- Fink ðŸ§
- Posts
- Are the elephants coming home to roost?
Are the elephants coming home to roost?
Roosting elephants? Almost as mental as thinking the market might go down, right?
That's what I had mentioned on Friday in this piece.
Just a quick update to the numbers on this one...
Today's Initial Jobless Claims came in at +261k.
Ignore the May print.
There was a revision there which means today's print is the highest in 19 months!
Yikes.
Now what's also pretty shitty looking is how commercial real estate loan origination has been stagnant for a while now, and commercial and industrial loans have been in a bear market through 2023 after a ridiculous mid-2021 to Dec 2022 bull trend...
If people aren't earning...
Then cashflow is not so liquid...
Which means businesses aren't earning...
An we get a steaming pile of shite.
What do we do then?
This isn't really a trade recommendation, but a way to think of what the best outcome might be here.
If we are seeing the slowdown in Europe occurring...
If we're thinking inflation might have topped out for a bit...
And if we're thinking some people might panic a bit about the employment situation...
Isn't that all a little disinflationary, and so we should buy bonds?
Here's TLT for you US guys and non-retail non US peeps...
And here's IBTL which is very similar for UK fellas.
Yes, OK, I got my arse handed to me when I thought inflation would be transitory...
And then Russia threw its toys out of the pram and decided to invade another country like a three year old.
But I do like bonds here.
We've seen a steady downtrend in the 10y breakeven inflation rate through this last year, while bonds haven't really caught a bid.
For me this is quite a nice risk to reward view, but it is quite bullish on inflation starting to remain sticky to the downside, something I am cognizant that I got caught out on in the last couple of years.
But isolating factors, I feel as though the probability is in the favour of bonds.
Every time rates have been at this level or higher, something has broken, and I don't really fancy being short humanity to be perfectly honest with you...
So to express a view that inflation is no longer a consistently increasing phenomenon, I reckon bonds tickle my fancy.
Not yet though.
I think on TLT, buying a bit more than a taster would happen above $110 and on IBTL, it's a nice shout to start getting involved at current prices.