5 Burst results for "Paulo Macro"
The Breakdown
"paulo macro" Discussed on The Breakdown
"Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Thursday, August 10th, and today we are talking about Coinbase's attempt to bring the world on chain. Before we get into that, however, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends. Well, as you heard from that introduction today, we are talking about Coinbase's base layer two. Day one was yesterday. But before we do that, we need to do a little check in on CPI. Today was CPI day, and this is always a good chance to get a gut level sense for where the macro is at the moment. And of course, to get a gut level sense of the macro or specifically the Fed's part in the macro, there's perhaps no one that markets listen to more than Nick Timiros, the chief economics correspondent at The Wall Street Journal, who is widely seen as having the most direct line to the Fed. A couple days ago, he tweeted, Wall Street forecasters expect the July CPI to show the headline and core indices rose 0.2% each from June. That would lower the 12 month core CPI to 4.7% from 4.8% in June, while boosting the headline index to 3.3% from 3.0% in June. Now, given that the markets really started to consolidate around this prediction, a lot of the discussion was not so much about what the numbers would be, but what the anticipated slight increase in inflation would represent from a narrative interpretation standpoint. The Kobayisi letter wrote, the fight against inflation is about to get really interesting. Inflation is set to begin rising again just as a Fed pause is expected. This is why the Fed is leaving all possibilities on the table. The fight against inflation continues. While the Fed's work seems to be near its end, the next few months will be interesting. It's never as simple as just raise rates and lower them later. Paulo Macro tweeted, if CPI comes in soft this morning, lots of bros think the curve flattens and rates fall. They are all backwards. The second grade inflation wave is already underway, and the Fed pause on falling core is going to detonate the long end. Another big dimension of the story is the China deflation showing up as we had discussed yesterday. Finance a lot tweeted, counterintuitive opinion. If CPI comes in slightly hot tomorrow, they'll use that as a bullish narrative to quote unquote prove the US economy is resilient in the face of Chinese deflation. What the talking heads won't tell the public is unlike previous recessions, this one starts in China. Now, whether finance a lot is wrong or right, one thing that is interesting to note is that we haven't really had a recession for a very long time that wasn't started by a financial crisis. Instead, right now, it appears if we got one, it would be led by a manufacturing drop off. We're just not used to that anymore, and so we don't necessarily know how to interpret it. In any case, there is definitely a sense of impending volatility coming down the line. Macro commentator Fei Jiao wrote, why I think resolution is now on the horizon as the summer begins to reach an end. CPI bottomed last month, and the base effects are about to get worse for the next, while making it harder to beat moving forward. Energy is bouncing here and will make headline CPI harder to overcome. The Bank of Japan is trying to unwind yield curve control now, which is complicated but could basically lead to dollar strength and higher yields, both negative for risk assets.
The Breakdown
A highlight from Will Coinbase's Launch of BASE Ignite the Crypto Builders?
"Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Thursday, August 10th, and today we are talking about Coinbase's attempt to bring the world on chain. Before we get into that, however, if you are enjoying The Breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit .ly slash breakdown pod. All right, friends. Well, as you heard from that introduction today, we are talking about Coinbase's base layer two. Day one was yesterday. But before we do that, we need to do a little check in on CPI. Today was CPI day, and this is always a good chance to get a gut level sense for where the macro is at the moment. And of course, to get a gut level sense of the macro or specifically the Fed's part in the macro, there's perhaps no one that markets listen to more than Nick Timiros, the chief economics correspondent at The Wall Street Journal, who is widely seen as having the most direct line to the Fed. A couple days ago, he tweeted, Wall Street forecasters expect the July CPI to show the headline and core indices rose 0 .2 % each from June. That would lower the 12 month core CPI to 4 .7 % from 4 .8 % in June, while boosting the headline index to 3 .3 % from 3 .0 % in June. Now, given that the markets really started to consolidate around this prediction, a lot of the discussion was not so much about what the numbers would be, but what the anticipated slight increase in inflation would represent from a narrative interpretation standpoint. The Kobayisi letter wrote, the fight against inflation is about to get really interesting. Inflation is set to begin rising again just as a Fed pause is expected. This is why the Fed is leaving all possibilities on the table. The fight against inflation continues. While the Fed's work seems to be near its end, the next few months will be interesting. It's never as simple as just raise rates and lower them later. Paulo Macro tweeted, if CPI comes in soft this morning, lots of bros think the curve flattens and rates fall. They are all backwards. The second grade inflation wave is already underway, and the Fed pause on falling core is going to detonate the long end. Another big dimension of the story is the China deflation showing up as we had discussed yesterday. Finance a lot tweeted, counterintuitive opinion. If CPI comes in slightly hot tomorrow, they'll use that as a bullish narrative to quote unquote prove the US economy is resilient in the face of Chinese deflation. What the talking heads won't tell the public is unlike previous recessions, this one starts in China. Now, whether finance a lot is wrong or right, one thing that is interesting to note is that we haven't really had a recession for a very long time that wasn't started by a financial crisis. Instead, right now, it appears if we got one, it would be led by a manufacturing drop off. We're just not used to that anymore, and so we don't necessarily know how to interpret it. In any case, there is definitely a sense of impending volatility coming down the line. Macro commentator Fei Jiao wrote, why I think resolution is now on the horizon as the summer begins to reach an end. CPI bottomed last month, and the base effects are about to get worse for the next, while making it harder to beat moving forward. Energy is bouncing here and will make headline CPI harder to overcome. The Bank of Japan is trying to unwind yield curve control now, which is complicated but could basically lead to dollar strength and higher yields, both negative for risk assets.
The Café Bitcoin Podcast
"paulo macro" Discussed on The Café Bitcoin Podcast
"Personally, I think they can. How high does it have to get over 4.03? Yes, sir. Could be. I mean, just my left curve take of it is, to me, the bonds market thinks US jobs data is strong, and they're giving the Fed more leeway to hike as necessary. They're giving them more slack to, OK, make sure that inflation is good and killed. We'll give you even more rope to do your job. Yeah, although you have to be really careful with what he says, quite publicly, Bill Ackman has come out and said he's shorting treasuries and expects yields to go much higher, which, if that's the case, I really want to see how the stock market reacts with a 10-year above 3.5, excuse me, 4.5. Yeah, I think that Bill Ackman tweet, I think it was an account called Paulo Macro who's been in that tweet for the better part of a year. So I'll point people to Paulo Macro, honestly. But what they said there, I agree. It's kind of hard to find out who's going to be the buyers, especially since this Japan debacle this week where you see the yields rise there. Is that going to suck capital over to the Japanese bond market instead of treasuries? And they're historically one of the biggest buyers of treasuries. And so you have all these dynamics when you look at who's actually going to be the buyers. And this is what Luke Gromen has talked about for many years, and Lin-Alden, who's going to be the buyer. And so really, there's always going to be a buyer. It's just going to be at a higher yield to attract them. And so I do think that we could see the long end continue to rise here and make new highs. And I think that's definitely, definitely possible. And then couple that with what Matt just said. If the economic data keeps coming in stronger, that's going to give the Fed more confidence to be more aggressive and continue to raise heights. Perhaps the market will expect the terminal rate to continue to increase and we can just continue to see it increase. So that's kind of how I'm thinking through things. I really point people towards multiple threads that Paulo Macro has put out on this topic. Just really, really insightful threads. Maybe from a year or a year and a half ago. So go check out that. Thanks for that, Sam. I'll just say I don't understand this argument one bit about there's not going to be buyers. I mean, it seems almost silly. You have an inverted yield curve, which by definition, you have more people demanding those instruments versus short-term instruments. So I think this argument, there's never going to be buyers or treasuries. I've been hearing it for 15 years. It seems kind of ridiculous.
The Breakdown
"paulo macro" Discussed on The Breakdown
"On that front, it certainly appears that a lot of these deposits are going right into higher yielding money market funds. Since the end of 2022, there have been a little under 400 billion in cumulative bank deposit declines and a very similar cumulative amount of increase in money market fund assets. A lot of folks are discussing this exact dynamic. Lisa abramo from Bloomberg writes, money market funds globally saw inflows of more than 60 billion in the week ending March 29th, while 5.2 billion float out of global equities. The volume of U.S. money market funds has surged by 305 billion since the start of March. Bassem lahood responded to that saying spot on, except banks started paying 4%. Got an email from JPMorgan, not starved for deposits last week. Balances over a hundred K equal API 4%. Paulo macro responded, I got the same. Small banks lose deposits to big banks, but big banks lose to money market funds. The flows to MMS have been relentless, and if you think government paper has started to crowd out private sector paper, just wait until they raise the debt ceiling and Yellen makes it rain. Indeed, banks being outcompeted with has been a really huge topic on fin to it. QE infinity tweets fed announces deposits of domestic banks dropped by 97 billion for the week of three 22. Here's the interesting part, 96 billion left the large banks only 1 billion left the regionals. My guess is that people are leaving banks for higher rates and treasuries and money market funds. Pretty interesting to see the money flying out of the big banks. That's what happens when you offer 0.1% rates on your CDs. Money will flow elsewhere, blows my mind that they could be this stupid, or maybe they just aren't well capitalized. Something stinks. Now outside of these money market flows, a lot of the debate frankly is, what's the real story here? Are these deposits in other words cause for concern? And something they are.
CoinDesk Podcast Network
"paulo macro" Discussed on CoinDesk Podcast Network
"The breakdown is produced and distributed by coin desk. What's going on guys, it is Wednesday, April 5th, and today we are asking whether this banking crisis is really over. A quick note before we dive in, there are two ways to listen to the breakdown. You can hear us on the coin desk podcast network feed, which comes out every afternoon and features other great coin desk shows, or you can listen on the breakdown only feed, which comes out a few hours later in the evening. Wherever you're listening, if you're enjoying the show, I would so appreciate it if you would take the time to leave a 5 star rating or review. It makes a big difference and I really appreciate it. All right guys, so over the weekend, I noticed a tweet from prominent political writer Matthew yglesias. This tweet broke my brain, and so I thought to myself, well, let's do a show about it. Matthew writes really simply, so all that bank stuff people were worried about seems to have turned out fine. Shrug emoji. Now, it didn't break my brain because Matthew's wrong that banking contagion seems to be for the time contained. Or that it appears that the fed's facilities are working. Or really anything substantive of what might underlie the tweet. It broke my brain because the thing is such a monument to trying to write off trying to understand complexity, as well as a glib dismissal of people who had concerns about the wider problem. All that bank stuff as if there wasn't something specific to try to actually understand. Now, at the risk of acting like a college student reading too much into a single line of text, I think that this was pretty clearly a jab at the biology type set who were arguing that there was a much bigger problem than just Silicon Valley bank. Now, I don't care at all if people don't like biology's $1 million Bitcoin bet. Or don't buy into someone like Arthur Hayes argument that the bank term funding program is going to almost assuredly see mission creep. And honestly, I don't even really need to call out Iglesias here as every day there are a million tweets from a variety of commentators that are equally glib and dismissive for the sake of Twitter engagement. I just happen to think that being glib about the most important issues we're dealing with is a huge part of the problem with current public discourse. And in this case, I think the underlying contention that the bank stuff people were worried about seems to have turned out fine is worthy of some serious consideration and dissection. So today, let's explore exactly that. Whether the bank stuff people were worried about turned out fine. And let's look at some of the numbers to start. By way of recapping, let's set a framework for what we're actually talking about here, specifically when we talk about the bank stuff that people were worried about. In short, people have been worried that numerous banks would see people withdrawing assets in an extra normal way. Due to some combination of one, being able to get better yield elsewhere, including buying treasuries directly, and two, concern about the viability of a specially smaller banks whose asset side of the balance sheet is underwater due to the rapid increase in interest rates. Looking at the big stories, the silver Gates and Silicon Valley banks, there was an attempt to write them off as just the concentration risk of having a specific industry as a lead depositor. And certainly that was a part of the issue. Silvergate was of course extraordinarily concentrated in crypto and Silicon Valley bank had a big portion of its deposits from the tech sector. This mattered because both of those beleaguered industries experienced circumstances that required depositors to request to withdraw their funds for reasons having nothing to do with concern over the viability of the banks. EG, startups burn cash to live and had less venture capital coming in to replace it, ergo, net outflows for SVB. Now the issue, of course, is that banks don't just keep their depositors cash in a vault. They put it into other things, such as loans or mortgage backed securities. Over the zero interest rate period and especially during the COVID years, in many cases, these institutions put those deposits in much longer dated securities in order to increase their yield. When interest rates rose, the value of those assets decreased comparatively. If you can get 4% plus on a risk free rate somewhere else, why are you going to keep your money in a 0% yielding bank account? When interest rates rose, the value of those assets decreased comparatively. This led to the phenomenon of American banks having more than $600 billion of unrealized losses on their books. An unrealized loss, of course, means that there is a security on the bank's books that would be worth less than when they bought it if it were forced to be sold on the open market. Now this doesn't matter if banks are able to hold those assets to maturity. But that brings us back to depositors, depositors come in, need their money back, and that means banks have to sell those securities. As was the case for SVB, that selling means that unrealized losses become realized. Realize losses, meanwhile, when reported, can catalyze insecurity around the bank itself and cause other nervous depositors to want to pull their money as well, which of course exacerbates the problem and creates a positive feedback loop where more realized losses lead to more withdrawals, lead to more realized losses, and so on and so forth. So what we really saw with these examples was a slew of different types of risk. Concentration risk of depositor bases, duration risk of the assets banks buy and invest in, and interest rate risk of, for example, the fed hiking faster than it had in 40 years. Not to mention for good measure, new types of risks, banks are just really wrapping their heads around, including social media risk. So when we talk about the quote unquote bank stuff people were worried about, it was really about all of that together with the specific concern that people were worried about other people withdrawing their money from banks en masse. So have we seen any of that? Bloomberg last week writes U.S. bank deposits and lending both dropped amid turmoil. The story is that deposits declined by the largest amount in two years, with commercial bank deposits dropping by about a $126 billion. But while that's a big scary seeming number, it's worth asking how much of that is due to fear of bank solvency versus just yield hunting. On that front, it certainly appears that a lot of these deposits are going right into higher yielding money market funds. Since the end of 2022, there have been a little under 400 billion in cumulative bank deposit declines and a very similar cumulative amount of increase in money market fund assets. A lot of folks are discussing this exact dynamic. Lisa abramo from Bloomberg writes, money market funds globally saw inflows of more than 60 billion in the week ending March 29th, while 5.2 billion float out of global equities. The volume of U.S. money market funds has surged by 305 billion since the start of March. Bassem lahood responded to that saying spot on, except banks started paying 4%. Got an email from JPMorgan, not starved for deposits last week. Balances over a hundred K equal API 4%. Paulo macro responded, I got the same. Small banks lose deposits to big banks, but big banks lose to money market funds. The flows to MMS have been relentless, and if you think government paper has started to crowd out private sector paper, just wait until they raise the debt ceiling and Yellen makes it rain. Indeed, banks being outcompeted with has been a really huge topic on fin to it. QE infinity tweets fed announces deposits of domestic banks dropped by 97 billion for the week of three 22. Here's the interesting part, 96 billion left the large banks only 1 billion left the regionals. My guess is that people are leaving banks for higher rates and treasuries and money market funds. Pretty interesting to see the money flying out of the big banks. That's what happens when you offer 0.1% rates on your CDs. Money will flow elsewhere, blows my mind that they could be this stupid, or maybe they just aren't well capitalized. Something stinks. Now outside of these money market flows, a lot of the debate frankly is, what's the real story here? Are these deposits in other words cause for concern? And something they are. The Kobayashi letter writes in March, U.S. banks lost around 390 billion in deposits, the biggest monthly decline in history. By comparison, not a single monthly decline in