G.F. Händel

[G.F. Händel @bayonnet321]

@Brad_Setser How does this relate to current account deficit? Chip imports? Net Interest expense?

[G.F. Händel @bayonnet321]

@dampedspring True and the wildcard is the Fed. If they are determined to combat inflation for good then it’s unequivocally bad for equities

[G.F. Händel @bayonnet321]

@LanceRoberts Only extreme skeptics say that. Moderate ones say the moat is weak, the revenues and profits are unlikely to pay for the sheet investment size and there is a real risk of commoditization of AI where marginal revenue settle to a super low level

[G.F. Händel @bayonnet321]

@StealthQE4 We’ve had these bs headlines a dozen of times, yet here we are. Not sure why you buy into it this time. Even he declares the war over, he needs to allow iranian oil to flow and turn a blind eye on tolls. Will he really?

[G.F. Händel @bayonnet321]

@StealthQE4 For this to matter to markets they need to end the blockade, allow Iran to sell oil and lift the recent economic embargo. None of these will happen

[G.F. Händel @bayonnet321]

@DerivativesDon @joebrusuelas @EconstratPB When the cost of debasement is higher than default even sov can do that. Russia has done it in the 90s (defaulted on domestic debt). Having said that, very unlikely US does it.

[G.F. Händel @bayonnet321]

@tylermacro10 Fairly simple. The economy grows at 2% with 6% fiscal deficit. At least 1pp of this growth is AI (if not more). Therefore underlying growth is between zero and 1% with huge fiscal deficits. Which means these rates aren’t affordable in the medium term

[G.F. Händel @bayonnet321]

@amlivemon @EuroBriefing These are all valid points and may have been deciding factors but that’s not what I was referring to. It’s a narrow point in objection to WM: saying euro membership lowers inflation is not ludicrous, saying the contrary is… euro unequivocally lowers inflation

[G.F. Händel @bayonnet321]

@amlivemon @EuroBriefing Those are true now but euro inflation has always been lower than most of RoW. If anything deindustrialization is an inflationary force. You surely don’t think Iceland’s cpi and rates would be similar under euro membership?

[G.F. Händel @bayonnet321]

@StealthQE4 Surely you don’t mean QE? It would be suicidal. Maybe other forms of support like the inflation indexation for CGT but almost impossible to see outright fiscal or monetary stimulus

[G.F. Händel @bayonnet321]

@dampedspring The moment capital feels debasement it will flee into other assets. You cannot have sustained negative real rates in a high inflation environment. It only works in low inflation conditions. Which means you need asset price correction and/or demand destruction.

[G.F. Händel @bayonnet321]

@DanielKral1 What do you expect yoy contributions to look like? Mix of household spending and govt?

[G.F. Händel @bayonnet321]

@DerivativesDon @robin_j_brooks Only a guess: could stable swap spreads be caused by record bank/dealer holdings of treasuries? They tend to hedge with swaps thus supporting the swap spreads. Also CTA/HF paying of swaps is popular…

[G.F. Händel @bayonnet321]

@ces921 If I were in charge I’d shrink the balance sheet and leave rates where they are or maybe even cut them. The income effect of high rates is mostly short-end driven while the restriction is mostly from long-end

[G.F. Händel @bayonnet321]

@DannyDayan5 @DerivativesDon @EquitOrr @SamanthaLaDuc @AvidCommentator @bluewolfpack1 Agreed too small but Bessent probably bet on the signalling effect rather than the actual impact of the purchases

[G.F. Händel @bayonnet321]

@dampedspring Forward rates lower due to rate hike expectations only works when fiscal is neutral or tight. It’s mega expansionary at the moment (for a non-recessionary period). 15y15y will tread water in the most optimistic scenario.

[G.F. Händel @bayonnet321]

@DerivativesDon Fair enough, you’re explaining the mechanism but the end result is the same. These credit events almost always happen following tightening.

[G.F. Händel @bayonnet321]

@AahanPrometheus Bonds suck until they don’t. The math isn’t that hard: deficit to gdp is 6% growth is around 2. Most analysts think AI’s contribution to growth is 1-2pp. So the US structurally grows 0-1% with 6% fiscal. If the cost doesn’t come down something is gonna break