YouSaid · the spoken record

David Cervantes

lines on the record: 97
first: 2023-10-09
most recent: 2023-10-09
sittings or episodes: 1
sources: podcast

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“That's a separate argument. My point is that when you got that kind of money slushing around in the economy, you got to remember a public sector deficit is a private sector surplus. Okay. So when the government's borrowing that kind of that amount of money, it's going into the private sector. It's effectively a short-term wealth transfer. So yeah, that kind of money being pumped into the private sector, it's unlikely you'll get a recession. So whether again, the Fed and the dollar and all this other stuff. But you can argue that you're blue in the face and have fun with it. But in terms of the cycle, it means this is stimulative money, as you said.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Yes. And if the Federal Reserve is buying all of those bonds that the U.S. is issuing to fund its deficits, then rates could go down maybe or not even go up. But if the Fed isn't, then who's going to buy the bonds?”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Which may or may not come to pass, but it's not going to, it's for this cycle, for the market that I'm trading, it matters. And it matters that when you've got that many trillions of dollars circulating in the economy, it's just going to be very hard to have a recession.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“It's really about exploring the nuance, trying to understand what is different. How much I should discount on that, also looking at all the stimulus money, the IRA, I mean, the amount of money, we're running around 8% GDP deficits. That's just like, this is like monumental, gargantuan amounts of money. This is like World War II style deficits. And the amount of fiscal money, you can moralize it all you want, say it's bad and redeemed and sustainability and all this.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“I'll get back to that. But my point is that getting back to the false signals, I think people started putting on, started kind of. Dismissing the supply chain impact. didn't take that into account when assessing the signal strength of the survey data, not realizing that the survey data would be distorted by these bull web effects in the supply chain. So getting back to how do I attract the real economy, it's more art than science. I'm probably a little older than most of your viewers. I've been doing this for a long time. And it's one of these things that you pick up through experience and also through formal study, mentorship, and people teach you. But yeah, there's a lot of nuance. I think that needs to get explored in asking these questions. If you kind of stick to an indicator-based framework, which I think could be is useful, but if you stick with a straight indicator framework, you're going to get a lot of false signals like we've gotten in this cycle. So to answer your question,”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“And the Fred, the Fed pretty money, and we got inflation just like Bill Friedman said, and supply chains became a punchline.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Kind of impacted by the supply chain, right? So if you talk, look at if you speak to supply chain managers, you have these bull whip effects where they hoarded supplies and then they got their inventories got blown out and they're now they're short on supplies, now they're short on sales. So you have this kind of really neurotic supply chain cycle that impacted the PMIs and made them generate the false signals that you mentioned. They just became unreliable because of the supply chain. The supply chain effects were real. I think people, when the Fed was back in 2021 saying, no, this is transitory, it's 2020. The inflation is transitory and we're going to get over this once we get to the supply chains. And then inflation mooned, the Fed had some egg on its face. And all of a sudden, supply chains became a laughing stock, kind of a punchline and a joke, in an economic joke. Suddenly, supply chains were like, oh, no, no, it's all M2 money growth.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“I prefer to approach the problem set with what not to look at. That's a lot easier to do. I think it's very easy to get caught up in kind of. Craziness there's a lot there, and every indicator is, I guess, you got to just treat differently based on the regime that we're in. And I think the PMIs, because they're survey-based, a lot of the soft data.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“But that has sent an ultimate false signal this year as recessions PMIs were declining from have been for over a year and bonds continued to get wrecked. So how do you track the economic data? Which do you say, oh, this is actually a good reading? This is a good reading to pay attention to, and this is actually a very overrated economic indicator that a lot of people are buying bonds based on this economic indicator, but actually it's a false signal. It's giving a false signal for X or Y reason.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“So we're going on Thursday, October 5th, and October 4th was a rally in the bond market. October 3rd and So, from September 22nd to October 3rd, it's just been absolute mayhem a sell off. And so, how do you track the economy? There's so many different pieces of economic data. The ones that are somewhat conclusive, like real GDP, they only get reported for once a quarter, and then there's estimates and there's real GDP. There's the Federal Reserve reports all these estimates, there's the labor market, which everyone says is lagging in and probably is lagging, but there's, I feel like then there are a lot of economic models and pieces of data that it's a reading of it's a, oh, this reading is 40. What is, what does 40 mean? It's 60. What does 60 mean? And like the PMIs, purchasing managers indices, that's my understanding of 2019 and before had a somewhat good track record of a PMI of 60 above 50 is growth below 50 is contraction. So if the PMIs are 45, 44, 43, that's likely indicating that a recession is on the way and that it's time to buy bonds.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“So, if we see a pullback in real, that will pull down non-nominal yields. So it's really just kind of the interplay. The interplay between real nominal rates of growth and how that's expressed in the bond market. So now I'm tactically long so far it's working out and the hopes and prayers.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“My call is based on okay, reels now at pushing 250 are going to start to bite. Q3 was somewhat of an acceleration anomaly before should provide some, we'll be some payback in the growth speed. So it's a non-recessionary slowdown. I'm some full to my panic about it. We might come in with that we're looking at Atlanta GDP 4.9% real. I don't think it's going to get a I don't think it's going to stay there. I think likely going to pull back. And it's whether it goes to three or two is not the issue. It's the marginal rate of change. So if we go from five to three, that's kind of a big deal in terms of”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Reels hitting my kind of my bogey on the real side and then nominals hitting my bogey on the nominal side. I took a position and went long. At that point, reels could become restrictive, slow down the economy. I do think we Q3 was bonkers in terms of economic acceleration. Nothing goes up in a straight line. So my call was not just your typical technical analysis view of, oh my God, rates went up. They're going to come back. They can keep going up. That's not going to, the move in itself means nothing for the future, the forward direction.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“I really don't see it that way as a trader, right? If you're an asset allocator or an investor, it's probably a different proposition. But as a trader, I'm looking at rates of change. I'm not looking for that kind of margin of safety. So I'm making a very calculated, probably high risk, taking a high risk position that for now we've hit an inflection point and we should see given the magnitude and the speed of the move up, we should see some pullback on that. And just also consistent with now, I think the rates, that rake height is going to start to bite reels also publicly tweeted. I had said that reels would get to about between 250 and 3%.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“And that's a good yield, obviously. It's not 1981, whatever, 15%, but it's a yield where if yields up go up to 5.75%, you're going to lose money. Someone who's long at 475 is going to lose money if they go to 575. You get a little bit of that protection because you're being paid. Whereas going from 1.75 to 5.75, I mean, that's just you're getting crushed. So you feel like you have a little more safety now.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“I got back in at 422 to short And at that point, we were getting close to the CPI, the PCE. I made a bad tactical call and covered that short. I made a profit. I covered at 427. So I squeezed out five bips. But I was a little early in that call. And by the time CPI and PCE came out, this thing had already mooned to 450 and changed. I was expecting PCE to be soft, so I took a small little punt position. What I mean by a punt, it's not obviously a core strategic or tactical. This is kind of just like a yellow gamble. Take a small trade. Didn't work out when it gets me. Held it. And actually a couple of days ago, once the 10-year hit my 475 target, which I publicly tweeted about back in August, I believe it was August 18th. I tweeted.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Horrible for the bomb. Well, horrible for all markets. So if you look at equities, they've been smoked since then, too. So once you, what's the long end started doing a lot of the heavy lifting of pressing these things in, equity started selling off getting more volatile? And then after that, the tenure was off to the races. I actually shorted the 10-year again.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, 3738. They're saying now we only expect A marginal increase of 4.1%, which is not recessionary. So now the new Fed policy posture is getting back to what shocked the market was that the shift in what they're really saying, the meta message, not the message on the dots, not the message at the press conference, the meta message, the message underneath all of this. And that was we're raising our forecast. And by the way, we no longer project a recessionary labor market, which means growth. So with great news for the business cycle, but it's not good news for risk assets because, as you said, it kicks out the rate cuts. It kicks out anything that was priced in. So the market was caught flat-footed.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so the actual data got released in, well, we already have the forecast. For the unemployment rate was lowered. Instead of, so back in March. When U3 was three, four, three, five, they're calling for four six. That's recessionary. So at that point, recession is deemed to be the optimal policy path to get inflation down. At that point, the Fed is saying, this is a recessionary forecast and we're cool with it, but we're going to go with it because that's going to get us the price stability mandate. In September, they lowered the unemployment unemployment rate forecast to 4.1. I think that was something that was not discussed a lot. Now”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Correct. And then on top of that, they raised their growth forecast. They raised their growth forecast, but even more important than that, They raised, I'm sorry, they lowered their unemployment forecast back in the March 2023 summary of economic productions, the dots, they were looking for, I believe, at the time, U3 unemployment was around 3.45. They were looking for about 4.6 unemployment. That's a change of 1% or more. That would trigger the SOM rule. I don't know if some of your listeners are familiar with the Psalm rule. It's basically the exact rule is if we get a 50 basis points increase in unemployment within 12 months of the most recent low, it's a trigger. It's a recessionary trigger or signal, not a trigger, a signal.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“But instead of new hikes being priced in, as has been the story since The first hike in March of 2022, instead of new hikes being priced in old cuts were being priced out. So the market doesn't think that the Fed is going to get to 6% now. I think it's still a less than 50% chance that they hike in November or December. So the market still thinks that the Fed is actually done. The marginal tightening is, and I know you know this, I'm explaining for the audience. Marginal tightening is coming out from. Cuts that the market thought they're oh, we think you're going to cut 200 basis points. Oh, no, actually, we think they're only going to do 100 basis points or four cuts. And then the long end is just going bananas.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Oh, for sure. But it's something a tool to calibrate growth and to calibrate Specific goal. And in this sort of, in this case, there was asymmetry between what was happening and what the goal was. The goal was slow the economy down, get it soft land it to 5% nominal GDP growth. And here it is. It's kind of mooning to 9-10%. So one point I made was that monetary policy is too loose. The follow-on consequence of that is that the yield curve would have to reprice and parallel move up. Of course, there's some folks that call it a bearish evening. That's also appropriate. But if you look at a graph, there was a parallel move up, a shift in the curve. So that's exactly what happened. The rates marked out a little shock. And then at the September FOMC meeting and the release of the new dots, the market is the rates market just went bananas, right? They said, oh my God, the Fed is super duper hawkish now.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Monetary policy was if you have acceleration nominal GDP, I don't care where rates are, it's too loose, right? It's just, it's by definition. You cannot have an acceleration in nominal growth. With that, with a restrictive policy, if your policy is really restrictive, it's not going to accelerate.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Fine, but you know, if you splitt in hairs, the routine estimate and forecast, right? The point is it's neither of those things. The point is it's statement intent. And getting back to my hypothetical here, you threaten your kids to clean up their room where you're going to do X, Y, or Z. Obviously, you're not going to literally rake them across the coals, but your threat is supposed to reflect an intent. And that intent is cleaning up the room or something bad's going to happen, even it doesn't mean you're going to rake them across the coals. So I think similarly with forward guidance and the dots, people conflate these things for estimates, forecasts. None of those things. They are statements of intent. They are goals. They are things that they are desired outcomes. So anyway, going back to my tweet on September 1st.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so there's a balance sheet, there's a monetary operations, open market operations, there's forward guidance is your show, monetary policy. The dots are monetary policy. Those are really the forward guidance is not a forecast. I think people think, oh my God. It's kind of like, I don't know, you tell your kids with some hyper hyperbole, you make a thread. If you don't clean up your room, this and this is going to happen, these horrible evil things.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Sorry, the Fed funds Fed funds without a cyclical high, right? So they're at the whatever they were, five and change. So everyone's looking at, got their eyes on rates as being the expression of monetary policy, but that's only one element of monetary policy. Monetary policy is a lot of things. Rates is a blunt tool. It's a big heavy tool, but there's a lot of other things going on.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“That's an annualized one month rate. So it's not going to be, I don't think it's going to be anywhere near that. But my point in pointing that out is that it shows acceleration. So the economy, the rates are moving up. The economy, despite the move up in rates, is starting to get hot. Stocks were still boiling hot in mid-August. And to me, it just seemed like there was going to be two opposing forces that would have me reconciled. And that would be the acceleration of the nominal economy. And what was happening in the rates complex. And I tweeted publicly on 9-1 September 1 that this would mean a couple of things. It meant that monetary policy was not tight enough, despite rates being at all time highs. monetary policy, which is completely separate from rates, rates are a part of monetary policy.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“That is not a sustainable, that's not sustainable in terms of the productive capacity economy and in terms of, it also runs contra to what the Fed is aiming for with their monetary policy. They're looking for a nominal GDP of somewhere between four and five percent. And in August, we started running around 9-10%, which is just, I mean, completely bonkers.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“At that point, with rates where they were, it kind of started feeling, okay, we had a big fast move up. This is nothing to go unnoticed by the equity market. And coincidentally, I was also going on vacation. So it was kind of a confluence of factors. So I got flat equities mid-August. So it got completely flat, covered my bond short, and went on vacation. It was kind of a, it was a combination, I'd say, maybe some insight, maybe some luck or both. And then I was on vacation and I'm just obviously watching things. And I started noticing that nominal GDP was getting really hot. I tweeted about this.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“And of course, the monetary transmission mechanism real rates at some point do start to respond to Fed hikes just by arithmetic composition. The real rate will move up. So, I mean, it's complicated, but effectively it's real economic activity, strength, incoming supply, QT, and effects from the Fed's monetary policy. So reels were starting to moon up. And then I took it, I took a big short at when the yields were at 378. I went short the 10 year and rode that to about 418, covered that short in early August. And as luck would have it, I did really well on the housing stocks, wrote that.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“As I was watching yields go up, I took them apart. I took him apart, I took apart the nominal yield curve and looked at real rates, term premiums, and came to the conclusion that the driver on the long end at least was not inflation expectations. Inflation expectations were anchored and not doing a whole lot. We started seeing disinflation in CPI and PCE. That's starting to accelerate in the spring. So I said to myself, why are rates starting to moonshot if inflation is coming down and the causality was at that point real yields? Real yields were starting to pop up. And that reflected the strength in the economy that I was able to get in front of and anticipate. On top of that, there's a few other dynamics.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“I started looking at what rates started moving up. I forgot where they bought them, but on July 21st, I published a long note. If you want to look at it, if anyone wants to look it up, it's called The Bond Markets Keeping it Real. The talk was, if you go back to the rate hiking cycle, it was that inflation kind of got out of control. The Fed had the tiger by the tail and there wasn't going to have to jack rates up in order to stop inflation, the narrative or the belief was they were going to kill the labor market and kill the economy and would be in a recessionary ditch.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“The answer is pretty much not even paying a whole lot of attention to the rate markets. I did take a short and twos after the mini banking crisis back in March. I wrote a thread on that on Twitter. It just didn't seem realistic that that would be enough stake down to the economy. So I shorted twos. Did pretty well in that position. Did that twice and then pretty much stayed away from the rates market until midsummer.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Answer your question, yeah. I was never, I was cautious late last year, got optimistic, and then got pretty bullish early this year and rode that for a while.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Things don't have to get marginally better. They have to get marginally less bad. It's like the economy was running with lead weights on its ankles. So I figured if things can just stop getting bad and stabilize, we could face some acceleration in the economy. That's in fact exactly what happened. NBA was forecasting. And of course, these forecasts are always a little off, but the way I figured it out was If we just got half of the improvement, they were forecasting we would get a tailwind in economic activity into the second half of this year. And that's exactly what happened. Stocks took off. Yields kind of found a bottom and started slowly moving up. And then, yeah, things in the stock market went kind of bonkers late spring, early summer, pricing in the acceleration that in fact took place.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“The answer is it's mostly new homes, but I'm sure it embodies some renovations. But for the most part, that This is a real drag on the economy. If it, with all that being just totally annihilated and nuked,”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“I think another big aha moment was when the mortgage bankers association, NBA, came out with a fixed residential investment forecast back in February of this year. So going back to what happened with the economy, fixed residential investment, which I just as an acronym called FRI, FRI had collapsed about 30% late last year. And that's just.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“The other part was there was just a secular housing shortage. I don't know what the number is, but it's big and it's kind of a, I think at this point now it's kind of a well understood phenomena that for a variety of reasons we are facing this massive shortage in housing. So then I got bullish on the housing stocks and those just really tick off. They picked up on October of 2022. The market was obviously I was not ahead of the market. The market was ahead of me, but I was able to catch part of the tailwind of that and get a lot of the housing stocks. And then at that point, yields started coming down, saw that as a tailwind for the economy.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“And from there, I built my thesis on, okay, well, the cycle might be soft, but it's not going to roll over. Being started picking up again, economic activity started picking up again late December, early January. My work into the housing linkages led me to why is, despite mortgage rates shooting to the moon, how is it that employment and construction spending are at all-time highs? How is that happening? Was obviously a few angles to that story. One was the supply chain backlogs where they just, there was products that weren't finished due to lack of supplies and they needed to be finished up”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“All time highs. They were just moonshotting. So it dawned on me that without having a turn down in that part of the economy that if we had a recession, it wasn't going to come from the housing market. And if it wasn't going to come from the housing market, then we had to look somewhere else. And although there was pockets of weakness in other areas such as manufacturing and industrial production, I'm sorry, not industrial production, manufacturing, it wasn't going to be enough to bring down the economy. We really needed housing as an economic vector to really just go down the toilet and that didn't happen. So I went off recession to watch in November 2022.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Or lose money, but there's no real wealth that's being created for the real economy outside of maybe the wealth effect. And that's kind of dubious itself. So going back to the housing market, the real economic activity was in construction spending and construction employment. And back in the fall, those numbers were actually”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“To try to understand the interplay between the housing market and the general economy, what I found was that seven out of 11 post-war recessions originated in the housing market. So that was it. For me, that was like, oh my God, we're going to go to this is right. We're heading down that path. And then as I got into really the nuts and bolts of national accounting and the GDP accounts and understanding not just the actual accounting, but going into causality and understanding linkages, it basically dawned on me that it wasn't necessarily housing sales or housing transactions that had the economic impact. That was just paper shuffling. That's kind of like trading stocks, right? When you buy a share of Apple or sell a share of Apple or whatever, there's no, there's a wealth transfer maybe, right? Someone might make my.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so as I mentioned, I approached a problem set by trying to understand what's going on underneath the economy, rewind to 2022. Rates were mooning, mortgage rates were mooning, mortgage spreads blew out a little bit. housing market transaction sales really froze up and we just started seeing general weakness across the economy if you recall we had two consecutive quarters of almost zero growth and and i think that kind of got everyone's recession flags out there myself included to be honest if you go back to september october 2022 i was on recession watch and then i i started going back to the housing market there's a lot of commentary about oh my god this is now the same setup for that we had prior to the global financial crisis where the housing market is going to take down the economy and we're kind of all doomed so i embarked on a research project”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“So, whatever your macro view has been over the past year, I guess we wind the clock back 12 months close to a bottom in stocks around 3,600, 3650, and then bonds were also had also sold off a lot too. And bonds rallied, I think, into about January, but then the bond bear market has really accelerated over the past seven months. So whatever your views been on stocks and bonds and the economy and how does your view on the economy relate to your view on stocks?”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so generally all macro, I don't do a whole lot of single stock work that's just outside my bailiwick focused on the big pictures and express those views primarily through the rates complex. So the treasury yield curve do a lot of the futures for the most part in part because it's just very liquid, basically a 24-7 or 24-5 market for the most part. And there's obviously a lot of leverage with that. do trade some ETFs do a lot of option spread work i dabble here and there in the volatility complex although that's that's more of a kind of a punter's game for me it's not a core competency nor is it how i make my bread and butter it's kind of like if i see a fat pitch occasionally i'll take it using option spreads on some salts on the uvxy etf but beyond that i don't get into volatility futures or anything more complex than that”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“Importantly, the policy cycle, not necessarily from an electoral standpoint, but just how the nuts and bolts of public policy impact macroeconomic policy.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT
“First of all, thanks for having me on the show. I'm really excited to be here for all your work, and it's proud to be a guest here. Just a general background, private capital management. It's a personal holding company investment vehicle for some personal funds, as well as that of some friends and family, my children's trusts. It's a small circle. I'm not looking for or taking outside money. So it's just kind of, this helps keep me focused on the research and not the marketing. Secondly, in terms of what my background is, my core background is in fixed income sales. I've done a lot of cross-asset work as well, but the core is fixed income sales. And with that to facilitate that and also just kind of work on my interests, a lot of macroeconomic analysis, that's kind of for me the starting point for how I approach the problem set, trying to understand the cycle, the economic cycle.”
2023-10-09 · Forward Guidance · Bond Bear Eyes Tactical Long In Treasury Notes | David Cervantes · IDENTIFIED FROM THE TRANSCRIPT