Macro Research

Feb 10, 2023

When Short-Squeeze?

I am very optimistic these days as you might have noticed in my articles this year. I believe we’re close to the liquidity bottom (if we haven’t passed it already) and markets are in the process of anticipating that. They might just steamroll over short-term challenges and even if they don’t, downside volatility will likely be short-lived. One source of this optimism is the incredibly bearish investor positioning that has built up throughout the correction we’ve been dealing with over the past 1-2 years…

a month ago · 7 likes · 2 comments · Fallacy Alarm

Wirtschaftswunder in Reverse

Before we dive in: I was recently invited to Astrid Wilde’s The Felurian podcast: We discussed our investment approaches and also touched on a few stocks specifically, including , and . I really enjoyed our conversation, hopefully you will, too.Fallacy Alarm is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber…

2 months ago · 9 likes · 4 comments · Fallacy Alarm

The next round of QE might happen without an official Fed program.

A lot of the liquidity injected during the last round of monetary stimulus has not yet become effective in the real economy. It is dormant in the Federal Reserve System and will be awakened once the Fed starts cutting rates. Money supply will likely rise rapidly at that point without an official QE program. In this article I will explain why…

2 months ago · 12 likes · 2 comments · Fallacy Alarm

The Fed just reversed 4 months QT in 4 days.

The screenshot below shows the weekly balance sheet for the Federal Reserve. It is up $300bn this week. That’s 4 months of QT reversed within 4 days! It’s 10% of the initial Mar-Jun’20 Covid impulse. And it’s 30% of the Sep-Nov’08 GFC impulse. And all of that in just one week…

3 months ago · 8 likes · 1 comment · Fallacy Alarm

Enough with the Fear Porn already.

is no more. I am sure you read the news. And perhaps you have even received some initial commentaries via email or you listened to some Twitter Spaces/Conference Calls. The overwhelming consensus ? We’re on the cusp of a mix of the Great Recession and the Great Depression most likely…

3 months ago · 20 likes · 12 comments · Fallacy Alarm

Here is why I'm not buying bonds.

The US Treasury yield curve is inverted by >100bps. It’s the steepest inversion since the early 80s. And in relative terms, it is the steepest inversion we have ever had. The one (and only) inference we can make from this observation with certainty is that markets are anticipating falling yields. To lock in current yields for as long as possible, investors are willing to pay a premium for long duration even if that comes with higher volatility exposure. I have written about the mechanics in the article below…

3 months ago · 6 likes · 1 comment · Fallacy Alarm

Time to Catch Up!

In an economy that sends the weirdest signals to those trying to make sense of it, there is one chart that stands out for me personally. One of the most baffling data points that is hard to reconcile with the narrative that monetary tightening is eating the US consumer alive…

3 months ago · 4 likes · Fallacy Alarm

Ten Trillion Dollars

Before we dive in: Fallacy Alarm has now surpassed 2,000 subscribers. Thank you so much everyone for your support. It is very motivating for me to keep going and live up to your expectations. As a result I am actually tackling a lot of the questions I have been asking myself with much more rigor than when I only wrote to myself…

3 months ago · 8 likes · 4 comments · Fallacy Alarm

The Great Pandemic Era Option Bubble

This article explains the last 3y from an angle you might not have heard before and the implications are profound in my opinion. While it is quite technical to follow, I encourage you to work your way through even if option trading might not be your forte or particular area of interest. I will try to convey my message as clear and digestible as possible…

4 months ago · 11 likes · 2 comments · Fallacy Alarm

S&P 5,000 by Christmas 2023? (Excel Workbook included)

If you are interested, I published my Jan’23 FOMC Digest earlier this week for premium subscribers: In that article, I argued that the Fed’s hiking cycle has likely ended with the February 25bps hike, the realization of which will likely be supportive for asset prices in the near-term…

4 months ago · 4 likes · Fallacy Alarm

Jan'23 FOMC Digest

The Federal Reserve issued their FOMC statement today. They hiked 25bps as expected and softened their language on further hikes. I believe they are done with their hiking cycle as of today. There is a lot of uncertainty with forecasting short term stock market movements, but I think the odds are high that the rally will be fueled by the market’s digest…

4 months ago · 1 comment · Fallacy Alarm

My Case for a Soft Landing

Objective vs. Subjective vs. Intersubjective Reality As described by Yuval Noah Harari in his fascinating book Sapiens, there are three types of realities: Objective Reality: Something that is true irrespective of how anyone feels about it. Gravity is a suitable example. It does not matter whether you believe in it or not, you are subject to this force…

4 months ago · 10 likes · 3 comments · Fallacy Alarm

Dec'22 Inflation Update

Today, the U.S. Bureau of Labor Statistics released their December 2022 consumer price index. Just wanted to share some quick thoughts contextualizing this release for you…

5 months ago · 3 likes · Fallacy Alarm

The Bear Case for Oil Stocks

Oil stocks (and energy stocks in general) have had a great run over the past two years fueled by an overstimulated economy and backfiring ESG rules. Investors did not want to touch them for years which led to severe undervaluations. There are quite a few proponents forecasting a longer term energy/oil bull market. A prominent example is Lyn Alden who ha…

6 months ago · 5 likes · Fallacy Alarm

The Relevance of Money Supply for the Trajectory of Inflation

Before we dive in: I have published two single stock reports last week for paid subscribers. In this article, I covered ‘s 3Q22 earnings, the impact of their questionable accounting principles and why I see the fair value at $1.40. And in this article…

6 months ago · 5 likes · 3 comments · Fallacy Alarm

What story is the Yield Curve Inversion telling us?

Yield curve inversion as a recession indicator The 10Y-2Y yield curve is currently inverted, meaning yields for short term US treasury bonds exceed the yield for long term US treasury bonds. And it is not just simply inverted. Taking the yield spread between the 10Y and the 2Y treasury bond as a representation for this inversion, it is actually the most inverted in 40 years. Whenever this happens, there are many voices out there predicting a recession. This is a valid concern, in the modern era every time the yield curve has inverted, a recession followed shortly thereafter…

7 months ago · Fallacy Alarm

Nov'22 FOMC Digest

What happened before? In my Sep’22 FOMC digest, I highlighted that it appears that Jerome Powell… Does not seem to acknowledge the difference between Monetary Inflation and Dearth Inflation: He justified stricter monetary policy with energy shortages due to the Ukraine war, which is a classical example of…

7 months ago · 8 likes · 2 comments · Fallacy Alarm

Deconstructing the growth rate of the US economy in Q3

The components of GDP As the name says, GDP attempts to measure the output of an economy, i.e. what we achieve with our hands and brains collectively in a given period. It consists of the consumption of goods and services, private and public investment, exports and imports. Inventory changes play a role, too. It attempts to explain our economy from a pro…

7 months ago · 3 likes · 3 comments · Fallacy Alarm

Here is why I am so adamant that (real) interest rates will fall

From an asset pricing perspective, the true big story of 2022 is not the inflation spike. It is the brutal real interest rate shock, which is driven by the conflict between deficit addicted fiscal policymakers and legacy focused monetary policymakers…

7 months ago · 1 like · Fallacy Alarm

How hot is the labor market really?

Today, initial unemployment claims, one of the key metrics that has been supportive of the strong labor market narrative came in at 219k, ahead of 203k consensus. Could be nothing. But could be something. And job openings are dropping like a stone. I have mentioned in a…

8 months ago · 7 likes · 3 comments · Fallacy Alarm

Sep'22 FOMC Digest

Listen now (14 min) | September 21, 2022 was quite the day for monetary policy. The Fed raised interest rates by 75bps as expected, but Jerome Powell’s subsequent press conference had some hawkish touch for the history books. In this article, I am going through what I view as some of the key statements he made, which were really puzzling to me. My comments are structured in …

8 months ago · 7 likes · 6 comments · Fallacy Alarm

How might the Fed pivot?

Two quick announcements before we dive in: 1. I have recorded podcast versions of the following articles: The Demographic Deflation Bomb is ticking From BioPharma to Industrial Biotech Both of these are freely available on Spotify for now to give you taste. Going forward, I will likely offer podcast versions of my articles as premium features. Here is a man…

8 months ago · 2 likes · 6 comments · Fallacy Alarm

What's the Score between Transitionistas and Inflationistas?

This article is also available as an audio version here. I am currently experimenting with ideas how to add premium value for paid subscribers without limiting access to the core content. Please let me know if you like it. I am considering to add audio versions for a more articles in the archive going forward…

9 months ago · 8 likes · 4 comments · Fallacy Alarm

Are we in a recession or not?

My unofficial target is to provide you with a differentiated take on a controversial topic in financial markets once a week. I believe that to be a good cadence for both what I can put out sustainably and what you can reasonably read without feeling spammed. Hence, apologies for the increase in cadence with this article. There is just so much buzz in my…

10 months ago · 4 likes · 2 comments · Fallacy Alarm

5 reasons why USD interest rates will plunge

A story on good analysis and poor implementation In October 2021, I wrote this to a friend who was wondering about the next moves markets would be making from here: Long term trends are still favorable (innovation cycle, demographics) to be bullish. But in the short and mid term, there are two false narratives that need to be proven wrong before the bull …

a year ago · 5 likes · Fallacy Alarm

It is about long term real interest rates, not spot CPI prints

Most people are looking at the wrong metrics in the current inflation spike When I scroll through Fintwit or consume other news these days, I often see comments like this from Bill Ackman…

a year ago · 2 likes · Fallacy Alarm

Is this the dawn of the Anti Carry Regime?

What is a Carry Regime? In this article, I am borrowing from the book ‘The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis’ written by Tim Lee, Jamie Lee and Kevin Coldiron. I will only touch on their ideas at a very high level and complement it with my own views and …

a year ago · 8 comments · Fallacy Alarm

9 reasons why we may not be in a housing bubble

The housing market is an extremely important lead indicator for economic health and financial market performance. If it coughs, the rest of the economy gets a cold. On the other hand, if it performs, it can fuel consumer sentiment and propel other asset prices higher. That is why I believe it pays off to study it to develop a view on it. Housing prices …

a year ago · 2 likes · 2 comments · Fallacy Alarm

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