Macroeconomic musings

Lots of companies have relied on cheap credit to keep operations up. That’s why they equate zirp to a drug addict needing their next fix.

This is going to spread to many other sectors. We should have just gone through the pain in 2008 but they papered over it kicking the can down the road. If the house of cards falls now it’s going to be way more painful. Last bailout people were marching in the streets over 800 billion. That’s chump change now. They will need 10xs that conservatively.

The fed has no ammunition left to fight what’s potentially coming. It’s either lower rates and increase inflation, or raise rates which will just consolidate more power to the wealthy corporations that can survive. Hopefully we can finally find a balance and work on repairing cracks in the system caused by zirp for so long.

It’s the end game scenario and all fiat suffers the same fate. Whether this happens in a year or 10 is anyone’s guess but it will happen…bail-ins will come first. Inflation was the first indicator and way to transfer more wealth out of the hands of the people.

Hope I’m wrong but history has a way of repeating, and every empire that rose and fell shared similar characteristics

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Jrouleau426🙌

You hit the nail right on the head and explained it in the most absolute profound way. I’m an investment banker and see the writing on the wall as well. The Fed will have to cut a couple of times this year, I totally agree with you, as we have to curb inflation. This will cause (hopefully) everything to be more economical to the middle and lower class, while pumping the breaks in the big corporations from shutting down the mom and pop shops in our nation. I think we can see the housing market cool off a bit until rates come down (again using history as a gage).

And once all this blows over in the next 12-18 months I’m wishing for the real unicorns :unicorn: to come back to the LH community, like some of those deals in the other thread.

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What sectors do you think this will spread to? I’m thinking solar grew way too fast too soon and was also highly dependent on low rates and materials and both of those are up. I’ve been shorting them for a bit now and doing pretty well, I’m not going to cover early like I did on my cvna shorts though.

The big banks also could take a hit this year and I think we’re going to see some smaller banks fold again. I missed out on the tech boom this year, didn’t see that coming at all. Luckily I have some exposure in my retirement funds. But also think they’re going to drop, I would never short them though. Nvda and amd runs have just been insane

For autos I still like Toyota but I don’t think any auto company will have meaningful growth this year and many will keep declining with their ev losses

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I’m glad you mentioned that, as part of our macro theme we do a lot of due diligence on pretty much all sectors. Looking at the alternatives electrification, solar, hydrogen etc. I believe we’re far from and many years away from moving along at this rate. The infrastructure isn’t there yet for this to happen by 2030 (it’s almost impossible to have grids built this quick from a global stand point, how are countries like Africa, China, India and other developing nations going to provide the required energy for their citizens).

Hold onto your NVDA, AMD, APPLE etc. they’ll hold their own over time (again if you look at history on either of them).

If I were you I’d look into the oil and gas sector.
For example, in our macro theme right now, we are looking at certain sectors we believe could actually outperform the market. We are looking at the economic cycle, which as you know, we are in a downward trend, a recessionary period coming into a bottoming phase.

As with all cycles, eventually, there will be a recovery and expansion phase. If you look at the historical points of these economic phases, as we enter into a recovery phase; commodities, energy, resources, they tend to outperform other industries, and sectors in the market. We’re simply looking at the past 100 years, the past economic cycles, and what industries perform best during each phase. It’s rational thinking and analysis that makes sense. As we investigated this a little further, we have isolated a problem in this macro theme. And we see an opportunity for growth. The problem is in the oil and gas industry.

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If you believe that we’re in a downward economic trend / in a recessionary period, I’m not sure what kind of investment banker you are. Every single bulge bracket has been publishing macro research calling for strong economic growth in 2024 led by decreasing interest rates, slowing inflation, and expansion of purchasing power. Economically speaking, this country is in a very strong place, and this should continue this year.

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$34 trillion in debt and counting…the fed continuously printing us into deeper poverty…essentially no more middle class, just rich people and poor people. This country hasn’t been in a strong place since 1835 when it was debt free

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If he stated what he voted for, it’ll be clear where his opinion coming from. LOL.

Some funds seek ROE in the form of buying puts. It’s still investing, just a different kind of investment from the standard approach.

But @drdvrgs know’s the greatest returns will be from leasing a lot of Vinfast vehicles.

#itslevelstothis

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Trust investment bankers to make deals, not do macroeconomics. You want macroeconomics go to a macroeconomist lmao.

That said, as for the banks research reports, I’d trust their macro predictions as much as the banks have put any money on them ($0). They can be good and useful reports but not from having good headlines/predictions, more so having some good pieces of analysis in them.

-buy side macro firm

The only I banker to remotely have a clue about rates is one on the DCM desk.

My scope is fairly limited to energy, oil and gas, but I would generally agree. Short of another Covid level event or radical policy change, we’re looking Gucci for the next 2 years min.

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Diversified equity ownership of the great companies of the world has never failed a generation of Americans who could afford to own them. Volatility is the accumulator’s best friend, embrace and love it. Unfortunately, human nature is suicidally pro-cyclical.

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Interest compounds. The debt will only go up from here on out. Any lie they say about bringing the debt down is wrong and mathematical incorrect. We are officially in uncharted territory. I predicted we will hit close to $40trillion in debt by the end of this year.

And that debt is the direct reason for increases in the market as it’s inflationary. Market cap of us stocks has almost proportionally increased with debt the last 20 years. So those that can afford to buy equities are winners. And the 10% that owns 90% of the market even more so. As inflation/affordability of goods rises/falls, less and less will be able to save creating even more of a wealth gap.

The issue moving forward is the market runs on populations buying their goods. That’s going to decrease and already is and could have a snowball effect as companies buy less services from big tech. But who knows, it’s not like p/e are rational right now anyway. About 60% above historic ratios and that’s even with record inflation leading to record profits. People are living on credit cards right now as is. That data is clear. What happens when inevitable layoffs come?

We can only print so much until other countries stop buying our debt, also already happening.

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This part is huge. Tons of overcapacity, inventory and overlap of products, people and office space.

Wages haven’t kept up with inflation and costs in general, AI is blowing into town and much of the seasoned workforce is retiring to be replaced by an underskilled, undertrained and undermotivated new crop of potential employees.

Add student loans, federal debt servicing, unaffordable housing as to prices and rates, rising consumer debt along with increased foreign conflict/competition and it is hard to have a positive, long term outlook.

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Boomers are supporting their grown children. Be it daily living expenses, down payments on houses, their children’s expenses (that’s a big one) day care is $25k a year, etc etc.

That’s a huge key that’s keeping all this going too. But each dollar they spend is prob coming out of the market as well. Then their costs are skyrocketing too. Wait until they get into assisted living bc the kids they helped don’t want them in their old age :joy:

I’ve heard a lot of talk about this boomer windfall coming to millennials and gen x. Will it be there when the time comes with costs this high?

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You mean Gen Xers. Boomers are already in assisted living…lol

Boomers are 60-80. So some are but they’re also living longer then ever too. And from what I see living well, packing the restaurants, cruise lines and vacation destinations.

You know private equity and big corporations are concocting every plan possible to extract their wealth right now. Their parents were savers, the boomers now are yoloing

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People born in January of 1946 are the first month of the official baby boom generation. Those people are turning 78 as we speak.

The real assisted-living crunch isn’t even close yet but will be unmanageable in the next 10-20 years.

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