New Zoltan Summary:
TL;DR There is a series of supply chain choke points that combine to put the US supply chain and the fed in a very precarious position.
As a result, the fed's hand will likely be forced to resume QE in early 2023.
I've been sounding the "not tightening just
TL;DR There is a series of supply chain choke points that combine to put the US supply chain and the fed in a very precarious position.
As a result, the fed's hand will likely be forced to resume QE in early 2023.
I've been sounding the "not tightening just
reloading" horn for awhile now. Zoltan's article puts it into perspective why this is the case.
- Banks have large excess reserves, so thus far commodity spot prices have not applied pressure to funding rates. However, as commodities face more choke points, this may change
- Banks have large excess reserves, so thus far commodity spot prices have not applied pressure to funding rates. However, as commodities face more choke points, this may change
- Neon gas is a key component of microchip production. Large steel plants are some of the leading producers of neon gas, as it is a byproduct.
- Ukraine, specifically Mariupol, is home to many of the largest of these steel plants, responsible for a significant amount of neon
- Ukraine, specifically Mariupol, is home to many of the largest of these steel plants, responsible for a significant amount of neon
- this explains why Russia bad focused on Mariupol and Donbas. While Taiwan is the chip producer, Ukraine is the raw materials supplier. Between Ukraine and Taiwan, Russia/China have the means to hold significant leverage over the west.
- specifically, chips used in high performance military equipment rely on neon gas as an input.
- this form of leverage can be compared to the Alsace-Lorraine region in ww2, rich in iron ore and key for steel making, was a key German asset in the war
- this form of leverage can be compared to the Alsace-Lorraine region in ww2, rich in iron ore and key for steel making, was a key German asset in the war
- increased production of military equipment should put an even greater strain on chip related supply chain constraints for electronics, autos, etc, even worse if we go to war
- banks are currently buying back stock, decreasing SLR and possibly putting pressure on lending rates
- banks are currently buying back stock, decreasing SLR and possibly putting pressure on lending rates
- similar to the headline news of being unwilling to provide a no fly zone in Ukraine, NATO refuses to provide safe passage for neon/other materials freight operators as this could lead to war.
- therefore, only way to transport neon is on the road, THROUGH China....
- therefore, only way to transport neon is on the road, THROUGH China....
- natural gas pipelines face similar issues
- if the world boycotts Russian oil, applies massive pressure to spot oil prices of course, SPR will only last so long.
- (my takeaway) continued bull run in Oil prices is almost inevitable
- if the world boycotts Russian oil, applies massive pressure to spot oil prices of course, SPR will only last so long.
- (my takeaway) continued bull run in Oil prices is almost inevitable
- another choke point: the US has no oil tankers or freight infrastructure, and China may perform a takeover of the world's largest fleet. We have no materials, no transportation.
We are remarkably unprepared for war.
We are remarkably unprepared for war.
You can see where this is going.
Even without war, there are massive supply chain constraints.
If war, or even just economic war, worsens, these supply chain issues will become acute and force the fed's hand.
Even without war, there are massive supply chain constraints.
If war, or even just economic war, worsens, these supply chain issues will become acute and force the fed's hand.
From Zoltan:
"Dealing with these chokepoints is the responsibility of the sovereign, and the sovereign will need a lot of money to deal with them. Thus, while we think QT is certainly happening in the short term, it's days and scale will be numbered from the get-go...
"Dealing with these chokepoints is the responsibility of the sovereign, and the sovereign will need a lot of money to deal with them. Thus, while we think QT is certainly happening in the short term, it's days and scale will be numbered from the get-go...
The fed will do QE again by summer 2023"
Mic drop...
Takeaway strategy: long oil this year, mostly avoid risk, front run the fed in early '23
Highly recommend the full article and all of his work, one of the best with macro:
plus2.credit-suisse.com
Mic drop...
Takeaway strategy: long oil this year, mostly avoid risk, front run the fed in early '23
Highly recommend the full article and all of his work, one of the best with macro:
plus2.credit-suisse.com
Lmao @CanteringClark thanks for the RT but JESUS these bots ๐. Now I know what it's like to be Twitter famous
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