I historically represent dumb money, buy-and-hold... am trying to learn, so many thanks for your well-written pieces that have both action items and transparent thought processes.
One question if I may: is it just me or is this a very fast moving cycle? Just given what I've read from you and others regarding regime changes from a macro perspective, it seems as though we are moving rapidly through the various phases, but that could simply be a function of my lack of personal experience in "feeling" the rapidity of prior cycles.
Well written, straight to the points comment as per usual Mr. Blonde. Thank you. I agree with most of the colour, but would also add that I believe shorts should include materials sectors, specifically base metals because of the inventory builds and overall street consensus to the long side as a knee jerk to the current Ukraine situation and longer term look to EV's. Suppose many can't handle the volatility or mark down to portfolios there though. Those shorts pay for the long's in high quality growth in niche areas, like Optical cables. Really hard to see any other sectors that would allow decent sleep over the next 3 months.
Thank you very much. Is this environment from inflation moving towards recession not a good environment for gold? Especially the Royalty and Streamers which offer inflation protection as well? Main stream financial advisors (like you?) do not seem to recognise this, so maybe I am wrong and long.... Thank you again.
thanks Wouter, i don't know enough about this space to have a strong opinion, but agree assets with variable current income streams should be better positioned.
Feel to be blessed to read posts like yours Blonde...keep it coming..! What do you think about Larry Summers call that feds rate to be raised to 3-4% due to sticky inflation rates? I guess your long call on bonds based on your thinking that inflation be peaked but Larry sees we are in wage-price spirals that it will be up high for quite a long time...! I guess bond longs will pay off if hold onto for sometimes but yields should be biased upward all this year...besides seasonality effects, do you think we already saw peaks in bond yields (long ends >10yrs) fundamentally? Thanks Blonde God bless you!
larry has had a good/right call so far. i think inflation momentum peaking and weaker than expected growth trends can change the narrative quite a bit in the next 6mos. nothing like fear of recession to reflexively change perception and outlook of inflation.
overall, this cycle we should expect more volatility...both up and down...a bit more like the 1970-80s boom/bust cycles. so perhaps the inflationistas are right about the long term trends, but on a down move we can see many inflation trades reprice lower first.
i think a very good chance we've seen the peak in bond yields for at least the next 12mos...similar to this time last year actually despite a backdrop that was far more favorable to rising yields.
Thank you for reply :) I guess only thing that holds me back in going long on bonds is just May FOMC / QT announcement -- worry of taking bond yields to another level high once again... but I am pretty much with all your thinking that yields cannot be going yolo with growth momentum heading South...! I think it has been a head scratcher for me that equities ignoring bond market tantrum all this quarter but do you think equity corrects from here once yields fall? because unlike 20-22 where low yields = equity rally, this time yields falls due to growth concerns?
i think alot of tightening and QT expectations have been priced...hence inverted yield curves. see the second set of charts above...notice macro growth composite vs. 10yr yield relative to its 12m avg....a meaningful divergence with yields higher in the face of growth slower. i think this reflects that hawkish pricing and inflation concern but does not yet reflect growth concerns. as always...having a view on markets requires some judgement.
my long duration position is primarily in TLT call spreads with Sept time frame to give my view some time to play out and position is limited loss exposure. i will also tactically trade TY or US futures and instruments like TMF on the long side, but may not hold those positions for more than short periods of time. hopefully that helps give more context.
agree...SPX is difficult to beat it is well constructed diversified index across styles and sectors. maybe more interesting to think about what to REMOVE from SPX rather than what to own instead. i spend alot of time on shorts while my core long exposure represents high quality growth that would be comparable to SPX+. discussed more here: https://stuckinthemiddle.substack.com/p/compounding-quality?s=w
i'm not a fan of specific targets, but think 30yr could fall ~50bps...with a probability distribution that i see as more likely to fall than rise given points above.
Great post. I always enjoy and appreciate your insights. Nice to read your views on rates too after such a messy Q1 in that class. Any thoughts on energy and industrial metals? I understand they are cyclical and a slowdown is underway, but the narrative around structural supply imbalances that will take months/years to iron out seems pretty compelling and supportive going forward, no?
if supply chains are so broken how is it that real retail inventories are so far above trend? how did we managed to import more consumer goods over the last 18mos than any period in the last 30yrs? supply chains stressed because we over stimulated…which will fade. sure production will be redistributed as globalization unwinds…but it’s redistribution not new demand. in 6-12mo time frame the business/profit cycle dominates these longer term narratives/trends IMO
Oh, I agree completely about retail inventories. My question was specifically about energy/commodities and what appears to be long-term structural deficits due to under-development. Wondering if these will be resilient even in light of the business cycle.
BTW, Barron's just put out a note to buy homebuilder stocks, which confirms your short is the way to go. Lol.
Am too old to trade or, more accurately stated, I’ve burnt both hands & feet chasing momentum & timing value over the years.
Long term cycles since I’ve been at this ( mid 80s) always include growth or lack thereof and inflation ( either too hot or too cold). And, you hammered it by using the adage of don’t fit the Fed. It’s a losers game that I can sing a long song about.😏
It dawned on me about 10yrs ago, after losing my shirt & a few other pieces of wardrobe in the 2000 crash that, focusing on high quality growth names that have been around for that past 50-60-70 yrs ( including World War II ) are a pretty good way to sleep & make money over time. Payouts included. You’ll probably laugh when I say Nestle, Lindt u Sprungli here in CH, Estée Lauder, L’Oreal here in EU land, tech names in the US like Microsoft, Google, Apple et cetera and, others just to mention a few still combine double digit compound growth and sport defensive characteristics that just can’t be overlooked.
I like the stuff you do. And read it carefully. Thank you for your Twitter space.
i agree bob. my core long positions are similar...high quality growth compounders. like any other investment they can go through periods of being out of favor or they get 'expensive' as most good businesses do, but if you can manage to hang on and carry the risk they will reward you over time. for me, i carry the risk by being smart about the cycle and having the right shorts to manage the volatility of those longs. think sometimes people forget that the tortoise won the race.
Excellent writing!!! It’s a pleasure to read ❤️🙏
great to hear yogi, glad you appreciate the work
I historically represent dumb money, buy-and-hold... am trying to learn, so many thanks for your well-written pieces that have both action items and transparent thought processes.
One question if I may: is it just me or is this a very fast moving cycle? Just given what I've read from you and others regarding regime changes from a macro perspective, it seems as though we are moving rapidly through the various phases, but that could simply be a function of my lack of personal experience in "feeling" the rapidity of prior cycles.
Well written, straight to the points comment as per usual Mr. Blonde. Thank you. I agree with most of the colour, but would also add that I believe shorts should include materials sectors, specifically base metals because of the inventory builds and overall street consensus to the long side as a knee jerk to the current Ukraine situation and longer term look to EV's. Suppose many can't handle the volatility or mark down to portfolios there though. Those shorts pay for the long's in high quality growth in niche areas, like Optical cables. Really hard to see any other sectors that would allow decent sleep over the next 3 months.
thanks for feedback Danny
Thank you very much. Is this environment from inflation moving towards recession not a good environment for gold? Especially the Royalty and Streamers which offer inflation protection as well? Main stream financial advisors (like you?) do not seem to recognise this, so maybe I am wrong and long.... Thank you again.
thanks Wouter, i don't know enough about this space to have a strong opinion, but agree assets with variable current income streams should be better positioned.
Feel to be blessed to read posts like yours Blonde...keep it coming..! What do you think about Larry Summers call that feds rate to be raised to 3-4% due to sticky inflation rates? I guess your long call on bonds based on your thinking that inflation be peaked but Larry sees we are in wage-price spirals that it will be up high for quite a long time...! I guess bond longs will pay off if hold onto for sometimes but yields should be biased upward all this year...besides seasonality effects, do you think we already saw peaks in bond yields (long ends >10yrs) fundamentally? Thanks Blonde God bless you!
larry has had a good/right call so far. i think inflation momentum peaking and weaker than expected growth trends can change the narrative quite a bit in the next 6mos. nothing like fear of recession to reflexively change perception and outlook of inflation.
overall, this cycle we should expect more volatility...both up and down...a bit more like the 1970-80s boom/bust cycles. so perhaps the inflationistas are right about the long term trends, but on a down move we can see many inflation trades reprice lower first.
i think a very good chance we've seen the peak in bond yields for at least the next 12mos...similar to this time last year actually despite a backdrop that was far more favorable to rising yields.
Thank you for reply :) I guess only thing that holds me back in going long on bonds is just May FOMC / QT announcement -- worry of taking bond yields to another level high once again... but I am pretty much with all your thinking that yields cannot be going yolo with growth momentum heading South...! I think it has been a head scratcher for me that equities ignoring bond market tantrum all this quarter but do you think equity corrects from here once yields fall? because unlike 20-22 where low yields = equity rally, this time yields falls due to growth concerns?
i think alot of tightening and QT expectations have been priced...hence inverted yield curves. see the second set of charts above...notice macro growth composite vs. 10yr yield relative to its 12m avg....a meaningful divergence with yields higher in the face of growth slower. i think this reflects that hawkish pricing and inflation concern but does not yet reflect growth concerns. as always...having a view on markets requires some judgement.
my long duration position is primarily in TLT call spreads with Sept time frame to give my view some time to play out and position is limited loss exposure. i will also tactically trade TY or US futures and instruments like TMF on the long side, but may not hold those positions for more than short periods of time. hopefully that helps give more context.
Why bother with individual names when the sp5 index delivers ? What would a price target be for a $TLT trade ?
agree...SPX is difficult to beat it is well constructed diversified index across styles and sectors. maybe more interesting to think about what to REMOVE from SPX rather than what to own instead. i spend alot of time on shorts while my core long exposure represents high quality growth that would be comparable to SPX+. discussed more here: https://stuckinthemiddle.substack.com/p/compounding-quality?s=w
i'm not a fan of specific targets, but think 30yr could fall ~50bps...with a probability distribution that i see as more likely to fall than rise given points above.
Great post. I always enjoy and appreciate your insights. Nice to read your views on rates too after such a messy Q1 in that class. Any thoughts on energy and industrial metals? I understand they are cyclical and a slowdown is underway, but the narrative around structural supply imbalances that will take months/years to iron out seems pretty compelling and supportive going forward, no?
thanks for sharing thoughts and your feedback.
if supply chains are so broken how is it that real retail inventories are so far above trend? how did we managed to import more consumer goods over the last 18mos than any period in the last 30yrs? supply chains stressed because we over stimulated…which will fade. sure production will be redistributed as globalization unwinds…but it’s redistribution not new demand. in 6-12mo time frame the business/profit cycle dominates these longer term narratives/trends IMO
Oh, I agree completely about retail inventories. My question was specifically about energy/commodities and what appears to be long-term structural deficits due to under-development. Wondering if these will be resilient even in light of the business cycle.
BTW, Barron's just put out a note to buy homebuilder stocks, which confirms your short is the way to go. Lol.
U do a good job. Key is to remain healthy above all so you can enjoy all the fruits of your labor 🙏👊
Am too old to trade or, more accurately stated, I’ve burnt both hands & feet chasing momentum & timing value over the years.
Long term cycles since I’ve been at this ( mid 80s) always include growth or lack thereof and inflation ( either too hot or too cold). And, you hammered it by using the adage of don’t fit the Fed. It’s a losers game that I can sing a long song about.😏
It dawned on me about 10yrs ago, after losing my shirt & a few other pieces of wardrobe in the 2000 crash that, focusing on high quality growth names that have been around for that past 50-60-70 yrs ( including World War II ) are a pretty good way to sleep & make money over time. Payouts included. You’ll probably laugh when I say Nestle, Lindt u Sprungli here in CH, Estée Lauder, L’Oreal here in EU land, tech names in the US like Microsoft, Google, Apple et cetera and, others just to mention a few still combine double digit compound growth and sport defensive characteristics that just can’t be overlooked.
I like the stuff you do. And read it carefully. Thank you for your Twitter space.
i agree bob. my core long positions are similar...high quality growth compounders. like any other investment they can go through periods of being out of favor or they get 'expensive' as most good businesses do, but if you can manage to hang on and carry the risk they will reward you over time. for me, i carry the risk by being smart about the cycle and having the right shorts to manage the volatility of those longs. think sometimes people forget that the tortoise won the race.
Lovely stuff as always 👏