YouSaid · the spoken record

Le Shrub

lines on the record: 99
first: 2024-02-26
most recent: 2024-02-26
sittings or episodes: 1
sources: podcast

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“Do we still have easy financial conditions? Are they going to cut? Are they committed for a re-election cycle? Is the AI story or its second wave? And, you know, don't forget the one reason why they actually have ammo. If they manage to get a few cold CPI prints, they actually have a lot of ammo. Because if I said like they want to cut, I mean, they have like, it's a 5% rate and they have QT on top. So in reality, this should be in a sweet spot where the cutting QT, the cutting rates down to 4%, and we're in a Goldilocks environment. That's what they should have done. But someone got a bit too greedy and we have too much liquidity in the system.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I think you have to trade first what's in front of you. So you trade first the pullback and then you see how they react on the pullback and then play for the second half of the year and how deep that pullback is. Like for example, I mean, we're so far above, I think the Nasdaq is at like 20% above this 200-day moving average or something. Maybe I was looking at the weekly one. Okay, let's do the S&P. So the S&P is 10% above its 200 daily moving average. So the S&P can drop 10% and it's still going to be in the bull market. And the Nasdaq is the same. So it's about like 12% above its 200 daily moving average. So that's a pretty big correction. We probably don't even get that. But if you get like a five to eight percent correction to flush out some x's, we still have some things. So first play for that and then secondly come back and say, you know what?”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think they're going to be, well, because look, I mean, the CPI, I said, because the CPI derailed their plans. But if they want to have a soft landing, they should be cutting down. That's what I mean. And also, by the way, this goes back to our Because if the Treasury hadn't injected that much liquidity in the system, I think the Fed would be cutting down. It would be easier for the Fed to cut. Whereas the situation we're in now is we have a hot market, hot economy, unemployment is low, and inflation is picked up. You have segments of the economy that cannot handle higher for longer. So it's going to be tough. I think it's going to be tough with them.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, geez, I mean, now you just jigsed it. We're going to have a crash Anyway, so it's going to take time. So if they want to just, you know, why keep rates at 5%? Why keep real rates so negative? Just take them down to four before it hits 3%. Don't be trichet.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Sorry, but I don't really believe it. Everyone thinks that because we're all monkeys trading stocks and the people that invest in this market, we all have a form of ADHD in some way. And we think everything is fast-moving. The economy is not fast moving. It's a tanker. It's not even a tanker. It's like the biggest tanker in the world that you can imagine.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Until December 08, because there were concern around inflation. They even raised, there was like a little raise as well. So the guy raised in, I can't remember, June or something. It was like the tertiary is like, why are you raising, man? We're like in subprime. Why are you raising race? We saw that it's like, you raised rates. You're crazy. So basically being trichet, like if you really want to achieve, let's put it this way. What do they want? What does Yellen want? Because what Yellen wants always Yellen gets. Yellen wants soft landing. The policymakers want soft landing. The Fed wants soft landing. How do you get soft landing? I think if you want to get soft landing, you actually need to cut now. Because you keep things too tight”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Let me, yeah, because, yeah, so that's why Trichet for us, yeah, so the Fed cut in September 07 and the jobless claims were rising. Remember when I said that you have to track the initial jobless claims as an indicator, as an early indicator of the economy, you should be tracking the change in the initial jobless claims. So those were rising in 07, and you obviously had the subprime was full force back then. Well, not full force. You could see it. Like we noticed it when HSBC and BNT were losing a lot of money back then. So the Fed cuts rates in September 2007. Yeah. And then the ECB kept rates high.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I'm trying to remember. So the Fed was seeing what was happening with Subprime and the Fed was cutting cut rates in 2007 first time. Trichet, remember he waited until Christmas 08 because he was worried about inflation.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“As long as the trend, because the one character, so we mentioned Burns, we mentioned Volcker, the one character we haven't mentioned is Trichet. Tricet was the head of the ECB, and I remember him very well. And there's an argument. What's worse for your legacy as a central banker? Do you want to be Volcker? Do you want to be Burns? Or do you want to be Trichet? And I would probably say that we as Europeans, Trichet did way worse than birds in some way. Because think about it this way. That's why I think they need to cut. I think they need to cut because you have some, you have a healthy economy, but you have some warning signals like the CRE market, for example, that things shouldn't stay too high. And what Trichet did, Trichet.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Tough one because if you ask me before the CPI, I would say three. And now we are, where are we? Yeah, it was still like three, four. So it's implying like we're at 5.3 implied 4. Yeah, four is implying four. I'm going to say, I'm going to say they're going to cut three times. I think they really want to cut. Sorry, I'm talking like 100 bips, 100 bits off, so four cuts of 25. I think they really want to cut. And I thought they were going to cut, and if you ask me January, I would have said these guys really want to cut in March, but the data obviously was coming worse and worse. You know what? I think they're not going to wait to hit a 2% target. Yeah. So that's why”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I mean, I looked at just one multifamily CLO as an example, and they had like 26% of their CLO book was delinquent. So, you know, there's obviously like some pockets over there. So this particular one, I'm not going to name the name, but it's like, it's basically proper deterioration in asset quality over the last few months. And you can see it actually just really picking up from October into January. So it was like a proper spike. It went from like 10% to 26%. So, you know, there are some warning signs. And, you know, this is the problem of higher for longer, right? So, you know, these guys would probably be okay if they cut rates aggressively by the end of the year. It could be okay. But higher for longer, you know, these guys are not going to do well.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah. But it's like, well, okay, but, you know, everyone was talking about office buildings. Everyone was talking about office buildings. And we went from office buildings to multifamily. And then suddenly. Start learning that there's financial media influencers that have been doing multifamily schemes, which I didn't know until a few months ago. So you start seeing, oh, geez, there has been some Max Stupid in these pockets as well. So it's not just, and this is the whole thing about the shannel banking system. It always finds ways to do something max stupid, like multifamily backed by social media influencers. So that's kind of Max stupid. So you will see a lot of losses, but it won't be the end of the world.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“My view is that it's not going to spread, but there's going to be real money lost here, right? I'm saying it's going to be contained in a number of players, not a few, many, but not systemically important ones. That's what I wanted to say. But if you want to be paying attention to something, you want to pay attention if it spreads, particularly to residential. If it spreads to residential, then you worry. So for example, We had the NYCB hit they took two hits. One was on CRE, but the other one was on multifamily. So that one was interesting to me.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Terms of the average person feeling it in their wealth somehow. That's what I meant. But yeah, absolutely, because in the case of CRE, you're going to have a permanent write-down as well. So permanent write-down is much more impactful for the poor souls that will get impacted. I don't know. I mean, we are talking about big numbers. So, again, to”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Microsoft is an equity, and people in the equity world at least are technically supposed to know that things can go down. Whereas I think what an issue is if you have something that you think of as money or like you think it has the risk profile of a three-month treasury bill and it actually has the risk profile of a delinquent thing that goes through Hero.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I mean, like CBRE estimated like 60 billion of losses, I think it's going to be much, much bigger than that over a few years. But if it's spread over a few years, over a few years, it's going to be absorbed by the profit generation of the banks. Now, the regional banks are a different story. The regional banks, you're always going to have, I think you will be waking up one day and say, oh my God, I didn't. You're going to wake up one day with signature bank type headlines and you're going to wake up one day with NYCB type headlines and you're going to see a few CLOs blow up. Yeah, let's put it this way. Microsoft is a $3 trillion company. It's going to be a bigger financial disaster if Microsoft has a profit warning, like if like 10 regional banks go bust nowadays.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“It's going to be just a few small banks, I think. I think what's more concerning, for example, in the German banks is that you have German real estate slowing down. So that would probably be a bigger headache. So let's put it this way. During the crime crisis, the subprime crisis We initially thought that it was just going to be contained to subprime, but then it spread out to everything. Come today to CRE because in a way it wasn't just a subprime afterwards. The investment grid also just went collapsed. So come back today, you have two trillion or whatever it is of commercial real estate. Not everything was speculative, right? You still have companies like that will keep their commercial real estate and they own it themselves. So it's not everything will be delinquent.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I'm actually doing an interview on Deutsche Fond Brief Bank. People should check that out. I think it actually might air before this one, just because things are moving quickly. Spoke with someone and you said, I was like, Can you do an interview in early March? And he said, We should do it sooner because things are moving.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“You're not going to see a Bank of America or anything nowhere near. These guys are making so much money right now from everything else that it's going to be like. It's going to be like maybe a EPS miss. It's not going to be a capital raise. An EPS miss they can handle.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“That's delinquent. That's 30 days late, actually. And that 1.6 is now 90 cents. So basically, there's a sharp deterioration already showing, and that's on the big banks. Now, the big banks, they might lose a few billion. Okay, fine. Something over the world, but some smaller ones like NYCB or like the listed CLOs or, you know, we saw that back in Japan or Deutsche Fund Brief in Germany. There's always the Germans, by the way, all right? So the Germans, you see a bunch of them like Ariel Fund. Okay, that is like 2008 because the Germans are always the ones that are going to buy the crap at the end. So basically, you do see the reserves falling in the US banking space. You will have, I think you will see a few companies go bankrupt for sure.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Think going back to my original comment so it's not subprime. I don't think we're going to have anything close to 08. But having said that, there's still losses that have yet to be taken. I mean, if you notice the one thing from the latest sense of results was that the reserves at the major banks or against CRE has fallen as well. So I was just looking at the reserves of JPMorgan, Back of America, West Fargo, Citigroup, all that. They had $1.6 for every dollar of CRE.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“You can have me write it up. Yeah, yeah, we should write it up. I'm gonna write this up, but it's true, like the IRA is gonna just, it has good projects and don't forget like the repatriation of key industries in the US. Americans should feel bullish about certain things in their economy. There are a lot of good things happening. Like in Europe, I'm a bit depressed sometimes. just today we're discussing about creating a joint army and raise 100 billion and I was thinking wow we're going to raise a hundred billion for a joint european army so that's what the u.s sense too that ukraine to ukraine in one year so so that's kind of a different scale unfortunately that we're dealing with”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I mean, Greece went from the ugly that plenty like a booming economy. So it's not all that bad. The other good thing about the US is that it has proper stimulus, like the IRA scheme, for example. It's proper, slow-burning stimulus. It's like eating protein, that it's slow burning. Like that's how it's going to play out. It's going to play out over two, three years.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Know, look, I'm still of the view that it's a reelection cycle. So you have 6% deficits. Going to have a pretty tough to get a recession with a 6% deficit. When you do get one bill, by the way, it's going to be nasty, something to be pretty aware of, because at some point, so based on the re-election cycle, I think it's not going to be a 2024. By the way, it's a very easy thing to track is like the rate of changing the initial jobless claims. And there's nothing scary there. If I was going to make a bet about a recession, it probably would be like a 2025 thing. But it's definitely not going to be a 2024 thing because the pump, you know, the policymakers are driven to keep easy money going for the re-election cycle. Now, 2025, will things hit a wall? Yeah, could be. I mean, Europe isn't doing very well. We have a lot of problems here, but, you know, it's just sluggish. It's not bad. It's just sluggish. I mean, Germany is in a technical recession. The UK is in a recession. But, you know, the rest is actually fine. Like I tracked some things in Greece.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Exactly, yeah, exactly. Everyone observes it, and everyone cares like the whole point was in July was a shock because no one expected it. November was a shock on the positive side. But, you know, now everyone was kind of stressed about it. It was a nothing burger. Also, the other thing is when people are observing it, the policymakers as well are a bit more cognizant about it. So the policymakers are like, oh, damn, now they've realized we issued 58% bills. We can't do that anymore. For example, so everyone is more aware and everyone plays the game.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Right. So if no one's really paying attention to something, there could be an exogenous shock to that variable. I'm speaking like an economist. I hate it. But then things are changing. But if everyone's worried about it, everyone's, you know, if everyone has...”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“But it's priced in because everyone's following it. So even if it's going to matter and it's going to impact things three months down the line on the day, no one cares. And by the way. That day I was having a, the next day I was having lunch with a CIO of a major private bank. And the guy was just going on about the QAR, the QAR, the QAR. I was like, what is this guy talking about? This guy probably never watched forward guidance in his life. But you kind of know when the guy is talking about the QAR in a group of, you know, Sleepy private bank client that it's probably the Schrodinger-Schrub analogy whereby it just doesn't matter anymore. It's probably going to matter down the line, but this particular one didn't matter.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“1999 scenario, by the way, because they're all trying to eat, but they can't. But they want to. So devils advocate about two scenarios. On the first scenario is they drain the RP and then things get serious. We have like a liquidity crunch for a few months. That's for scenario number one. You know, the second scenario is that actually what if inflation does come down? And then we ease like 99 stock. So the plumbing is really interesting, but you need to see it. It's like in July, it was an obvious hit, put it this way. It's an obvious hit. In November, it was an obvious hit. In January, it wasn't. It was like a nothing burger. I almost call it like Schr ⁇ dinger's. Like you observe it. Once you observe it, it no longer matters”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I just think of it as just adding liquidity in the market. Let's just keep it simple. It's basically just adding liquidity. So if you issue coupons, you drain liquidity, bills RRP, you just injecting liquidity. So the whole point is you don't want it to go to zero. So the other argument I'm making as well, which could run counter to what we just said, once you have liquidity in the system, guys and gals that buy the AI stocks, they don't really care about where the rates are again, they're just going to buy SMCI up 50%, 100%. So as long as liquidity is there, you're going to see excessive behavior. And there's a lot of examples of many, many crashes whereby the Fed is warning everyone is like, you're taking too much risk, you're taking too much risk. We're going to tie them. We're going to tighten. And then the market crashes. Well, we don't really have it here. That's why you shouldn't really roll out.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“We are thinking whether Powell was going to be, remember it was the debate if Powell was going to be like Volcker or like birds. What if Powell is Volcker and Yellen is birds? About think about it because I was thinking, I mean, they're competing against each other. One is pulling one side, the other one is pulling the other side, and we have what we have. And it's actually, in some way, it's doing a bit of disservice. Because the Fed wants to cut rates, and now a financial conditions have eased because of treasury actions and they can't cut rates. So basically, there you go. You have basically you have Vulgar and Byrne's in the same room”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Which was a fascinating way of looking at it. And it kind of shows the Tamagotchi reaction function not being just about fiscal anymore, but it's also about monetary. And I mean, I can walk through, well, it's kind of simple. So, you know, the Fed has the RP and they're issuing where they're borrowing from the markets. And then the Treasury is issuing bills where they're borrowing from the markets. If the treasury issues a lot of bills, it's competing against the RP and it drags the RRP. So the Treasury can dictate the timing on when QT would kind accelerate the timing of QT. That's one thing. And then two, the Treasury can actually dampen the effect of QT because as the Fed is doing QT, the other guys are issuing bills and stimulating the economy. So maybe... Maybe just maybe hear me out on this one because I had this realization today.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“The second scenario is that Yellen has been masterful in changing the allocation because the QT that the Fed does, it's actually automatic. But the QRA is supposed to be like implicitly, like I said, 80-20, but she went as high as 58% on the bill side. So does it matter because she actually tweaked it more than the guidelines? And in a way, you know, there was a fantastic piece by Steve Miran, which I think you had on your show as well, whereby he kind of shows that Yelen took over the monetary policy”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Actually, it's creating crowding out. Like I remember at university when I started economics as well, they were talking about crowding out. Crowding out is a very classic concept whereby government issuance crowds out private investment. But in reality, we never really saw crowding out in our lifetime. So I've been wondering if what we saw in July and what we saw in the last six months is a result of crowding out because now we have 120% debt to GDP with six to eight percent fiscal deficits. So maybe that's why it matters. That's one scenario.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“So I've done pretty okay for 17 years without knowing what the QRA is, without caring about the RP, without caring about the TGA. But I'm kind of like a special SITS equity investor with, I do more distress credit stuff as well. But it kind of never really impacted me as such. But then, and I was speaking with Andy Costen about it, who actually was the first one to bring it to my attention. And this is the key question I was having. Did the Julyn change implicit guidance of an 80-20 split between coupons and bills that the QRA matters again? Or is it because the issuance became so big?”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Matters. A lot of people say, Oh, when the Fed's doing quantitative easing, stocks will go up. When the Fed's doing quantitative tightening, stocks will go down. You know, that theory is not working out so well as the Fed continues to reduce its balance sheet via quantitative tightening and stocks go up, then you can make it more complicated by introducing the Treasury and how much issuance is in longer duration papers such as bonds versus bills. And I think like it is a fact that when the Treasury issues more bills than bonds, the duration in the system goes down and it's also generally a fact that that is going to require less balance sheet. So it's like less volatile for the banks and the holders of that paper. Now where it becomes like a claim or a speculative claim is, oh, that's bullish for stocks or other assets outside of the fixed income markets. I'm of the belief that these things are worthy to be studied in their own rights. So even people like, oh, it doesn't matter for stocks. They're interesting me and I think that people should.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Lowing down of Qt. And then it kind of realized that we're not in election cycle. We're in a re-election cycle. It's a re-election cycle. So they're preparing, they're keeping that in their arsenal for a second half boost if they need to. That's basically as simple as that.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Instead of 20%. It's like Vitaperon. You know, that's kind of like Argentina Argentina style. But the reason why she did it is because the Tamagotchi reaction function was triggered 5% 10 year. Similarly with the inflation last year, one time that this reaction function confused me a little was when they had like a little rough start of the year the market just wobbled if you remember the first week. And as soon as the market wobbled, they came out and they said they sent Lori Logan to say that the Fed would slow down QT because the RP is ringed. So that was one example of a reaction function that confused me a little bit because the market was only down like 1%. The 10 year was like pretty low. So I was wondering what drove them to come out and guide.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“What happened in November in November, I took it so when the US 10 year crossed 5%, when people were thinking about the QRA and what the Fed would do and what, you know, I mean, you've had a lot of programs on the QRA, anti-Costland is like the legend on QRA breakdowns. And you've had him on, which actually helped me a lot at the time, but the QRA was the mix between bonds and coupons and bills. So the more bills you have, the more bullish it is, the less bills you have, the more bearishes. So when people were predicting what you would do, I had a very simple view at the time. The US 10 year was cross 5%. So the Tamagochi reaction function would say US 10 year above 5% bad act, do something. And she did. She came in and the QRA came with 58% bill.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Change the direction like if you get three whole prints, then we can talk about a proper return of platform. And then the Tamagotchi reaction function will become more jittery in some way. I'll give you another example of the reaction function to think about it.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And so if plenation is below 6%, food and all that stuff, then tamaroccillen is happy to do whatever she wants. She can drain the TGA. She can do whatever she wants with the QRA. She can pump the market as she wishes, drain the RRP, do whatever she wants, as long as population is low. But if platplation is high, you're entering the danger zone of the 1970s. That's kind of what we saw in 2022. So we've experienced it firsthand. And I think the hot inflation print last week kind of brings back some of those fears. That's why the market, I think, is going to be nervous. Maybe it stays nervous until the next CPI, by the way. Because we only had one old print, let's be honest about it. I'm actually a believer that inflation is going to trend down, but you can't have one hot print. You probably need another two, three hot prints to actually.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Tax proceeds and also their donors make a lot of money. And also, if they created all the wealth inflation, they can go on the board of a hedge fund and make a lot of money themselves. So what they care about is, so the policymakers can generate wealthflation and they want that as long as they below, say, 6%.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“And what that reaction function is, you have to figure out what triggers her. So one very simple aspect of the reaction function. I break down inflation in two parts. So I think of inflation as being composed of wealth inflation, and that's the price of financial assets going up or real estate or cost of private schools, for example. And then the second component is plebflation, which is what the average person feels, like you and me. So the plebs, what we're feeling. In reality, people get confused sometimes because I saw a lot of them saying, oh, the market is all-time highs, the market can't, you know, the Fed can't cut rates. It's like, no, no, that's completely wrong. That's wealthflation. Market going up is wealthflation. The policymakers want to...”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Kamag I'll tell you why because Tamaguchi is Lagarde because she likes Gucci. but yellen is a tamaki so so it's it's just a it's just a joke that i've made that tamagu was this little japanese toy that you were probably i don't know if you saw them in your childhood you probably didn't so there was this chinese toys that you would feed them they would get hungry and you have to feed them to be happy And then you have to, you know, they were tired, you had to put them to sleep. So they had a reaction function that you had to deal with in some way. So I kind of joked, you know, I kind of joke because I like to visualize things that Yellen, when I say Yellen, I kind of mean the Treasury and the policymakers, but I like to vision Yellen doing it. She's like a Tamagochi in the sense that she has a reaction function.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“That all the banks are suffering. You have the real estate write downs, and everything is down, including tech. Like in 2008, tech was down as well in the US. And then in 2022, US tech was down, but energy was up. So today you have a weird situation in China where energy is all-time high and tech is down the toilet and everything else is wobbly and nothing else is working. So it's kind of a very strange situation. I mean, we had some positive travel data last weekend from the Chinese holiday. So some green shoots like e-commerce activity at Mutan was up 36%. You had like Beijing, tourist spend was up 60%, train travel was up 60% year on year. So you had green shoots, but to be honest, China will be a sluggish economy. Let's be honest about it. So it's more like a value play to just put aside and just hope for the best and just pray that I don't invade Taiwan otherwise.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“He said, Look, you just buy the index or you buy the biggest company. So you either buy the index, the CWB or the FXI, which are the ETFs of China, or you buy Alibaba or Tencent or whatever. Just keep it simple. There's no point going into the smaller stuff. Definitely I wouldn't touch the banks. One thing that I really that really, really surprised me, and I think it might surprise you too, is that a stock-like Sinoq and Petrochina is ripping right now. It's at the highest. I looked at it and it's like, I was really surprised because I was, you know, I had shares in Petrobras and, you know, as another emerging market company, but I wouldn't think that Sinok and PetroChina would actually be at all time high right now. It's bizarre because the Chinese market, like people, people don't pay attention to this, but actually the Chinese market looks a lot like the US market in 2008 and 2022 at the same time. So 2008 in the same”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I don't touch that because I think one should completely avoid banks, completely avoid real estate developers, stick to like, look, China's an emerging market. So if you want to play an emerging market, the only way you do it is someone smarter than me told me that. I think it was Porter Collins.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Policymakers panic, the markets stop panicking. And I think what's going to happen at some point as well, what you're going to see, because they have so much cash on their balance sheet, I think the policymakers will be not incentivizing pushing these companies to be buying the stock to support their share prices.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I broke my discipline and instead of buying calls, I actually bought stock. I found the biggest and the most liquid stock, so Alibaba. You have Tenson as well, but I didn't want to do the gaming side. But you had Baba, which was like half of its market cap was in cash with a dominant position in Alik A&merce, also a hyperscaler, by the way. like, well, you know what? I'll just buy this and see if they manage to defend the HSI 15,000 level. So what you saw in the next few weeks, you saw them just coming in and trying to stabilize and prop the stock market. So honestly, my trade is that stupid. I'm just watching the 15,000 level. If it breaks it, I'll probably bail out. But in the meantime, I think the policymakers panicked. And when the policy...”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“And saying, We're going to take tough measures, we're going to ban short selling, and we're going to stop funds from selling any stock. So that was at 15,000. So I told myself, hold on, what if the reaction function is to defend the Hong Kong 15,000 level? By the way, that's like a, I don't know, I mean, the Chinese market hit like a 10-year low or something, something stupid. So I'm like, you know what?”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Look, it's a very, very simple story. So basically, you know, I have a view on China. So my view is you have to figure out what the reaction function of policymakers is to make an investment. So I'm joking about yelling being like a Tamagotchi in the sense that you need to figure out what her reaction function is to see how she acts. And then with China, you have to do the same. It's like, when do these guys act? January being long China, I had calls on the Chinese index in January and I'm like, the market was just in freefall. And at the time, I said, I don't want to own any stocks in China because I don't trust them, but I'm willing to buy calls. At some point, the market really took a hit. And then when the Hong Kong index hit 15,000, it started bouncing and you started seeing premium.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT