YouSaid · the spoken record

Julian Brigden

lines on the record: 101
first: 2023-07-26
most recent: 2023-07-26
sittings or episodes: 1
sources: podcast

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“So, likewise, they could just reach out to support at mi2partners.com. And that'll get us either, you know, if you want to think about subscribing to the real vision stuff that we do with Raoul, which is more retail orientated or the institutional stuff from I took.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you're not getting another bonus, right? So it doesn't create that sustainable metric. And I think this is why they look at the inflation, which has mostly been caused by energy and food as bad inflation. It suppresses underlying consumption. And I think until those dynamics start to materially change, don't get me wrong, could they tweak the band here or there? Maybe. Maybe. But are they going to get Fed type religion or ECB type religion? No.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Run ups where it looks like we're going, we're going. Wages are really going to take off. But actually, if you look at monthly earnings, which is a series that we tend to follow, hasn't really sustainably moved above 2%. You get some big pay settlements, but they tend to be these classic Japanese thing where they pay bonuses, right? They give you a bonus. But that, you know, you go, okay, I've got a bonus. What am I getting next month?”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Something that's a good inflation versus bad inflation, right? So there is good inflation if you're Japanese in the sense that it's driven by underlying wage growth, right? So it's driven by it's sustainable inflation, right? And remember, they're still worried about deflation to some degree. It's sustainable. So it becomes self-generating. So wages are rising, the economy's booming, consumers are buying, et cetera, et cetera. And we haven't seen that in Japan for like 30 years, right? They have these.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“So we follow Japan very closely. We write this thing called a Japan update. We've got a couple of people look at it who've been doing it for 30-odd years. We've been very much in the camp that the BOJ will not at this stage move. Now could the dynamics change? Yes, they could. What do we think needs to change? Well, I think what really needs to change, Jack, is the”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Final question. It's a mechanical question Do you think that interest rates will stay at zero for the Japanese yen, Bank of Japan new governor? Some people said, oh, they're going to change, raise interest rates. They raise the bans a little bit for yield curb control. But I mean, it would have to be one of the very few central banks if the only one that still has interest rates at zero, when inflation is going up, admittedly it's still slow, but yeah. When are we going to see a positive interest rate?”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“It's a bit complicated. I'm sorry if it's a bit wonky, but it's a bit of a thesis of ours, but it's worked out so far. It was one of the reasons why we sort of turned bullish on the yen and the euro when we did. And it's something that we're just kind of watching. And it's a pattern that we've been through in the past. And I think if I look at where we are now, I think it's equivalent to sort of early 2017 where you started to see. Dollar and Mimbigo, or Dollar One goes sideways, and Euromimbi and Euroan basically move up, which means if the dollar's not really moving anywhere, it's kind of Euro dollars. The euro's going up in straight. And that's one of the reasons why we're slightly bullish. It's a bit more mechanical than anything else.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“They're selling their US treasuries to buy Yuan, and they're doing that to defend the Yuan. And they're not increasing interest rates, which would defend the Yuan, but so they could be stimulative. So interest rates are like 2%.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“You don't want to see there's a limit to how far that currency weakness becomes a benefit and when it tips over to being a fundamental problem. And I think we've hit that point. And that's why I don't think they really want to see the Reminbi weaken much more against the dollar.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“But it's just a reserve tool. As I said, There's lots of people out there saying, well, the remembered is just going to keep weakening, keep weakening, keep weakening. And in a... In a normal economy, that may be the case, but in a centrally planned economy, where you're trying to manipulate these various levers to, and you have the ability more than other places to manipulate these various levers. Infinite currency weakness while it may help your manufacturers if the fundamental problem is not your manufacturing sector, but it's actually your asset markets, your housing market and your equity market.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Who understands FX or understands options, they're running kind of the largest positive gamma options book on the planet. So essentially as the dollar has risen against the Romimbi over the last two years, the value of their dollar reserves as a percentage of their total reserves have risen. And now if they want to keep that balance, if they want to revert that balance to where it was, they need to start selling dollars and buying other reserve currencies, which is euro and yen. And that's essentially what I think they did back then. And I'm suspicious they're doing now.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“We've kind of hit the limit to where that goes. And that's why I think you're starting to see some signs of euro and yen strength, because very much in when they did this last time. You saw a devaluation in the currency, it got to a point pretty much exactly the same levels as we got to this point. And then they stopped the currency weakening against the dollar anymore. And the burden of the weakening to help their manufacturing shifted to the euro and the yen and both of those rose against the Remimbi and the dollar didn't really go anywhere anymore. So I think, and I, as I said, I think they manipulate this jack essentially because their reserves are so enormous that, and I don't want to get overly wonky here, but essentially.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Back then, they weren't doing QE anymore, and we started to see towards the end of that period some rate hikes from Janet Yellen, if you remember. And the Chinese have let the currency kind of take the strain and help to support their manufacturing sector, which this time is weak, right? But there is a limit to how weak you want your currency to go, particularly when you are trying to keep money inside the economy to support asset prices, be those stocks or apartments, right? You don't want capital flight, right? So there's this kind of balancing equation between the gains that you get from a currency weakness helping your external sector, your manufacturing sector, and what it does to your capital markets. And I think...”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“I think they're cheap for a reason, Jack. And I think you've always got to be careful about when you say when you use that sort of rich, cheap analysis, as they call it, right? Are our stocks just super rich and their stocks cheap because ours are just super rich, right? On a relative basis. So no, there's no question, though, you're right. It's been a very, very lackluster reopening. Is it as quite as dire as some of the data suggests? Probably not. I think, look, when it comes to the Reminbi, I am not in the camp that believes that this is anything close to a free-floating currency. I think that the Chinese manipulate the currency. I think the weakness that we've seen over the last couple of years resembles very much the weakness that we saw from 2014 to 2015 in the Raminbi as the last time the US was tightening monetary policy.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“And the one currency the dollar has been strong against is the Chinese yuan, not the Japanese yen, but the Chinese yuan. What is going on in China? Is it fair to say that the reopening boom that was expected has been lackluster? And by the way, Chinese stocks on a valuation basis are cheap. Now, they could be cheap for a reason. But yeah, I.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Maybe Jack, you know, and that's why I'm not, I've got a Euro trade on slightly long. We put it on so that this thing could come off a little bit and then we'll see what happens after that. But it's not a huge bet. And I think it could end up, I do think the dollar is the one variable I'm watching very, very, very closely because once the dollar changes direction, your whole investment thesis changes very dramatically. And it tends to happen for a multi-year period. But we're not. There yet nascent signs, maybe right, convicting real signs? No.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“I think very sluggish, right? I mean, I think, look, manufacturing across the whole world is looking sluggish, right? We've had, there's unquestionably we've had a big inventory cycle. And Europe in particular is very vulnerable to that big inventory cycle because they're more manufacturing orange, particularly northern Europe. And we all tend to focus on German data or French data, and they're more manufacturing sensitive than, say, Italy or Spain. So, yeah, I mean, they're going through a rough time. I mean, I think the idea that they wouldn't go through a rough time is wrong. But US manufacturing has gone through a rough time So, I mean, do we get this choppiness short term? Maybe.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Look, at least initially in that process, I mean, we don't have a Fed that's doing that, by the way I mean, I think they should. I think they may have to, or the bond market will do it for them, which will not be a positive. You know, this is why trading the dollar at this point is quite complicated because I think in the major currencies, which are really the yen and the euro, okay, there is this element that they're not only a carry trade, at least they can be initially, okay, where, you know, sure, if US rates go up more than Europe the euro could go down against the dollar. But if in that process you break The stability of US financial markets and the money goes home, that's when actually the dollar could really weaken against those currencies in particular.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“That makes sense. So How does it, how do you reconcile a very high US rates with a weak dollar? For example, if the US, let's say gets a 6% on the Fed funds rate, where does the ECB hike, European Central Bank hike interest rates?”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Other things outperforming the US equity market. It doesn't mean the US equity market doesn't go up. It did go up from 2002 to 2008. It's just you would have been better off as a US investor being outside the US taking advantage of a weaker dollar and rising overseas assets.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“I mean, typically it ends up in the former. But starts with the latter. So you get the initially, you get a nasty decline, say against those funding currencies, you get the euro goes up, the yen goes up in an environment of risk off, okay, where things, where asset stocks are falling, let's say, right? US stocks are perhaps falling the most because that's where the bubble is. And then eventually when the Fed starts to cut rates, right? Because the economy is in the recession at that point, Jack, which really started in 2002. That's when the dollar starts to really materially decline. And that's a positive for the rest of the world. It's a reflationary event for the rest of the world. And what you typically see then is...”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Do you think that will be kind of an early 2000 scenario where it's just kind of a structurally weak dollar that boosts commodity prices, boosts gold? Or do you think it could be like a kind of a reverse dollar squeeze that's a little bit more violent?”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“So if, look, I'm not saying it well, but if the bubble does burst, If the equity bubble does burst, the place where the equity bubble is unquestionably. The largest Not overseas. So they all go down, don't get me wrong, Jack. It's just asking go down potentially a lot more.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“But so you think that the US stock market will suffer in this scenario, but it won't be other foreign markets because often isn't the case historically that when the Fed raises rates, sure, the US equity market suffers, but it's the kind of most least dirty shirt in the laundry.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“So, if in the process of jacking up rates, the Fed breaks something and we get a big risk off move, I would not be at all surprised to see euro against the dollar go up, even as the dollar went up against some other currencies. And you've seen that in the past. And you get huge movements then in relative currencies. So you might get euro go up hugely against the Aussie dollar or the kiwi or some emerging market currencies. And likewise, the yen go up for the same reasons because it's a funder of trades that are getting unwound jack. And as those trades get unwound, people have to buy back those euros or yet.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“But what if, Jack? In the process of raising rates, we blow up what I think is a bubble in the US equity market and that all those trades That are funded in yen, invested in the US equity market, get unwound. Well, actually what's going to happen is while the dollar may go up against the Aussie dollar or the Canadian dollar or the Chilean currencies, it may fall against the yen as that carry trade is unwound, right? It may fall against the euro because the Europeans are being the ones who predominantly put money into our equity market to fund our current account deficit. So you could get these big movements in the dollar. Between currencies”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Should be, but here's the issue, Jack. I think at that point you need to, and this is where it gets quite complicated for non-FX people, because we always talk about the value. Lots of people talk about the value. by training. There is no such thing. I mean, you can look at the dollar index to get a metric of what the dollar is worth, but that's the dollar versus a basket of currencies and predominantly the European currencies. So you have to start differentiating against the dollar against what. So in an environment where rates went up another 200 basis points, I could see the dollar doing extraordinarily well against quite a few currencies, particularly some emerging markets, say, let's say it could do very well against some of the commodity currencies you'd expect it to hurt global growth, right, which would hurt commodity currencies.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Especially in FX, right? I mean, one of the best things with FX is you had sort of heavy levels of leverage you could take.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“You're taking the currency risk, Jack, right? So if the currency moves against you. Know that 5%, it doesn't take much for an underlying move in the asset to wipe out that rate differential. Let's think about this, right? So you're earning 5% being invested in dollars, right, as a Japanese investor or as a hedge fund borrowing yen and buying a dollar asset, right? You're earning that 5%. But if dollar yen drops, You've wiped out all of that carry gain, right? And God forbid it drops 10% or God forbid your leveraged. It really doesn't take that much to wipe out that carry. That's the point.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Interest rate differential is really interesting. I think it's interesting that the sell-off in the yen started in March of 2022 when the Fed first started raising rates. So if the Japanese rates were basically a zero or nominally negative and the Fed was basically at zero nominally positive, now the Fed's at 5.5% and as a fixed income investor, you're getting paid so much more park it in the dollar rather than The yen. So tell it, would you take”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Actually, it starts to rise in value and you owe more money to pay it back. And that's where things could get kind of ugly.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Make it back to the high. And the risk is that when that fails, you fail to make the new high. You come close so tantalizingly close, but you just miss it. That's when the bubble bursts because that's when investors go, I'm done. And this chart looks very similar to the Nasdaq. And it should do because my suspicion is lots of professionals are borrowing yen, leveraging themselves up because yen is super cheap and the BOJ isn't going to raise rates, right? So I could fund myself in yen for virtually nothing. I can convert it into dollars. I can go and buy NVIDIA and I can make a fortune, right? Because NVIDIA is going up. I'm paying nothing for my borrowed money. But the problem is that's to go back to this, it's an unstable, stable equilibrium. Because if Nvidia doesn't go up, then that trade doesn't work. But also if the yen goes up and dollar yen goes down, then those monies that you”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, this is a humongous FX move, right? Humongous FX move. And we did it in the best part of six months, right? Then it topped out and it dropped starting in sort of September, October down to about 128. And since then, it's tried to make it all the way back. But if you remember what a classic bubble is, you kind of have these bull traps. So you have the blow-off move, you then drop sharply, and then you try and kind of come back to the highs because, you know, if you're willing to pay 152 for something and suddenly the thing is 128 and the narrative hasn't really changed, Jack, then surely at 128, it's a bargain, right? But something in the dynamics in that interim has changed and you never quite.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“So you had this parabolic blow off in dollar yen. It then dropped very hard and we're trying desperately to kind of re-rally dollar yen. But it looks like it could be failing. And if it does, that's important because dolly yen is the funding currency. For a lot of the speculative players to buy US assets. Back to that dollar year end. So we hit a Hit a high of 150 in this kind of just like the overpower, you know 150 in a parabolic move from March of 2022, where it just went straight up. So that literally looks like the jet fighter that's going to go vertical, right? It's whoosh. And we went all the way from 115 to 152, which in currency terms is a not a stock, right? This is the currency of two massive economies.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Kind of call definitively a dollar top. We've had a little bit of a play. We bought some Euro calls. We said it looked a bit stretched. So we hedged them. And now we're trying to play that. We bought some dollar yen some dollar puts against the yen because that looks very bubblishious to me. That's the one that really I think looks really intriguing because it looks you covered up you follow this when Raul and I on Real Vision has, he calls it a crash pattern, that kind of bubble chart. I call it a classic bubble. Dolly N looks exactly like that, Jack.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“As long as those metrics kind of hold up, Jack, we can have this stable, unstable equilibrium and a strong dollar and so on and so forth. But there have been some cracks recently, right? Actually, for all the euphoria around US stocks since the third quarter, you would have been better off owning European stocks in euros than US stocks in Euro. So from the perspective of a European investor We have seen a bit of a slowdown in the economy, not as much as we probably need to. So we still need that foreign money. And the dollar has started to show a few signs of kind of weakness. I don't think we've seen enough yet.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, or they're buying stocks, right? They're buying stocks, right? The Swedish central bank, oh, sorry, the Swiss central banks bought bloody stocks, right? That's literally, they're taking their current account surplus and funding our current account deficit by buying Apple, literally by buying Apple, right?”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“That trade could unwind. Secondly, you need a booming economy because the booming economy requires the funding. And if the economy stops booming, then the current account deficit shrinks. We don't need so much foreign money and the money just goes home. And the third thing you need is you need ongoing dollar strength because the money that's come in is in foreign currency, right? Foreigners have lent us essentially euros to go and buy BMWs.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“At the end of the day, it is a tremendously powerful cycle, but it is hasn't some inherent instabilities at the heart of the system. So it depends on kind of three. Think of it like a three-legged stool. So the first thing you need, because foreigners have bought US assets to fund this trade, okay? And it really is the world's largest carry trade. Those assets need to continue to outperform. So if US stocks or US bonds materially underperform their peers,”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Into equities. The corporates took that money that they borrowed from the corporate bond market and bought back their own stock. So equities went up even more. So you had this strong dollar and booming stock market. And that in the real economy manifests itself into economic strength via the wealth effect. And it also requires, it leads to a booming economy and a large current account deficit, which needs to be funded by yet foreigners again with yet more inflow. So we get this really strong reflexive cycle, Jack.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“I think part of the problem that we got with the dollar is that all the world's money is essentially sitting here. It's sitting and has really come here since 2011, then accelerating in 2014, and then since COVID. And it has helped to perpetuate this self-reinforcing, if you want to use the true sort of SORS technical term, reflexive cycle. So in other words, As the dollar strengthens it also underpins the fundamentals that justify that dollar strength. And so we've had this situation where we've had money flowing into the US because we were raising rates, we were doing QT in 2014, money came into the, or we stopped QE, sorry, in 2014, and money came into the dollar looking for that strength. It then looked for a home. So it went into corporate bonds or”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“So I'm. I've been in the camp that the dollars look stretched to me for a couple of years. Now, having said that, you know, it looked like it was going to roll over prior to Ukraine. And then obviously we saw the invasion and the thing just took off again because all that money got scared of being in Europe and fled into the relative safety of the United States.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Banks Nope. Look, that's why, look at the end of the day, you can have these views on macro. But, you know, one of the strengths I think that I like to think we have at MI2, it doesn't always work, right? We get stopped out of trades and think we get things wrong, is that you have guys who look, you know, who are traders and what we got in the team, guys who ran portfolios and big portfolios at funds and so on and so forth, who look at price action. And might say to me, Julian, and I know you think that's what's going to happen, but it didn't happening now, mate. So we can't put the trade on, right? Or if, and if we do put the trade on and we're wrong, you always have to have a stop.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, it's just amazing how some narratives that seem so ironclad don't play out. Like who would have thought that the homebuilders would have been on Blood Marian? And the other thing is rising rates are supposed to be good for banks, right? And rising rates hurt technology stocks and they help banks.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Which is why they could charge more for their prices, even though they're not selling as many because not many people can afford them. So if you look at new home sales, they're down, right? Quite materially down from where they were in 2021 and even in 2022. It's just that the price has risen for the unit that they sell. So their profits are up.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Parabolic, and we got tried to short again, got our heads ripped off. You know, that's what stops her for. So it was a small loss. And I think what I, you know, and it goes back to some of the things that we've said before. But it's really truth in home builders. What I underestimated was. How the rice, the increase in price would offset the fall in volume. So the fact that the price of the houses that they're selling is so much higher than before, Jack means that even though they're selling far fewer of them than they were at the heights of COVID, their revenues have been very good. I mean, right here, right now, and I've got a couple of models that we tweaked to look at this, the home builders do look. Even bloody extended relative to that metric. But there's unquestionably that's what last year helped them really, really outperform.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“That it creates another problem, and that is we're seeing some slowing in the housing market, which is obviously very sensitive to longer-term yields, but we're not seeing as much as we probably should. And in fact, there are some nascent signs that we might actually be seeing even some sort of reacceleration. And really, the Fed could kind of do with higher 10-year yields because it would mitigate the need for them to do even more unfed funds. You know, I think it's both more mechanical than it used to be. So the inversion is now, I think, slightly misleading because I think it's a function of mechanics related to the balance sheet. But it also creates a problem in that, I mean, kind of nice if FedFund, if 10-year yields were four, not, you know, five, not. Three and change, right?”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“So, is the bond market a good predictor in that sense, or is the curve? And I think the answer was he always was, right? I think it always was a very good predictor. But the problem is really since 2008, 09, the shape of the yield curve seems to have got very become very correlated to what the Fed does with their balance sheet. So to a certain extent, Jack, what's happened is as they've initiated QT, it naturally tends to invert the curve and pin longer-term yields down as short-term yields rise. And you can look at the correlations that are actually very strong between the rate change of the defense balance sheet and that thing. Now, I suspect that makes it less of a useful indicator, Jack. And I also think...”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“And I'm an arm of the US government and the Biden administration. Would I be sitting there going, I know that it could hit the equity market and I'm up for re-election next year. So do I really want that to happen? So I think that liquidity side of the equation is a little tougher, right? What treasury decides to do with its issuance, which should weigh on liquidity Let's see, right? Most of the people that most of the forecast I've seen suggest that they will have to do some because Logic would just dictate that you don't want to roll everything over in the bill market, right? You don't want to be rolling over trillions of dollars every couple of months, right? Let's”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT
“Correct. Right now, I have a little suspicion that they know that if they push a lot of duration or issue a lot of longer dated bonds into the market, that that will tend to drain liquidity out of the system. They can't get bought by money market funds. They have to come out of bank reserves. It's bank reserves that will hit the criticity in the system. And if I were Treasury.”
2023-07-26 · Forward Guidance · Julian Brigden: Markets "On A Knife's Edge" After July Fed Meeting · IDENTIFIED FROM THE TRANSCRIPT