B: Reading your work has been time well spent. It would be helpful to have the spread at the bottom of some of the charts to put the historical differences in context a little easier. I read this on an iPad Pro and it’s difficult to make out the historical context when making comparisons (particularly when the pic has two charts on it). Just a thought...
For example, the 2nd chart from the top. C/d 200 day and 10yr 200d. Personal experience when looking at the chart. After a quick glance of what I’m looking at, I start right, see the spread and then work my way left for the historical comparison. When I go left, I found myself having to really look at it (bringing my head closer to the screen and almost squinting) to see the historical spread and ask myself if I missed any detail as I still looked at it. Looking at the spread, may eliminate that as I can first look right, then look at the spread at the bottom and not have to spend the time doing a deep review of the historical differences of the two lines. Generally, whenever spread or correlation was at the bottom of the charts, it typically was helpful and useful info. That specific chart is a side by side, so when I click on it to enlarge it’s not as big as a single chart. I can zoom in, but think it is just easier with less margin of error as the reader to miss a detail if the spread was at the bottom. B: this is just an opinion of one, not sure what the other readers think. And of course, the experience would be different depending on what the reader is using to read this on.
Charts that have comparisons that have a tight consistent overlap for the entire history, that wouldn’t be useful as it would be obvious. Follow up B if needed. Thanks
Hi, thanks so much for your write-up. I read something like the following on Twitter and wanted your thoughts on it: we are more likely in a sustained cyclical environment vs. a recession, fed pauses, growth outperforms environment. what are your thoughts on the notion of a "sustained cyclical environment" and does that support the case of adding duration risk to long holdings?
thank you for the feedback and question. i'm not going to spend alot of time elaborating on or defending someone else's opinion. i've shared my view reasonably clearly (i think) here and on twitter. see 'tailwinds to headwins', 'peaking profit growth momentum', 'from fed hikes to growth cuts', etc.
i don't know what "sustained cyclical environment" even means. for markets and making money its nonsense b/c we've just experienced one of the largest drawdowns in markets and cyclical/defensive ratio in the last decade...so if you ran with the "sustained" view point you are holding losses right now.
my view on duration is a new one for me and i'd be the first to admit its a little uncomfortable given the noise around me. however, as i suggested i think the market narrative 6mos from now can be quite different and i think that should be more the focus than what's happened in the last 6mos.
i was very bearish on duration from mid-2020 and now don't see the risk/reward the same way. maybe yields rise a bit further, but given my growth outlook and view that inflation momentum is peaking i think the risk/reward favors some long duration exposure in the portfolio. my starting position is Sept TLT call spreads (~30-40 delta) and from a tactical trading standpoint my focus is looking for opportunities to buy treasury futures rather than sell them. i'm not suggesting an "all in" approach to duration at this stage.
hopefully this helps clarify the viewpoint and thought process.
thanks a lot for the timely reply. I've read your prior posts as well, find them of high value. I'm still unclear on what "sustained cyclical environment" could mean. Happy to DM you the source on Twitter. from a fairly reputable person - so worth thinking through even if it's for the sake of an alternative viewpoint. I am clear on your views but I like to compare a few different ones before formulating my own vs. just basing it on yours b/c everything is so clearly stated, so please don't take offense to my question on somebody else's thoughts on your blog post.
no problem or offense taken in the slightest. i just can’t spend time trying to clarify everyone else’s view/position…wouldn’t leave much time evaluating my own which i hold in higher standards. i could very well be wrong, but will be wrong on my own merit which is always easier to bounce back from.
fair enough and thanks again for your thoughts. i only asked about that specifically b/c I noticed some overlap b/t your views and that persons, i.e. adding more duration risk
Thank you Mr Blonde as always. Excellent and cleverly thought out comments. I really respect the software vs. semis component as a pair trade as I had been racking my brains for another pair trade during this cyclical shift. Ran some data and it makes perfect sense. I've said it before but these articles are worth more than 90% of sell and buy side research out there and I really do commend you for having this out there for free. When you do decide to put this behind a pay wall, I'd like you to know you definitely have a willing subscriber here
Mr. Blonde thanks for excellent analysis. Regarding table where you conclude that equity vig. gen'l win over bond vig. and suggest duration exposure may be at hand. I'm squinting at the table of subsequent change in 10 yr. yield and if you draw a horizontal line dividing the table into two sections at the boundary between 1981 and 1984 I believe that divides the era into two regimes obviously the inflationary regime that existed from your 1969 thru 1981 data (actually CPI peaked probably a few years later), AND, the more disinflationary period following Volker from 1984 to present. Anyway, dividing your table in two (inflationary 1969-1981, disinflationary 1984-2020) it looks to me like the behavior of the 10 yr. yield flips between the two regimes. For instance, in the inflationary regime 14 out of 20 table elements, representing varying period lengths reveal higher 10 yr. ylds. Whereas, in the disinflationary years, 16 out of 20 instances reveal lower 10 yr. ylds. in response to cyclical slowdown. Just sayin, maybe if inflation is sticky from here, correlation flips again? Just a thought?
good observation, makes good sense and is a possible outcome. i'd only say that even during the scary 1970s when y/y inflation fell so did 10yr yields. i'm also not convinced that today's environment is really like the 1970s other than inflation sentiment....$ stronger, debt higher, no labor unions, etc. time will tell, thanks for the comment and feedback.
Mr G has been around the block for so many yrs it’s funny. Today, his Family team supports all his many mistakes. 😂
That said, he no longer wastes time w/ IB sell side research.
Having the gift of triage Mr G has come across Mr. Blonde on TWITTER who’s research & thought process, when applied in practice to portfolios ( in our case global) can be incremental ONLY, when followed carefully.
PS! We ( I) don’t know him.
Whether adding long duration to the portfolio idea or, falling manufacturing PMI view or the nuanced view on inflation as relates to the RED political wave about to take place end of this year in the US, valuations are about to take a front seat in this epic real time financial movie!
CAPITULATION?
Not by a long shot.
S&P 3570 would be a FABULOUS 5yr opportunity as much as it might test nerves for for all of those around & holding 1st class quality growth names during this process.
No one knows, time, date & bottoming out.
Who said - what hurts can only make you stronger if only you survive …. Indeed THRIVE 🙏
Excellent work as always Mr Blonde thank you for documenting and sharing your insights...at what point to Semiconductors become investable they’ve been absolutely crushed and I’d hate to miss the entry back up....?
semis are a classic “early cyclical” and do best in early stages of recovery. beat to wait until ISM falls to 50, evaluate how much further it might fall, and be prepared to buy semis for outperformance as part of the recovery trade. if i had to guess on timing i’d say 4q22 at the earliest, but 1q23 maybe more likely
Dear Mr. Blonde. Firstly, Thank You! Secondly, fwiw I and I am 100% I am not alone here, I and others would gladly pay a $ premium to hear your thoughts. Thank you again.
B: Reading your work has been time well spent. It would be helpful to have the spread at the bottom of some of the charts to put the historical differences in context a little easier. I read this on an iPad Pro and it’s difficult to make out the historical context when making comparisons (particularly when the pic has two charts on it). Just a thought...
thank you for the feedback. so i understand and can improve, what “spread” would you like to see? are you referencing a specific chart?
For example, the 2nd chart from the top. C/d 200 day and 10yr 200d. Personal experience when looking at the chart. After a quick glance of what I’m looking at, I start right, see the spread and then work my way left for the historical comparison. When I go left, I found myself having to really look at it (bringing my head closer to the screen and almost squinting) to see the historical spread and ask myself if I missed any detail as I still looked at it. Looking at the spread, may eliminate that as I can first look right, then look at the spread at the bottom and not have to spend the time doing a deep review of the historical differences of the two lines. Generally, whenever spread or correlation was at the bottom of the charts, it typically was helpful and useful info. That specific chart is a side by side, so when I click on it to enlarge it’s not as big as a single chart. I can zoom in, but think it is just easier with less margin of error as the reader to miss a detail if the spread was at the bottom. B: this is just an opinion of one, not sure what the other readers think. And of course, the experience would be different depending on what the reader is using to read this on.
Charts that have comparisons that have a tight consistent overlap for the entire history, that wouldn’t be useful as it would be obvious. Follow up B if needed. Thanks
Hi, thanks so much for your write-up. I read something like the following on Twitter and wanted your thoughts on it: we are more likely in a sustained cyclical environment vs. a recession, fed pauses, growth outperforms environment. what are your thoughts on the notion of a "sustained cyclical environment" and does that support the case of adding duration risk to long holdings?
thank you for the feedback and question. i'm not going to spend alot of time elaborating on or defending someone else's opinion. i've shared my view reasonably clearly (i think) here and on twitter. see 'tailwinds to headwins', 'peaking profit growth momentum', 'from fed hikes to growth cuts', etc.
i don't know what "sustained cyclical environment" even means. for markets and making money its nonsense b/c we've just experienced one of the largest drawdowns in markets and cyclical/defensive ratio in the last decade...so if you ran with the "sustained" view point you are holding losses right now.
my view on duration is a new one for me and i'd be the first to admit its a little uncomfortable given the noise around me. however, as i suggested i think the market narrative 6mos from now can be quite different and i think that should be more the focus than what's happened in the last 6mos.
i was very bearish on duration from mid-2020 and now don't see the risk/reward the same way. maybe yields rise a bit further, but given my growth outlook and view that inflation momentum is peaking i think the risk/reward favors some long duration exposure in the portfolio. my starting position is Sept TLT call spreads (~30-40 delta) and from a tactical trading standpoint my focus is looking for opportunities to buy treasury futures rather than sell them. i'm not suggesting an "all in" approach to duration at this stage.
hopefully this helps clarify the viewpoint and thought process.
thanks a lot for the timely reply. I've read your prior posts as well, find them of high value. I'm still unclear on what "sustained cyclical environment" could mean. Happy to DM you the source on Twitter. from a fairly reputable person - so worth thinking through even if it's for the sake of an alternative viewpoint. I am clear on your views but I like to compare a few different ones before formulating my own vs. just basing it on yours b/c everything is so clearly stated, so please don't take offense to my question on somebody else's thoughts on your blog post.
no problem or offense taken in the slightest. i just can’t spend time trying to clarify everyone else’s view/position…wouldn’t leave much time evaluating my own which i hold in higher standards. i could very well be wrong, but will be wrong on my own merit which is always easier to bounce back from.
will check out your message, thx
fair enough and thanks again for your thoughts. i only asked about that specifically b/c I noticed some overlap b/t your views and that persons, i.e. adding more duration risk
Thank you Mr Blonde as always. Excellent and cleverly thought out comments. I really respect the software vs. semis component as a pair trade as I had been racking my brains for another pair trade during this cyclical shift. Ran some data and it makes perfect sense. I've said it before but these articles are worth more than 90% of sell and buy side research out there and I really do commend you for having this out there for free. When you do decide to put this behind a pay wall, I'd like you to know you definitely have a willing subscriber here
thank you for the feedback Danny, really glad to hear the work/insight is appreciated. its motivating. best of luck
Mr. Blonde thanks for excellent analysis. Regarding table where you conclude that equity vig. gen'l win over bond vig. and suggest duration exposure may be at hand. I'm squinting at the table of subsequent change in 10 yr. yield and if you draw a horizontal line dividing the table into two sections at the boundary between 1981 and 1984 I believe that divides the era into two regimes obviously the inflationary regime that existed from your 1969 thru 1981 data (actually CPI peaked probably a few years later), AND, the more disinflationary period following Volker from 1984 to present. Anyway, dividing your table in two (inflationary 1969-1981, disinflationary 1984-2020) it looks to me like the behavior of the 10 yr. yield flips between the two regimes. For instance, in the inflationary regime 14 out of 20 table elements, representing varying period lengths reveal higher 10 yr. ylds. Whereas, in the disinflationary years, 16 out of 20 instances reveal lower 10 yr. ylds. in response to cyclical slowdown. Just sayin, maybe if inflation is sticky from here, correlation flips again? Just a thought?
good observation, makes good sense and is a possible outcome. i'd only say that even during the scary 1970s when y/y inflation fell so did 10yr yields. i'm also not convinced that today's environment is really like the 1970s other than inflation sentiment....$ stronger, debt higher, no labor unions, etc. time will tell, thanks for the comment and feedback.
https://twitter.com/MrBlonde_macro/status/1518642587501953025?s=20&t=iiW_szj6Cj-XwuzYWokB3Q
Mr G has been around the block for so many yrs it’s funny. Today, his Family team supports all his many mistakes. 😂
That said, he no longer wastes time w/ IB sell side research.
Having the gift of triage Mr G has come across Mr. Blonde on TWITTER who’s research & thought process, when applied in practice to portfolios ( in our case global) can be incremental ONLY, when followed carefully.
PS! We ( I) don’t know him.
Whether adding long duration to the portfolio idea or, falling manufacturing PMI view or the nuanced view on inflation as relates to the RED political wave about to take place end of this year in the US, valuations are about to take a front seat in this epic real time financial movie!
CAPITULATION?
Not by a long shot.
S&P 3570 would be a FABULOUS 5yr opportunity as much as it might test nerves for for all of those around & holding 1st class quality growth names during this process.
No one knows, time, date & bottoming out.
Who said - what hurts can only make you stronger if only you survive …. Indeed THRIVE 🙏
Excellent feedback Mr Blonde 🎯👊👍
Second the excellent research and actionable ideas. Really is very impressive. Good to see somebody (Mr G) giving out compliments where they are due.
Excellent work as always Mr Blonde thank you for documenting and sharing your insights...at what point to Semiconductors become investable they’ve been absolutely crushed and I’d hate to miss the entry back up....?
semis are a classic “early cyclical” and do best in early stages of recovery. beat to wait until ISM falls to 50, evaluate how much further it might fall, and be prepared to buy semis for outperformance as part of the recovery trade. if i had to guess on timing i’d say 4q22 at the earliest, but 1q23 maybe more likely
Dang thanks so much hard to wait but I must be patient thanks again for all you do MB
Dear Mr. Blonde. Firstly, Thank You! Secondly, fwiw I and I am 100% I am not alone here, I and others would gladly pay a $ premium to hear your thoughts. Thank you again.
thank you michael this is very flattering feedback. that time will come, but for now save your money and enjoy the content
Cheers Mr Blonde, always a pleasure to read your thoughts.
Excellent summary and view on the markets. Keep it up!!