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Teddy Vallee

lines on the record: 56
first: 2022-04-28
most recent: 2022-04-28
sittings or episodes: 1
sources: podcast

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“That sort of shows that, but I would think of it differently from the Fed's movement versus the Fed's movement in turn affecting what the future looks like for liquidity. And if I'm thinking about what's a positive liquidity environment, it's when the Fed has already cut and the rates are moving lower that allows banks for more capital to start coming through the economy and we haven't even seen the rates lower piece. Now that's not to say certain projects and protocols could just absolutely moon. That's completely impossible. But from a macro perspective, how I view the asset from an allocation Viewpoint It's just the risk lord is just not amazing to me.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, right. So if you think about when rates started to rise in 2016, that ultimately affected the liquidity conditions eighteen months later, right? So 18 months later after called February, March of 2016 is when crypto topped, which would have been 18 months from the time that rates bottoms. So it doesn't necessarily mean it's not necessarily the Fed's hiking cycle. It's the Fed's hiking cycle affects liquidity at the time. And I think so liquidity from 16 when markets bottom through the end of almost 18 and Bitcoin actually corresponds and leans some of the stuff through the end of the beginning of 18.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so if you think back to that time, I think you have to think about it from a relative tightening perspective. So I would say our leading indicators of liquidity and liquidity itself, if you think about Fed tightening cycle, right, it doesn't happen right away as it relates to liquidity. It typically comes through liquidity called 12 to 14 months after. So the Fed tightening then went to crypto top.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“I think that opportunity comes later this year, so we're doing, I'm starting to do a lot more work there getting ready for when that time comes.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think crypto is one of those things that you just need to own. So the way that we're dealing with it is we've just sized it accordingly. So it's one of our smallest over the past six months has been one of the smallest allocations we've had to it. It's still called four to five percent, but we've just taken it down to be wary of the backdrop. The more work I do it on in terms of liquidity, also the Chinese liquidity cycle. There's a really, really, really high correlation in terms of where the returns come from. drawdowns during different periods of time and right now is just not the time to you know be playing around and sizing it um you know it could go up a lot and it'd be great i mean i'd make money on that but from a risk reward perspective you always just want to you know be thinking about the balance of probabilities and the balance of probabilities either flat or down for me versus you know great conditions to be you know max position”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“So we were very long coming into the beginning of the year under the assumption that one, China is re-accelerating and the dollar would move lower. I think the communication from the Fed and where they ultimately want to get to basically prove that view incorrect. So we took off the position. Fortunately, a profit. But I think it's tough for, from a tightening perspective, you typically don't want to own gold or the miners or the minor equities when you have a material tightening in some of the financial conditions. So I'm hesitant right now, but they've come off a lot, and I'm playing around with it. They're probably over trading it and overthinking about it too much, but I just want to be careful given sort of the current backdrop.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, more of the really bean down stuff. I'm in the process of designing the basket, but things that I probably want to own for longer than 12 months that also have a positive tailwind on that front. The right front”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Think you buy gold and gold miners. I think you buy gold and gold miners. And I think that sets off a period of lower dollar weakness, assuming that China irons itself out. If China can iron itself out, it creates a very clear picture for the dollar and more so gold. I think inflation likely stays at a higher level due to some longer term sort of commodity imbalances due to underinvestment and call it the oil patch and creates a very, very positive backdrop for gold and gold miners. So that's sort of the first place I'd be looking. And I'm looking and starting to do some work on a basket of growth names. Probably the same stuff that I've been short for the past year and a half. Things that probably do better with lower interest rates and could outperform on a relative basis, assuming that he makes his pivot.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“And I think down 30%, maybe he says, Look, we're down 25, 30. He says, look, we break even inflation. Expectations have come down significantly. We've sort of broken inflation's back and we expect that to come through the market over the next few months. Supply chains look to be getting better makes something up. So I think he could find something down 30, you're definitely going to break evens coming in a lot. He'll find something to look towards, but it's tough for him unless break-even inflation expectations come down for him to really pivot.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“I think it's going to be very difficult for Pal to backtrack on the current path, especially when we're one to two hikes into the hiking cycle. I think it's going to take time for inflation to come lower. I can see it settling at three and a half to four and a half percent by the end of this year and likely staying in that vicinity throughout the next year, although that's contingent on sort of the Fed's response at that period of time. But I think it's very difficult for him to pivot and be dovish when we're seeing these inflation prints and we're seeing, we've only hiked one or two times in the cycle. So I think his bias has to be negative.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Move lower in the SP, and now he's going three for three third time's a charm where he's really hammering it. So I think, you know, he also has sort of a political Tailwind, too, where the administration is like, Look, you need to solve inflation. So he sort of has the Given a couple of different things, components in it, and theirs are a little more lagging. And we are seeing some of the tightest financial conditions that we've seen ex-COVID over the past decade. So there's been material tightening. In what's going on under the surface, I think, is going to continue to come through equities and probably credit spreads.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“I think they're just going to keep going until it breaks. And, you know, for example, we were down 20 on the NASDAQ when Powell came out for his last meeting and was one of the most hawkish she's ever been in terms of his communication. Markets ultimately bounced because everyone was significantly short into that. But he didn't flinch at down 20 on the NASDAQ. I think we were down called 15 at the time on the S&P. Didn't flinch. So down 25 to 30, I think is the point where they stopped doing some of this. And I think it's also interesting how steadfast he's been because he was one of the original members that told Bernanke, look, we got to chill out and we should taper. And that led to the taper tantrum. And then he had the autopilot communique in December of 2018 that led to a 19% move or 18%.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“SP down 25. So I think they're going to just keep going until SP goes down 25 to break this thing. It was interesting. Sarah Eisen asked Powell in his little communique the other day or their little panel discussion like are you targeting The stock market to go lower, and he bopped around it, but you can see he's sort of jolted back.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Which now is about sixty basis points Now you're not going to see that on the chart because it's an old chart but roughly given what I'm telling you it's 60 roughly 60 basis points so it's positive now”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so effectively, what it is in the black sort of histogram below, that's our internals model, so where the market internals are effectively pricing the tenure rate and where the 30-year rate, excuse me, and where the 30 year rate is. So when you see significant downside deviations in terms of rates being when that black histogram is low, that means rates are lower than where effectively the market internals are pricing 30 or rates. And that has historically happened during periods of QE. So the big, big discounts that you've seen with rates relative to call it banks to utilities, copper to gold, happen during periods of QE. However, periods of QT, you see a material overshoot to the upside. And we've only had really one sort of event so far. And I think we're in the middle of that overshoot to the upside.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“So I'm open to it, and it's definitely something I've thought about and continuously thinking about as it relates to how to structure it and where's like the best part to make these trades. But I think the growth backdrop right now seems so clear to me that it outweighs the QT part, especially given the fact that we have that 60 basis point delta between where we think where the market's pricing 10-year rates and where 10 year rates are today.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Can't put money. You haven't been able to put hide anywhere. And people have been rotating out of bonds into a lot of the defensive sectors. So utilities and staples have gone bananas. Where does that money go now, especially if growth, if I'm right on the growth backdrop, you know, tech continues to get, and now they're knocking off the generals, so tech continues to get hit. I think the money is going to rotate back into bonds and the pain trade is probably likely bonds higher.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“China doing what it's doing if we didn't have such a tight, quick move in a lot of these rates markets, and if we were able to digest this a little easier, then I think 4% is a higher probability than what we've seen in terms of what they've done so far and the swiftness of their moves. I think the swiftness of the moves materially reduces the probability we go to 4%. However, if we did if the actions and what they priced in started earlier and were slower and China was not a factor, then I think 4% could have been in the cards. But given what the market internals are saying right now, look at trucking relative to low vol, all of these things, like banks relative to utilities, high beta to low vol You have to listen to the markets, the markets are saying, look, like growth is slowing fast.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think historically you've seen, and there's only been really one instance, but last time that we did QT, you saw a material overshoot and where rates were from, call it our internals model last time they were roughly 80 basis points in terms of the overshoot from where we saw fair value at the high and right now we're at 60 basis points so I think 4% is difficult. Look, if we didn't have”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Think 10's at 4% would be interesting. If things don't get better on the inflation front, if I'm wrong on the inflation front, then who knows maybe we could go there, but 4% on 10 years would be a wow.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“It really depends what the Fed has indicated so far across the majority of participants is that their sort of neutral rate is two, two and a half. And most of the communication has been that they want to get marginally above that, which call it gets you to 3% to sort of dampen inflation.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Is people's assumption of growth being strong and okay, that leads to higher rates and the Fed moving more aggressively and acting more aggressively and sort of pricing that in. However, if people are recognizing that growth is really slowing and you have a shock on the crude front, that's just a double whammy. So I think the probabilities of the probabilities of that accrued move to 140, 150 leading to the Fed getting more hawkish or much less than they have been prior to the past few weeks.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“I think yes. I think down 25 to 30, there's never been, there's always been a recession when you've been down 30% on the S&P. And just from a, if you look at the relationship of household net worth and consumption, there's an 80% R squared between the two of them. So if the S&P is really getting smoked like that, it's absolutely going to come through the consumption side, which will ultimately affect inflation to the downside. If crude, I think the probabilities of crude going 140, 150 have materially lessened from the beginning of the year when I wrote that. And primarily because of some of the actions that the US has taken, but also on the demand front from China, it just makes it much more, much more difficult to probably attain some of those things. So if crude goes to 140, 150, I think when growth...”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“If you've seen the Chinese industrials really, really taking them on the chin, the market's starting to sniff out China. And I think once the Fed, the market being lower and the Fed starting to recognize that, maybe tamps down their view of where they ultimately get to. I think that's probably 2%, from call it what's priced in like three, three and a half right now. So it's more of just it's not saying that he's not going to hike. It's saying he's not going to get as far as they think they can.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, call another 15 from here. I think if he actualizes what's priced into the curve, you'll be down 30 on S&P given the current backdrop. Assuming nothing changes out of China. Now things change out of China and things get marginally better, but you still have had the largest tightening that we've seen that I've ever seen by far. And that has not come through the numbers yet. That's still, you still have a 12 month runway, minimum 12 month, call it 12-month runway in the US where things should be cycling lower. So I think it's a fair point. He could be even more aggressive, but if they get more aggressive, I think given the backdrop in people's, I think the markets are starting to sniff out China. If you've seen Alcoa, if you've seen some of the copper miners, if you've seen the Brazilian real...”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I would say there's two different markets. One is the priced in for where PAL should go. And two is what he actually does. So his actualization, I think he can get to 2%, no problem by then this year. And they're trying to probably get their ASAP. I think where he ultimately, he's not going to be able to get there because you're going to have an issue in the S&P. And I think his numbers probably down 25 to 30. And if they actualize from the high. So, we're”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“But if the Ved doesn't care about those negative outcomes and continues to tighten monetary conditions and raise rates in the face of a collapse in asset prices or even a recession, just because you deserve to make money because you were right about the economy, won't you still lose money by being long the front end of the yield curve if rates continue to hike up? What do you think will happen that will cause another Powell pivot? Because to me, it seems like we're pretty far away from a Powell pivot where we're only one hike into the cycle and inflation is at 8.5%. What's the risk that you're a little early, Teddy?”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“So, I think the bias for rates, I'm not necessarily talking about tier rates, I'm talking about what's priced in the euro dollar curve. I think it's much lower from here versus higher. So the risk reward is very, very attractive. So those are sort of the most interesting parts. Until the Fed changes its tone on solving inflation, which they should have addressed a while ago. I mean, they have a tough job, so God bless them. It's definitely not a job I'd ever want. But they've been very clear in their messaging that I'm out here to solve this. And by solving for that factor at the exactly the wrong time, it leads to negative, pretty negative outcomes.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“But call it the next three to six months. I think you have downside risk probably to commodities emanating out of China, which I don't think a lot of people have fully grasped yet. As China alone, if they continue the current policy, now that could completely change, they could pivot and say, look, we're done with this. We're going to just juice and really crank credit. But if they continue the current policy, things are not looking great. So you have a situation where growth slowing inflation likely comes in, especially from a year-on-year basis, which I have feeling that will likely change the narrative, especially after it peaks and people just pile in the other way. And that leaves the Fed in a position where they're doing the largest tightening we've seen, which a lot of it's already come through the markets, but actualizing that in the face of those scenarios happening to me seems rather difficult.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“I just illustrated. So you also on the inflation front, if I'm correct in China, and China is a huge issue. And on the commodity side, China's an unbelievably large driver of commodity demand. And that would therefore lead to a softening in commodity prices and therefore some inflation prints. If you look interestingly at sort of steel production and steel inventory, steel inventories are tracking significantly above where they have over the past three years, which to me is effectively saying, look, China's locked down and it's starting to solve some of the supply demand imbalances in a few of these commodities. I'm not saying it solves all of them. And I'm not saying over the longer term that it could go much higher.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Where's priced in now to the Fed, to call it the euro dollar market, three, I think it was $322 yesterday prior to today or two days ago, so it's roughly three percent by the end of this year. And then a few of these options contracts on the 20 on December 2023s are pricing in call it three and a half percent. So I think one of the main trades and one of the things I'm most convicted about is the Fed not getting to 3.5%. Call it 3%, 3.25 by the end of this year. I think if they actualize that, you're going to have a significant move in the equity market, which is sort of why I still think equities are a tough go. I will say though a lot of the equities themselves have re-rated on the multiple front. The multiples aren't as crazy as they were at all previously. So now the next iteration, if we do have a leg down, would likely come from the earnings side. And if you look at some of the earnings estimates, we're still significantly above where our leading indicators would put them in where I think they should trade, given sort of that growth backdrop.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“So 17 now. Okay, so it was up today about a point. Yeah The move to the low from the high over that time frame, or call it the past 30 days, the probability that happening is like 20 basis points. So the move that you've seen is just incredible. Now that move is effectively saying, look, we think growth inflation are going to be crazy strong. And I'm providing scenario where I think that's likely incorrect based on our leading indicators and what the markets are currently telling me. So for me, the long and he's quite attractive here from a growth and inflation perspective. Now, the risk to that are clearly some of the QT things where you've seen overshoots historically on rates from where you would say fair value is. But I think the risk reward on bonds here is very favorable, which I guess leads me more towards the short end as well.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“And a clear growth slowdown. And one of the places that people have not, if you look at the move-in, let's just call it TLT, for example, I believe on the year it was down.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Quite positive in how that transpires. A few things that we're seeing on the inflation front indicate that you should see inflation roll over the next, call it next month and trend lower throughout the end of the year, which I think creates a different dynamic from sort of unanchored inflation. You're going to have some upside on the housing front for the next four to five months, but if you look at some of the leads of housing inflation, it should then peter out. That's going to be offset. However, due to just due to the comps and the base effects of inflation and you're suddenly seeing some of the things that have really driven it on the good side start to fade. And I think those things continue to fade over the next few months. Now there is a scenario where things get crazy with China and things re-accelerate, but that would be in two to three months from now. So in the short term, I think you have an easy on the inflation side.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I think next 12 months growth is moving lower and during negative sort of global growth backdrops, you want to be long bonds relative to call it to stocks. If I look out and sort of envision the world the next six to nine months, it's a much different scenario than 10 years at 2.8%. And if you look at some of the same internals that I was mentioning previously, that we help use to price effectively where rates should trade those things are saying tens at 2.2% from 2.8 today. So it's just a natural function of the market nowadays to overshoot significantly in both ways. And I think we've had a material overshoot to the upside that's been facilitated by the Federal Reserve on this crusade to really dampen inflation. I think they'll ultimately be”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“So, going back to the bond market, starting this year, you were short everything, the two year, the 10 year, the 30 year, everything in between. Now you're essentially long everything. I think I understand why you were long the 10-year and the 30-year because you think inflation will slow radically, you think growth will slow radically because of what's going on in China so oversold. I want to hear more about that position. And then I want to ask a follow-up question about the front end, actually. But tell us a little bit about the long end, the 10-year and the 30-year treasury yield.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“But I think it's very difficult to be quite positive, which may be from the trader's perspective is probably maybe the time you buy it. But for me, the facts have changed until those facts flip in the other way, then it's just, I think it's just a tough risk”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I flipped that recently. The beginning of the year, I came in under the assumption, look, China is now going a leading indicators in China are positive called by the back half of this year. Therefore, you should see critic growth come out of China. A lot of the talk out of China has been quite positive in terms of increasing sort of fixed asset investment and infrastructure. I had to change that view though because the facts changed when they started doing these lockdowns. And the lockdowns are significantly more adverse than the positive potential credit additions that you'll see. We had an inflection, I think, in it now. I think it bottomed already and it should continue higher. But shutting down your economy is materially more powerful.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Own risk assets until a couple variables changed. I think one, the Fed needs to chill. It's clearly, I think this is a policy error. The policy error was them not moving sooner and now having to basically move it's such an incredibly fast rate that the markets aren't going to be able to handle it. To China needs to get their act together regarding COVID. It's really not a good backdrop if they continue their current lockdown sort of situation from a growth perspective. And then I think once those things sort of get solved, then things look much more interesting. And trades to be had after that. But we have from here to there, there's still a decent runway I think that ultimately leads to equities continuing to have a tough go and rates moving lower, not higher.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“The reason there's a huge problem is that China drives 48% of all global GDP growth this year you've got call it IMF at 3.6% for where GDP is going to be on a year-on-year basis at the end of the year. If we assume those old numbers call it 1.8% is from China historically driven If they lock down 40% of their economy think about adding 40% of your economy to GDP. GDP would be absolutely bananas, right? It would be almost 50% higher from the actual numbers. You're now subtracting 40%. So we could actually have just from China alone if they continue this type of policy a negative global growth picture just from China. Then you add in one of the largest heightening cycles we've seen from the United States and you add in the energy picture in Europe and the tightening that's going on in Europe and you have a very precarious situation that's tough to”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Ener Personal consumption Yep, exactly correct. It's still quite small given that personal consumption's gone up, but the move that it's had recently is somewhat alarming and it's not going to help. And then if I'm, I think the supply demand side on crude right now, although this is changing and is pretty fluid, still favors it to the upside. So the energy situation really adversely affecting both the US and specifically Europe. So Europe's in a tough shape. Add on to that, I think the big elephant in the room that not a lot of people have factored in yet is these shutdowns in China. So 40% of China's GDP is effectively locked in right now. Some of it's coming back online slowly, but the question is, okay, is this how they're going to continuously deal with COVID? And if this is continuously how they're going to deal with COVID, then there's a huge problem.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Decline in consumption until we get to call it 2.9, so another 100 basis points. That said, it's not helpful. It's not helpful to have one of your main input costs go higher.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“For yeah, for risk assets, any risk assets, I put crypto in there as well. Until Powell capitulates, now let's add two other factors to this sort of equation that we have here. Russia invades Ukraine, which creates a whole new distribution of supply-side issues for commodities, especially energy, natural gas in Europe and crude oil. This new problem is manifesting itself in Europe, which likely goes into recession given the price of electricity over there. And also domestically in the US, it's really adversely hurt sort of the U.S. consumers. Given that retail gas prices are up, you know, 25 to 30 percent. I still think you have some potential more upside right now. It's 1.9% of PCE, and you haven't seen a material.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Just difficult to say, okay, look, I like risk assets here. If I'm wrong, I don't really care. As I mentioned, we're sort of structured in the options market. So we're not going to lose a lot. But I just think it's probably four down, one up type of thing, maybe three down, one up.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“If you see slow in growth, but you still have inflation, it's Powell's view that it doesn't matter because inflation is still an issue. And you heard more recent comments from him saying, you know, we're no longer going to wait for the supply side to figure itself out to get inflation under control. So he's coming for the throat of inflation, regardless of what's happening on the economic backdrop. So that scenario, if you think about liquidity, markets do very well when there's a lot of positive liquidity. If you think about the, especially crypto, right? Crypto is one of the most liquid positive liquidity correlated assets there is. All of Bitcoin's returns have come during global growth upcycles and recorded cycles. So right now, if you think about liquidity and sort of risk assets, we now have one of the tightest tightenings that we've seen, I think historically.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“By 27 trillion dollars. There was another million people that started their own businesses because the government was effectively financing everyone's balance sheet. So you had a significant amount of people outside the labor force that were holding up the unemployment rate. However, they had jobs or had enough capital to finance themselves and continue consumption at a current rate or even a higher rate. So finally, we get to this point like three or four months ago where the unemployment rate comes down significantly and the Fed's like, oh shit, we need to move. So not only are they moving, they're moving at an incredibly fast rate. And the issue is they're no longer caring about the economy. They've said, I think the most important line that Powell has mentioned is we can't have a strong labor market unless we get inflation under control. That's effectively green lights a recession.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Go lower based on the lead indicators, and it's now sort of being confirmed by the markets. The trucking sector, which is one of the most economically sensitive sectors, is getting absolutely slammed relative to sort of lowball equities, which has historically been a very, very correlated to the ISM also. So you see this monster tightening in the economy, and the Fed I think is, as I talked about at the beginning of 2010,”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Of the largest moves in history. The two year just had on a six month way to change basis, had the biggest move since 1987. You've had the Fed from a rate of change basis go from still buying 100 billion of bonds to effectively rolling off their balance sheet in an incredibly short time. So we've had the fastest tightening cycle in history, especially if you factor in the Fed's balance sheet, which is leading to significantly adverse things in some of the economic data. So if you look at mortgage applications, for example, it's like 50 to 60% off its prior highs. You're starting to see the average sort of credit card spend in a basket of the average spend, point of sale being down materially, which historically is correlated with ISM, ISM New Orders is getting smoked. I think all that stuff continues to”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“All right, so like I mentioned before, we have a pretty serious leading indicator process, and if we look out 12 months from now, it's pretty clear to us that global growth is going to be moving much lower. So you add that with the confirmation now from the markets. If you look at market internals, housing stocks relative to lowball is down 30% from the high, high beta to low beta to low vol is down called 25% financials, relative utilities is down 25%. Consumer discretionary relative to consumer staples is down another 28% from the high. So the internals of the market are telling you that growth is fading fast. And why is this? One, we just had the largest tightening cycle in the history of maybe publicly traded markets. I think the available data that I have, mortgage rates have won.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT
“Relative trade. So Brazil's no longer, we no longer have Brazil on, we are still net short equities, however through the options market and looking for, you know, we can get into it in more detail, but I think the backdrop right now is pretty precarious and difficult to have a positive view on risk assets, which maybe is therefore leads to, you know, okay, maybe you should have a view if that's if it's so tough to be positive. But for me, and we can get into this more in detail, but for me, the Fed needs to walk back their current tone to have any type of positive sort of view on risk assets for the next six to nine months.”
2022-04-28 · Forward Guidance · The “Short Everything” Trade | Teddy Vallee · IDENTIFIED FROM THE TRANSCRIPT