We’re changing our tune a bit here at KEDM. After spending years alone in the desert thinking that Fiscal trumps everything else, and laughing at all the recession lunatics who were shorting at the lows in 2022, we now feel that our desert island is getting a bit crowded. Too many Macro bros suddenly agree with us. Inflation always causes bifurcation and a lower overall standard of living. For the first time since the lows in 2020, we think that things may actually be deteriorating a bit in the economy, particularly for the bottom 1/3 of consumers. We know that once this starts, it gets worse. It is said that termites eat upwards from the bottom of a CDO’s cap structure, and the same goes for the living standards of a nation’s population. It starts with the peasants, but soon, the middle class also feels the pinch. The signs are there, all sorts of retailers have been missing Q1 numbers. Casinos, reporting more real-time monthly data, are having a rough Q2. And you know it’s bad when tech bros start cutting back on their SAAS spending.
Of course, during an inflation, particularly an asset one, the top 5% do just fine, with the 0.1% having the best of it. Everyone else sort of gets shredded. Though, this will only play out in slow motion as so many Americans own their own homes.
We’re not calling for a crash. Rather, we see all sorts of sectors that are starting to experience headwinds—a slowdown if you will. We see financial products starting to detonate and that’s usually the cue. We think it’s time to cut back. Last week’s theme at KEDM was ‘harvest season.’ We keep harvesting non-core and illiquid positions. Want to high-grade the book. Summers tend to be violently sideways, and we don’t want to get whipped around. Meanwhile, these coming US elections look to be an absolute klusterfuk.
Our plan is to cut back, and then go on vacation. We want to come back in October, fresh in mind and ready to play whatever chaos there is during the elections. By then, we think the consumer economy will be leaking more obviously, and there will be an actual trend to things. We think certain sectors are going to be more immune to this, maybe even pro-cyclical. We plan to stay long inflation, and chaos. Most of the rest of it is a sale…
We know they’re going to have to stimulate at some point, but there’s also a coming fiscal crisis, and a duration crisis. How do you print into a bond market that’s going no-bid??
Kuppy’s Event Driven Monitor (“KEDM”) is not a financial or investment advisor and the information contained in this publication is not intended to constitute legal, accounting, or text advice or individually-tailored investment advice and is not designed to meet your personal financial situation. The investments discussed in this publication may not be suitable for you. You are required to conduct your own due diligence, analyses, draw your own conclusions, and make your own investment decisions. Any areas concerning legal, accounting, or tax advice or individually-tailored investment advice should be referred to your lawyers, accountants, tax advisors, investment advisers, or other professionals registered or otherwise authorized to provide such advice. KEDM makes no recommendations whatsoever regarding buying, selling, or holding a specified security, a class of securities, or the securities of a class of issuers, and all commentary is for educational purposes only. The investment examples noted are intended to provide and example of the events and data KEDM flags each week and is not representative of typical returns generated by each event or any future returns.
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Times Are A Changin’….
A low frequency but juicy strategy where the edge is government incompetence.
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We’re changing our tune a bit here at KEDM. After spending years alone in the desert thinking that Fiscal trumps everything else, and laughing at all the recession lunatics who were shorting at the lows in 2022, we now feel that our desert island is getting a bit crowded. Too many Macro bros suddenly agree with us. Inflation always causes bifurcation and a lower overall standard of living. For the first time since the lows in 2020, we think that things may actually be deteriorating a bit in the economy, particularly for the bottom 1/3 of consumers. We know that once this starts, it gets worse. It is said that termites eat upwards from the bottom of a CDO’s cap structure, and the same goes for the living standards of a nation’s population. It starts with the peasants, but soon, the middle class also feels the pinch. The signs are there, all sorts of retailers have been missing Q1 numbers. Casinos, reporting more real-time monthly data, are having a rough Q2. And you know it’s bad when tech bros start cutting back on their SAAS spending.
Of course, during an inflation, particularly an asset one, the top 5% do just fine, with the 0.1% having the best of it. Everyone else sort of gets shredded. Though, this will only play out in slow motion as so many Americans own their own homes.
We’re not calling for a crash. Rather, we see all sorts of sectors that are starting to experience headwinds—a slowdown if you will. We see financial products starting to detonate and that’s usually the cue. We think it’s time to cut back. Last week’s theme at KEDM was ‘harvest season.’ We keep harvesting non-core and illiquid positions. Want to high-grade the book. Summers tend to be violently sideways, and we don’t want to get whipped around. Meanwhile, these coming US elections look to be an absolute klusterfuk.
Our plan is to cut back, and then go on vacation. We want to come back in October, fresh in mind and ready to play whatever chaos there is during the elections. By then, we think the consumer economy will be leaking more obviously, and there will be an actual trend to things. We think certain sectors are going to be more immune to this, maybe even pro-cyclical. We plan to stay long inflation, and chaos. Most of the rest of it is a sale…
We know they’re going to have to stimulate at some point, but there’s also a coming fiscal crisis, and a duration crisis. How do you print into a bond market that’s going no-bid??
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Kuppy’s Event Driven Monitor (“KEDM”) is not a financial or investment advisor and the information contained in this publication is not intended to constitute legal, accounting, or text advice or individually-tailored investment advice and is not designed to meet your personal financial situation. The investments discussed in this publication may not be suitable for you. You are required to conduct your own due diligence, analyses, draw your own conclusions, and make your own investment decisions. Any areas concerning legal, accounting, or tax advice or individually-tailored investment advice should be referred to your lawyers, accountants, tax advisors, investment advisers, or other professionals registered or otherwise authorized to provide such advice. KEDM makes no recommendations whatsoever regarding buying, selling, or holding a specified security, a class of securities, or the securities of a class of issuers, and all commentary is for educational purposes only. The investment examples noted are intended to provide and example of the events and data KEDM flags each week and is not representative of typical returns generated by each event or any future returns.