WM 18 June 2022

Quotes

Gradually then suddenly

Steve Curry and Steve Kerr win again

On courage

Lessons & Thoughts

Heart beat

Liquidity & Buoyancy

What hurts instructs: learning through mistakes

You have to experience it for yourself

Think about process, hope and luck is not a strategy

Remember

Results you need to rank amongst the greats

Lessons for growth investors = it is about high ROIC not high top line growth

Bearish Pennant applied

Signs of tops vs Signs of bottoms

Small thing matter when at high speed

Mind the gaps

Reversible vs irreversible process

Have we already reached singularity?

How ESG impacts bottom up analysis

Question your sources

Empathy matters

Macro news

Deflating the bubble. Let there be

Money

It was a week for the history books with most central banks following the Fed and raising rates. The Fed' 75bp hike for example was followed by the SNB's 50bp surprised hike. Note that a week before 1y deposit rates in Switzerland had shot up to 30bp, thereby highlighting liquidity drying up in the financial system already. The CHF rose 2% on the news versus the USD, as the SNB is about to officially putting an end to 10 year policy of negative interest rates.

Precedent of Fed liquidity squeezes

Typical Liquidity cycle

Cycle

GDP

China to the rescue?

Job market

Wages

The Fed has the solution:

First sign that slow down is now starting

Silver lining = the democrats will lose the mid term election by a landslide = good for stocks. October bottom.

Policy mistakes no1 = monetary stimulus when economy stopped due to shut down of supply. Policy mistake no 2= taking the money back as liquidity already drying up due to inflation. Killing the patient instead of the symptom is not good medicine. Start with the right diagnostic

GDP growth to collapse

Inflation

PPI

CPI

Why inflation is sticky

Corporate profit expectations

Gold

M2 growth over two years = +50%. Gold +45%. Gold will sniff ahead the next QE and peak in ST interest rates. Gold should rise in periods of stagflation, but liquidity may force some to liquidate their gold to access dollars.

Silver

Bitcoin & the crypto debacle

Some companies will thrive through the use of blockchain tech

Run for USD has reached panic mode

Dollar breaking ball

CNY

EM flows

CHF bounces

Sending the SMI crashing (nice head and shoulder!)

EUR

JPY is in trouble

Dovish when currency falls = more fall

Fixed income

The SNB is finally capitulating and stopped weakening the CHF by announcing a surprised 50bp hike, still showing negative rates.

T bonds down

1y treasury bill

2y bond yields

10y bonds: soon a buy

20y bonds

Inversion

JJBs feeling sick

PIGS dont fly anymore as Italian bond yields reach 4% for the first time since 2014

Corporate bonds: investment grade

Junk bonds

Volatile bonds

Real estate

No bid on MBS last week shows that liquidity has completely dried up and nobody wants to fund new mortgages. Mortgage rates spike with 30y mortgage in the US at 6%. Even in Switzerland, the 10y mortgage (which was 0.7% at the lows, is now at 3%!). The housing market is about to crash.