More Gonzo Macro
I’m still having fun. Playing with ChatGPT. Feeding it my classic Eclectica investment letters. Those from 2007 read particularly like today.
I’m asking the AI poodle to elucidate my old letters with a good dose of Hunter S Thompson attitude
Gonzo Macro 😎 I then double down with a thick veneer of Acid Capitalism. Making more poetry.
Crazy at first sighting but probably smarter than most of what you’ll read today. Chart is $IAI and is the US Broker Dealer index. If that sucker breaks to the downside...
Let's go !
Man, let me tell you, there's a freakin' circus going on in the U.S. economy, and we're right in the middle of it. It's this wild acid trip where we're all just waiting for the big, bad recession to rip and show us its ugly face. We know it's lurking, we just don't know when the hell is it gonna strike ?
Today, the money game is tripping and we’re passing through some crazy sluice gates on the way down to financial hell.
The Fed's been goofing with their rates, the 2-year Ts have been yielding more than the 10s for a while now. Inversions, they say, cast ominous shades over the outcome of all of our tomorrows.
The idea of a choke point has been supporting the markets, got them wet dreaming of a girl called Goldilocks. Fed's gonna choke, Fed's our friend, not foe …Fed cut coming and stocks gonna go Lucy in the Sky with Diamonds
I don’t know, man…
The private equity folks been faking it so long, dolling out the quaaludes everywhere. Hoping no one might notice their fudge-terfuge. Their marks are out-of-sight
But here's the kicker - high asset prices are keeping the Feds nervous. Got them gripping their elevated rates promise even tighter, vowing not to let go, threatening to be loutish for longer...
Imagine, the Fed as the Grim Reaper ?
I got some form. I checked. And every time the market takes a major nosedive, it's preceded by a year or two of the financial sector getting its butt kicked.
You know the U.S. Broker Dealer Index, that chart above, it hit its peak way back in January 2006. This time round, it peaked in late 2021.
And then we've got this mortgage madness. We got no transactions. The good folk can’t take their mortgages with them. They can’t sell their houses. Interest rates should have been slashed already. If it stays like this for longer, prices are gonna come tumbling down
But it gets weirder. They call it 'the big leverage swap.' In the '90s, it was pension funds coming to own all the leverage in listed companies, think telecoms
But now, culminating in '21, it's been private equity and hedge funds leveraging to buy leveraged companies, and their big investors ? Yeah, those pension ballers again betting on lower rates. Stay lucky or stay smart, sounds like only one side of the coin...
And because there’s only 7 funky stocks left rising, the other divas are diving back into debt, buying back their own stock, inflating the shit out of the market even more. Stocks ain’t never been so ugly versus the return from bonds
Here's the punchline - the corporate world is depending on crazy cats like you and me to keep on spending like there's no tomorrow.
The profit cycle is hitched to the precarious degenerates of our community...
But as the banks start pulling the plug on those dicey commercial mortgages and credit cards march gaily over the default cliff once more, another big reset is surely coming.
Brace,
Brace yourself
We’re going down
Staring at another wild deflationary ride.
The economic roulette wheel is spinning
Buckle up!