Macro meanderings?

Not sure which sub-forum this belongs to, but it would be awesome to have a thread dedicated to discussing various global macro views. There are multiple members that I have interesting macro-related discussions with and it would be interesting to hear their views in a consolidated form.

PS. Oh, and if we do create this thread, let's keep politics out of it. I don't care if you are a conservative or liberal, I care about hearing your view about the market, preferably built on some evidence.

Comments (22)

Feb 24, 2019

Nice, looking to here some perspectives. Unfortunately I'm in energy so I don't know how much I can relate. But be nice to hear from guys like @Martinghoul @ironnchef @macro bruin @Revsly who trades trade macro, specially in rates or rates/currency vol but have been MIA.

Feb 28, 2019

0

Feb 28, 2019

Yes, would be nice to get some sort of weekly post on here for macro

Mar 12, 2019

4 months in a row of decline in furniture/home furnishings; 5 months of decline in electronics/appliance sales; clothing at a 10-month low; gas sales at a 15-month low; electronics at an 18-month low; furniture at a 20-month low. All shutdown related? Nah.

The long-term historical patterns suggest gold getting a significant bid at the end of an easing cycle - given that we are in (not beginning) the cycle now that's at least a two-year horizon.

Mar 21, 2019

i understand macro to be large thematic moves between asset classes (Rates / FX / Credit / Equity Index, etc...)...so this probably belongs in AM asset mgmt.

What was on your mind?

just google it...you're welcome

Mar 21, 2019
faceslappingcompilation:

What was on your mind?

"I got my mind on my money and my money on my mind" (c)

It's an odd market, feels like we are on the brink of something but any potential catalysts get completely ignored. Credit is weak, numbers are crap all over... yet we grind up like nothing is up - is that the Fed put in play?

What's it like from your rates perch?

Mar 21, 2019

Just moved the thread here, to the investing & macro forum :-)

Mar 21, 2019
Mostly Random Dude:

Not sure which sub-forum this belongs to, but it would be awesome to have a thread dedicated to discussing various global macro views. There are multiple members that I have interesting macro-related discussions with and it would be interesting to hear their views in a consolidated form.

I think given FEDs latest dovish stance, we won't see rates going up for a while and market will keep climbing until we get some much more bubbleicious valuations.

As far as the ROW and China trade concerns, I think they are a drag, but would could be the catalyst to our next downturn is if real estate continues to soften... ideally, we see a nice shallow recession in 2020-21, but who knows. Would love to hear your thoughts.

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Mar 21, 2019

in so I can follow this thread, very curious

Mar 22, 2019

From the other side of the pond: manufacturing is doing abysimal in Ger/Fra/Ita, No Deal Brexit being a realistic possibility could cost Germany 100k jobs, ECB launching TLTRO 3 smells like a panic move, upcoming European elections could be a further blow (unlikely-though the recent regional elections in the Netherlands say that the polarization wave is still riding high). The Old Continent is dying.

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Mar 22, 2019

There is a substantial growing disconnect between pro forma rents and tenant's ability to pay said pro forma rents in most markets across the majority of asset classes. This is exacerbated by rising labor costs, both in construction and operations. Value-add capital will be forced to re-adjust expectations.

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Mar 22, 2019

this would lead me to believe rents should come down...which means the attractiveness of homeownership relatively speaking should decline, leading to price pressures

but again, I'm out of my sandbox and don't know much about RE, so please correct me where I'm wrong...

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Mar 26, 2019

I believe InVino meant office and retail tenants, not apartment tenants. Apartments are still being built at a rapid pace throughout the US, but the demand is there, for now. You're not seeing apartment rents come down, but you are seeing some wackiness like landlords offering 2 months free rent on a 12 month lease, giving a free studio apartment to a pianist to play in the lobby, buildings with golf simulators, etc...

Home prices should suffer for various reasons besides the relative cost of renting vs buying: millennials' preference for urban living, the growing "gig economy" and telecommuting, student loans delaying childbirth, and higher mortgage interest rates. I also think the experience of 2008 permanently ruined the idea of homeownership as an investment for many people currently in their late 20s/early 30s.

Mar 22, 2019

Feels like everyone is still trying to ease their way out of the 2008 crash, and we've used up the majority of the runway without taking off. I think that a lot of the economic growth has not been "real" and driven largely by cheap credit (#1 culprit being Chinese corporate/commercial credit). With growth slowing worldwide, I think there are a lot of concerns about the ability to pay off these expenses in the future.

I think more advantage could've been taken of the cheap credit to invest in infrastructure, particularly in developed nations. It's relatively easier to create jobs/employment/income through building/renewing roads & utilities to increase consumer spending, as opposed to relying on tech breakthroughs (eg. electric cars) to drive sales of new companies. Unfortunately, this can come across as "left" political stance.

It's tough to ignore the political lens for macro perspectives IMO. You can't talk about growth rates in Africa w/o talking about massive Asian investment in natural resources. Likewise, is it good for Nigeria that 1 guy (Dangote) is investing massively in staple products like cement & fertilizer? Yes it's good because investment = jobs --> positive future, etcetc. So people use Nigeria as a positive example for economic activity in Africa, but where are the competitors? Are we seeing the early stages of monopolization of resources/materials? I can't say for sure (it's likely no one can), but having $17 billion in Africa goes much farther than $17 billion in USA/EU/Asia.

I work in a ridiculous real estate market where projections are still aggressively upwards around the board (eg. all asset classes, most geographic markets), and considering some of the economic #s coming out recently, I don't agree with some of the market's bullish views.

$0.02

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Mar 28, 2019
KClubs:

It's tough to ignore the political lens for macro perspectives IMO.

I think there is a big difference between understanding the political situation as it relates to the economy (good) vs using your political beliefs to drive trade ideas (really bad). When I said "let's keep politics out of it", I meant the latter.

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Mar 26, 2019

Some pundits maintain that what really scares the Fed is that the 3-month/10-year curve, which has inverted and has been labeled by the San Francisco Fed as the true harbinger of a coming economic slowdown.

If the San Fran Fed is correct about the importance of the 3-month/10-year curve, then the Fed has a very serious problem for even in the face of a dramatic dovish pivot the curves have not reacted in an appropriate fashion.

Mar 28, 2019
VolatilitySmile:

Some pundits maintain that what really scares the Fed is that the 3-month/10-year curve, which has inverted and has been labeled by the San Francisco Fed as the true harbinger of a coming economic slowdown.

If the San Fran Fed is correct about the importance of the 3-month/10-year curve, then the FED has a very serious problem for even in the face of a dramatic dovish pivot the curves have not reacted in an appropriate fashion.

I saw this paper last year, is that what you are referring to?

The Near-Term Forward Yield Spread as a Leading Indicator

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Mar 27, 2019

How do we like the recent numbers? What do we think of the upcoming ones?

Most Helpful
Mar 28, 2019

Let me try to chip in a bit on the commodities side. Ever since the trade wars started last year, the farmers have been struggling. Especially the grains farmers. Some simple facts to throw out there are China used to purchase more than half of our soybean production and China was the biggest consumer of our grains production. With the trade disagreements and the higher taxes imposed on China when importing from us, they bought grains from Brazil instead. This was the major reason why the ags' prices went shit-canned and been down-ticking ever since the trade war. Demand for animal feed also went down to the ASF for hogs. To not elaborate too much, demand has slumped while supply remains high which causes the prices for these products (corn, beans, wheat, etc) to go down.

Now as for what are the macro implications? First off, given the farmers are not able to sell their crops, how are they going to fund their daily expenses and further more to finance their crops at grain elevators and etc? Sure, the futures markets are offering a premium for farmers to carry their crops. But the question becomes, how much does that carry pay for storage fees at grain elevators, opportunity costs, and etc? That's why the government had stepped in to promote some sort of relief plan for them. Some are taking on debt while some are frankly crestfallen and don't know what to do. If the trade wars drags on anymore, these farmers will struggle and will trickle down in a macro way whether the government will step in or just let them deal with it on their own.

In conclusion
1) farmers maybe make up a percent of our GDP, not as much as it used to but nonetheless an indicator of our financial wellness as a nation (higher discretionary income leads to higher consumption of commodities, not the case at this moment)
2) Farmers not being able to sell their crops may take on debt and if the markets are still not favorable (margins are already so slim, price of planting vs the price of sale), default on payments can happen. Can make some impact in the debt market due to numerous defaults

My two cents :)

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Mar 29, 2019

It'll be interesting to see how this flooding going on right now in the Midwest affects new crop corn and beans. With the massive carry out from last year and the continuing demand problems from the trade war it'll take apocalyptic destruction to bring prices back up to a good range in the short term.

In the long term, it's my belief that we'll start to see grain supply's tighten up in the next 2-5 years. Who knows what'll happen with global politics lately but I'd assume Trump will try to end the trade war before the 2020 election to get the Midwest vote. That would most likely suck up a good amount of supply and bring S+D back into relative equilibrium. Unfortunately, barring the Chinese stepping back in as buyers, there'll be an even worse over supply before things get better. Farmers are already below break even. The twin constraints of limited space and limited available cash are already concerning. Rising interest rates are going to murder them because even with the high carry, farmers and elevators will run into liquidity issues if they can't move their grain eventually. I know of several elevators that are still sitting on crops from the first Obama administration. They can only build so many ground piles (Cheap and easy grain storage bins that don't preserve quality well). At a certain point, people are just going to be forced to sell at a loss or allow crops to die in the field. There's going to have to be a rush to convert the mounds of shitty old grain to cash. After the dust settles (3-5 years depending on the next several crops) supply should be brought more into line with current demand.

Just my two cents, curious if anyone feels differently.

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Mar 31, 2019
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Apr 16, 2019
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