“The incentives here point to inflation. And inflation is really bad for risk assets because it sends bond yields higher and equity multiples lower.”
Inflation from oil shock crushes risk assets as yields rise and equity multiples fall
“this is the ratio between the two. And we're at a low where in 2000 we saw... the tech bubble burst and then the Dow Transports took off...”
Transports mean-revert higher versus tech as capital concentrates out of software into real things
“you start to cut and stimulate … you get a bear steepening”
Bonds are awful here as bear flattening turns to bear steepening once cuts and stimulus hit into the election
“margins are more than double what they were at in 2020, the ratio is still the same … that's why I think you gotta look at what displays relative strength in…”
Gold mining equities are cheap versus bullion despite double the margins, set to rerate higher
“I don't know where you put your money besides stocks … maybe that's the phenomenon of why things mean revert higher anyways, because it's just…”
Stocks rerate higher as the great rotation out of debt makes equities the only place to save
“this is the combined high-yield loan distressed universe. It's hit its highest level since June of 2023 … these things are hard to unwind”
Junk credit prices a benign world while distressed loans pile up and the consumer cracks; spreads gap wider.
“I think financials, like, I don't really see a good case to be made for financials here … small caps and all these sort of cyclical— we were saying a couple…”
Higher oil and inflation crush consumer demand, so financials and small caps face credit problems
“over the past few years, airlines have stopped hedging their jet fuel... So none of them are hedged going into this.”
US airlines dropped fuel hedging just as oil spiked, so unhedged carriers eat the full cost shock and earnings sink.
“the demand for compute is way higher than we expect … they're throttling the usage because everybody's trying to actually do things with it”
Compute demand far exceeds expectations as agents throttle usage, AI is secular
“as an investor, you should be more cautious going into the midterms because you have this huge vol event sitting out on the horizon.”
Cash is a position into the midterms, a huge vol event with record political stakes ahead