as the left tail risk or maybe slightly more probable than the left toe risk, but it's probably just as probable as the modal outcome. But once that distribution starts to change in terms of the shape of distribution, by the middle of the year, that right tail risk probability is going to be declining and the left-tail risk probability is going to be rising. And that, in my opinion, is going to be a big issue. So how you posture yourself as an investor with respect to beta depends on where we are in the markets. Right now, I would argue, you know, it's near fully priced. Could you have another 100 points of S&P? Sure, why not? Again, like I said, I've been surprised many a thousand times in this game we play. But from a style, from an alpha standpoint, I think the cyclical leadership that we've observed.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Punched in the mouth on March 22nd by that SCP and that dot plot, or at the bare minimum, definitely double punched and kicked on June 14th by the SEP, the dot plot. And oh, by the way, the dead ceiling is going to be an issue. All these things are going to be coalescing at the same time growth is starting to inflect lower across the US and global economy.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Totally, totally. And so, yeah, now you're 3,800 in mid-February, and then everyone's super bearish again, and people are going to have their faces chopped up. They're going to get their arms, legs, everything chopped up in the first half of this year. But ultimately, I do believe it's appropriate as an investor to trade this period of time, this transitory Godilax period of time, but the bullish bias, because at the bare minimum, if you're in a range, you in theory should have lower realized volatility. So, I wouldn't be chasing it here with any gung-ho fervor. But ultimately, I do believe that that range that you could trade with a bullish bias is probably going to either get”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Full range of probable outcomes. You really just want it to anchor on one side of the distribution or the other, you could get really bullish or really bearish here. And I think it's very easy on a day like today where the market gets kind of Bitcoin's ripping, markets ripping on the CPI to get really bullish and not understanding that full range of probable distribution associated with the motor outcome of the left tail. And I think just as easily as we are here today, we could come back in a few weeks with Jay Powell has a super hawkish press conference on the first and markets are down at 3,800. And it's like, no, no, no, no. Everything we thought in December was correct. I think you were.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“That spread will continue to rise, particularly as asset market valuations come in, equity risk premiums compressed, et cetera. And so ultimately you have for a variety of reasons, not the least of which is Fed doing more than expected and valuations getting just kind of into levels that are really inconsistent with where we are in the business cycle, you're going to have institutional investors that are unwilling to chase the market beyond a certain point. But I would also argue in the first half of the year, because of that flattering of net liquidity that we're going to see, particularly through the lens of what Jenny Ellen is doing and that likelihood that there are P and TGA combined to offset quantitative tightening, potentially overwhelm quantitative tightening, you're going to have a floor under asset markers as well that is also supported again by China reopening stimulus. So, I mean, these are some violent cross-currents, Jack. I've been doing this for a really long time. You know, I think if you didn't do all the research and you did not understand the”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“That's the interest rate to 5%. That's the money, the financial advisor type crowd and the retail investor crowd. You've seen our research where we say we went from dating our hot, sexy girlfriend Tina, the girl next door. Now we're back to our old homely kind of ride or die hold you down type girl Tara. We used to date Tara in middle school, right? Where you had a significant spread in terms of kind of short-term investment grade debt instruments relative to the yields you could get on, let's say, a dividend yield on the S&P or other type of riskier assets. And so at the end of the day.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Are already kind of fully priced from a good first-dab perspective? Maybe not fully priced. Could you get to $42,200 on the SP? Sure. I mean, I've been surprised by markets for the last 14 years. So it's not going to change. But I think when you're getting above 4,100, 4,200 in the S&P, you're starting to get back to valuation levels that no buy side or I talk to. And I talked to all the biggest firms and you know who's in the world can support from a bottom-up standpoint. You're going to be seeing stock prices and credit spreads that are just nonsensical in terms of where we are in the business cycle. Especially when interest rates are at 5.5%.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“And ultimately can inflate asset markets. And so those are two dynamics from a debt selling standpoint that are positive today vis- ⁇-vis Janet Yellen's decisions in terms of how she's managing cash ahead of that catalyst, but ultimately are going to prove to be doubly negative issues in the future, not the least of which is because we're going to have a political battle very likely to have a political battle about the debt ceiling, which could result in a downgrade or something like that, or fears of a downgrade, if you will. But more importantly, when we get to the other side of this whole process, you know Treasury General accounts going back up could potentially see reverse people facility spike again into the second half of this year. So it's very likely that what could be a sideways to uptrend in net liquidity from the perspective of our model to something that gives way to a much more negative trend in the back half of the year. So it all sets up for, I wouldn't say like a good first half and a bet and a terrible second half because I think.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Persistently negative. And because there was a shortage of T-bills, and that shortage of T-bills, in my opinion, was part of the reason we saw asymptotic rise and exponential rise in the reverse reboot facility balance because those money market funds couldn't find assets to invest in. And so the Fed, hiking interest rates, you know, the reversibo facility became a very attractive investment vehicle for those types of funds. Well, now if Yellen is flooding the market with T-Bills as a cash management technique throughout this first part of the year, first quarter, maybe even the first half of the year, that's ultimately going to compress that spread and allow those funds from capitalizing the Fed balance sheet, basically, to capitalizing shadow banks, et cetera, in the money markets, which ultimately allows shadow banks like hedge funds, you know, credit funds, pension funds, et cetera, not pension funds, but other types of shadow banks, mortgage lenders, et cetera. They now have the ample capacity to take on incremental leverage if they choose to.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“As well. And so accelerating the T-bill issuance is actually putting more supply of treasury bills on the market and it's actually compressing what had been a very deeply negative spread between T-bill yields and similar maturity money market rates. Now, why does that matter? Well, sorry, but T-B-B-B-B-B rates. T-bo rates had been persistently negative relative to money market rates. The spread was negative.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Now, be close from that perspective means that she's got a bunch of tools and levers who to pay, what to pay, you know, draining down the Treasury General account balance, which we believe will continue throughout the first part of this year. That's something that's going to be positive from a net liquidity standpoint because, again, that draining of that Treasury Joan account balance is effectively supplying liquidity to the real economy or taking trap what was liquidity that it was removed from the real economy and giving it back to the real economy. What's likely to also flatter net liquidity, at least in the first quarter, potentially through the first half of this year, is the fact that Yellen is actually targeting more TBL issuance as a cash management technique. If you look at the last couple of auctions of T-bills, we've seen net debt increase by $18 billion relative to the previous run rate of T-bill issuance. So she's accelerating T-bill issuance as a cash management technique.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, absolutely. So, you know, we came into the year with the expectation that this trend of lower highs and lower lows and net liquidity would likely continue, citing our net liquidity model where we take the Fed balance sheet total assets, subtract both the Treasury General account balance and the reciprocal facility balance from that as a more approximate measure of the amount of liquidity the government, the US dollar liquidity that the government is either supplying or taking from the market. Based on our read-through of what we're seeing out of Channet Yellen from the Treasury Department, it's likely that may not be the case, at least in the first quarter of this year and potentially well until the first half of this year, which ultimately puts a floor into markets as well for the time being. So I'll start with kind of the first step in terms of her cash management techniques ahead of this debt-selling fight, which by the way, she's $64 billion away from on a 30-something trillion dollar pile of debt subject to that debt limit. So we're pretty close.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Right, yeah, so liquidity is super important for an investor, it's basically the ease with which you can enter and exit a position, very correlated with asset prices. And in this case, liquidity basically means money can be from the government, from the central bank, from commercial banks, from savings. But yeah, I mean, you have a chart of net liquidity and we can put it up, maps quite closely with risk assets. It had been going down, as people can see. Do you expect to continue to go down? And I know there's a particular force that has kind of changed your calculus that's new.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“In that big battle, in my opinion, could create some market volatility as well in the middle of the year. So it's all kind of setting up for like, you know, at the bare minimum, flat to up, positive, slightly positive first half, you know, certainly in this very positive relative to consensus that is calling for a really negative first half, including an earnings recession, to know the pain, in our opinion, from a risk asset standpoint is certainly likely to be concentrated in the second half, if only because the economic pain broadly, not just in the U.S., is going to be concentrating the second half and there won't be any central banks running at first beck and call to deal with that from a policy standpoint.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Large concessions, you know, and make changes to entitlement spending, et cetera, et cetera, that the Democrats, you know, based on their previous history of hiking the debt ceiling three times during the Trump administration without any concessions, there's going to be a big battle there.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Going to go, oh my God, the unemployment rate's at 4.6%. I got to throw QE on the market. No, it's going to say, well, we forecasted that. It's going to say we forecasted that. What's the big deal? And so that, in my opinion, we're going to have a Wiley Coyote moment at some point in the second half of this year. I believe we'll start right around mid-year because there's a couple things we haven't talked about yet, which is net liquidity. We have the debt ceiling this year. We haven't had a real good one since 2011. You remember that one? That was fun. And it's the same setup. Democratic president did probably way too much from a fiscal policy standpoint. Aggressive Republican Party who comes in and says way too much. We need to stop. And it's the same setup. Exactly what happened with Obamacare and the Republican Party and led by the Tea Party or not even led by the Tea Party taken hostage by the Tea Party back and then. And now, you know, I don't know what they're calling themselves now, but whatever this small faction that's taking their Republican Party hostage at this car juncture, they're going to demand.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Air quotes business cycle type dynamic. And ultimately, we're just kind of on that pre-recessionary path of the long and variable lags of monetary policy one by one catching up with borrowers in the corporate sector, borrowers in the household sector that are ultimately getting kind of restrained from incremental consumption and investment. Now, that process takes a while. It's going to take a while and ultimately, again, I think as long as that process takes a while, you're going to have what looks at least underneath the surface from a wage and income standpoint of economy that can handle more rate hikes from the perspective of the Fed, which is going to deliver those more rate hikes. And ultimately, when we get to the point of the process where it can no longer handle any more rate hikes, i.e. we're getting very close or in recession, that in our opinion, because the Fed is already projecting that, it's going to be a problem. Markets are going to have to scream, kick, yell like kids at a toy store throwing a tantrum to get the QE. This is not a fed.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“My general thoughts is that this as awkward and weird as this cycle has been from a, you know, in terms of reopening and then the cowarding in the goods and carding out of goods and how that's kind of really had some pretty significant influences both to the upside and downside and activity and in prices. I think we're now starting to get to the point in the business cycle, and I'll cite a couple of statistics for you. If you look at the ISM services and manufacturing statistics, there's a lot of obviously subcategories or sub-indices within that within both of those. You have the supplier delivery times surveys, you know, percentage of respondents that are reporting slower supplier delivery times. Those things spiked to the pandemic went way up. And now both of them are at or below their structural means, their long-term means. And so it's telling you that we're now back, and at least that's an indication, whether you look at port data, et cetera, et cetera, trying to reopening. We're now back in a kind of a normal, I use that significant.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Is we all spend way too damn much time on Twitter chasing around charts and passing charts and looking at charts. And the reality is the economy doesn't move as fast as our retweet function. There's a series of processes that need to take place in the economy, namely corporate profitability needs to erode to a significant enough degree that corporates actually start to shed headcount and that decline in total income is likely to be what causes the recession. But again, I think we're two to three quarters away from that at least.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“I don't think we need to make it that complicated. There's effectively six to seven million missing workers relative to the prior trend in this current where we are today in this current business cycle. And that's obviously flattered a lot of wage statistics, irrespective of the mess that was the average hourly earnings last Friday. You had a significant decline in average weekly hours, had a lot of part-time employees that dragged the number down, which is why I like looking at more stable measures of income and employment. Like, again, nominal employee compensation, we get that at the end of the month in the PE in the PCE report. And then every month, or sorry, every quarter, we get the employment cost index data, which again is corroborating that well above trend pace of nominal employee compensation growth rate that we observed in the most recent months. So in our opinion, it's going to be this is a very boring stereotypical business cycle. Part of the problem with the pandemic is one of the things that's been great for me in our”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Being a disinflationary force or a recessionary force of just things cost way more money so people don't have as much as much money and they're having to use their credit card instead of using their actual money.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“And yeah, so I remember the banks which are going to report tomorrow actually on the 13th, Bank of America for their third quarter, they had this chart of just people's income. Like, oh, if in 2019 you had $2,000 in your bank account, now you have $6,000. This is actually actual bank deposits, like actual money. So yeah, the strength of the consumer balance sheet, very strong wages going up by a lot. You had fiscal stimulus that is a hangover of that. But it's not headed in the right direction. We're headed towards the, right? Because credit card spending is going up. Things are getting more expensive. Prices over the past year have gone up more than wages. That may not be true over the next year. Who knows? But that is eating at people's purchasing power. So do you see that?”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Of prior business cycles, namely heading into the GFC, we're at 99 cents on the dollar. So this is, in our opinion, I think the bloodbath that we're seeing in housing that obviously is causing the goods disinflation, the contraction, the goods economy vis- ⁇-vis the manufacturing PMI, et cetera, leading indicators obviously falling off a cliff. I think that stuff is more contained than the average investor realizes, which ultimately means the economy is more resilient than the average investor realizes. And that sounds bullish. If the Fed weren't tightening, if we weren't in a liquidity cycle downturn, it'd be fine. It'd be great. You'd be buying everything. The issue is the reason I think the market has upside kind of resistance in this kind of push-pull between transitory Goldilocks and our modal outcome scenario is because the economy is resilient and you historically just have never seen a significant kind of breakdown in wage pressure absent or outside of a recession. So the Fed's going to need to get that if it”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, absolutely. Yeah, that's data to the third quarter. So one thing I'd also call out, you know, obviously housing has fallen off a cliff from a sales and activity standpoint, and that makes a lot of sense. Mortgage rates have skyrocketed to north of six, maybe even 7% last time I checked. But if you look at it on an effective basis, the nationwide effective mortgage rate is 3.42%. And so the reason new home sales, pending home sales are down 35 to 40 percent year over year is because you, me, and no one we know is stupid enough to trade their 3.42% mortgage for a 7% mortgage so no one's moving because no one's moving we continue to see activity collapse in the housing market but from a leverage cycle standpoint it's just not it's just not that onerous you know the household debt service ratio if you look at mortgage debt specifically is at 4 percent which is practically an all-time low and then household debt mortgage debt at 66 cents on the dollar is well shy of”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“To the GFC. So consumers have not levered up. They have the ample capacity to lever up, and they certainly have the cash to service that debt, but they don't really need to because, again, debt service ratios, which I think has as important as an indicator as anything when you're talking about financial tightening and ultimately the business cycle, the household debt service ratio is practically an all-time low in 9.8% at the current juncture. This U.S. consumer-led economy, 70% of GDP has ample capacity to keep muddling through, particularly if inflation continues to surprise the downside because it flatters rural incomes in the process. Now, ultimately, that's not a sustainable dynamic because, again, the Fed, in our opinion, is going to take the policy rate into a restrictive set of setting. It's not restrictive now, but it will get restrictive, and ultimately that restrictive process will start to kind of feed upon itself and ultimately cause some negative outcomes in the labor market that kind of put all that to bed, in our opinion, likely by Q4.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“The chart looks like this. Okay, okay. You can be long with chart. Yeah, I'll send it to you so you can show the viewers. No, it's extremely bullish from that perspective. Now, obviously, there's some sectoral and compositional issues in terms of maybe the lower-end consumers from an income distribution perspective have less checkable cash than their upper income counterparts, but don't forget that upper income counterparts tend to do all the spending in this economy. If you look at the top two decis of consumers by income cohort, they actually account for 40 to 45 percent of total spending. So the rich folks in this country really outkick their coverage from a spending standpoint. But that's just these kind of the asset side of the balance sheet. If you look at the liability side of the consumer balance sheet, household debt is 101 cents on the dollar if you look at the ratio between total debt and nominal disposable personal income. So that number is well down from where it was in previous cycles. I think we peaked at 134 cents on the dollar heading.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“The household sector balance sheet is just as good a shape as it's ever been. I mean, I make no bones about that. Consumers, if you look at their checkable deposits, they have 7.9 trillion dollars of cash on their balance sheet right now. You add up that checkable deposits and money market fund shares. That number is 5% of total assets, which is the highest number we've seen in the history of the time series. Because Ubers have never had this much cash, both in terms of the at nominal dollars, but also in terms of the share of their overall balance sheet.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“So, great questions, Jack. I think PMIs are a useful tool because they do, you know, they're very timely leading indicator that a lot of people care about. And so the bare minimum, it helps you aggregate what other investors think about the deltas on growth. And so that's very important. But I don't know that they're particularly instructive in telling you what the actual level of growth is. I've done obviously a tremendous amount of econometric analysis in terms of trying to relate PMIs back to other indicators in the economy. And they tend to be fairly co-integrated. But in terms of using it as a tell-all metric on the economy, I think it's somewhat dangerous, particularly in the context of the manufacturing PMI. Don't forget, if you look at the U.S. economy, 82% of our GDPs comes from the service sector, services sector, 86% of employment comes from the services sector. So when you talk about a manufacturing sector in the U.S. economy, you're talking about like...”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Globally, ex China from a fixed income standpoint. And so I think it really makes the bond buying call here today a very difficult call when we don't agree with. I think that's the big, big difference.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Including Japan. They're actually going to do a review of the side effects of their quantitative and qualitative easing program at their meeting next week. In our opinion, I think that's a leading indicator that they're going to be continued revisions to the yield curve control policy that also may result in a tighter monetary policy out of Japan. So you got BOJ there and obviously Korota's out of here in April. And so he might be setting his replacement up to actually do a little bit more on that front. I'm not making that call. I don't know if I know enough to make that call yet. But certainly in moving in the tightening direction, obviously fad still in the tightening direction. As long as China is, you know, adding a growth impulse to the global economy, which again, we expect it will, certainly in the first half of this year, Europe's going to be in a better footing from an economic standpoint. So ultimately, that means the ECB can tighten more than what's probably currently priced in. And the Bank of England is likely to be able to tighten a little bit more than what's currently priced in. So we're still in this liquidity cycle downturn.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so it is a little bit different from a risk management standpoint, right? Like, you need to understand that we need to understand as investors that, hey, look, it might be safe to go in the water and buy a bond today in the left-tail risk scenario. Because again, ultimately it means that, hey, look, the Fed is at the bare minimum, let's say, want a two-quarter sooner to effectively pivoting when they will finally pivot, which I believe is a 2024 event in terms of supply in the market with liquidity. That's a big difference if you have to wait six months on that. If the modal outcome scenario remains the modal outcome throughout the year in terms of resiliency of the economy, Fed pushing back against market expectations for easing, Fed pushing back against easing of financial conditions broadly throughout that process, then it's very unlikely that you can buy a bond at this particular juncture, in my opinion, because again, you still have the whole entire kind of major developed central banks, ex-China, tightening monetary policy.”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“So your modal outcome and your left tail risk are different in terms of timing. Modal outcome is recession won't happen until Q3 or Q4 of 2023. Left tail is that it starts much sooner. But is the outcome different in terms of like, could a recession happen in Q3 or Q4, but it's as severe as it just starts three months later?”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“I want to say investment great credit spreads at $160-ish basis points on a mean basis. If you look at the last three recessions, we got to 453 basis points over. That includes the shallowest recession, U.S. economic history in 2001, one of the deepest in the GFC and ultimately and obviously the 1991 to 1991 recession, I believe, is the third shallow ocean history. So you got a lot of different recessions in there in terms of the deltas, but from where we are today, in terms of having priced that in. high yield credit spreads check 428 basis points wide at the current juncture you know or sorry you know a little bit less than 400 now uh you know if you can get the 1500 wide on a mean basis in terms of the last three business cycles um so again i just it's very clear to me that if we're wrong on the resiliency of the economy and the recession starts sooner than say q4 of 2023 you know maybe even one or two quarters sooner then the market's going to have a problem but again i think that's a declining probability from a risk management standpoint”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT
“It does in terms of the balance sheet health of the consumer and corporate sector, which we can talk about. If we're wrong on that, anniversion materializes sooner, it hasn't been priced in. Not even close to being priced in. We look at four different metrics to track”
2023-01-19 · Forward Guidance · “Transitory Goldilocks” Is Here | Darius Dale · IDENTIFIED FROM THE TRANSCRIPT