The massive rise in food and energy prices have caused an enormous tightening of financial conditions, along with the liquidity issues of de-platforming Russia. The 2/10’s swaps curve is at 15bps and will hit zero soon, showing how tight conditions really are. 1/
The odds of rate hikes are falling fast because hiking rates into a supply shock just exacerbates what is likely to become a global recession as the Russia situation will not get solved fast. Demand will erode fast at these prices too.
Europe is now in a hot mess. I think there is a decent chance of MMT style handouts to cover food and energy costs. This could be a global thing. It was the new trick that the governments and CB’s learned in 2020. How else do they deal with the obliteration of household finances?
I think it also accelerates green energy commitment, a global deal with Iran and a shift towards Morocco (manufacturing) and Algeria (gas) as regional further splinter into more regionalised supply chains they can control easier (I.e not Russia or China)
The right trades here remain gold and crypto (no one’s liability), bonds and dollars. One sniff of a change in CB’s use of balance sheet and crypto explodes again but patience required.
The entire set up is very similar to March 2020 for crypto. Let’s see if it makes a new low
The entire set up is very similar to March 2020 for crypto. Let’s see if it makes a new low
But traditional recession trades outside of crypto will be very very useful.
No one owns enough bonds and gold. Dollars will get trickier soon as the Fed start the global swap line spigot.
Good luck out there. These are dark times.
No one owns enough bonds and gold. Dollars will get trickier soon as the Fed start the global swap line spigot.
Good luck out there. These are dark times.
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