Thanks! Great financial breakdown of what I argue on a much more aggregate level. A question: you see a wealth transfer from citizens to government - I agree but see that as a ‘station’ on the way to private/industrial pockets. Basically, the state being the one organising the transit of funds from the regular man-in-the-street’s savings to industrial (oligarch) accounts. No?
1) what do u think of currencies over here, longing dollar basket for a sustained upside (20% over few months for currencies sound extremely good to me- from these levels) given oil is a 2x / -50% in both respective scenarios
and
2) would u say that the weakening dxy against rising yield would be a trigger for a long GOLD trade/ investment - redenomination of the world’s currency.
3) after they invade, i do believe that it is a moment of reckoning so probably the risk assets go down rather than up (i think most ppl are still in denial of reality and thinking deescalation is coming or rather thats how they are allocated)
1/ i wouldn't long DXY though i agree it could spike in short-term since it is against my longer term view.
2/ yes, we are bullish on gold. any short term dip would be nice to have.
3/ we have been shorting risk assets for a while and believe they will go lower. however there could be short term bounces when markets in extreme fear. but it doesn't change the bigger picture
1) isnt dxy pegged against a basket of other countries, majorly euro? in which case euro probably drops hard against usd first (the shorter time frame)
2) after which i would imagine OIL
has a blowoff top in which the only asset worth holding in the risk assets collapse in light of correlation-1 scenario is the dollar?
this is the nuance i am thinking about, thanks for your thoughts
1/ yes, in the short time frame, DXY will be strong and your scenario would play out. the weakening DXY is the story afterwards. that's why i frame the iran war is strengthening DXY but killing the reasons it would be strong,
2/ i also agree oil is the most obvious play here. i think the playbook of oil could be a rise and spike into the “boots on the ground” event. once the market is in fear. probably we will see a top of oil and a bottom of risk asset in a short term because people start to imagine US will be winning the war in days. once the hope vanish, the trend will resume. (simply a bold guess of the playbook)
1) what do u think of the odds of a possible export ban in the future?
2)
and given relative pricing of all currencies, wouldnt DXY simply go up even if
a) treasury yields going up
b) risk assets collapse
since other countries arguably suffer more (both on A and B) given that the world’s oil is still priced in dollars and that america is still a net exporter and banning oil exports arguably strengthen the dollar even more (as relative to importers currency?)
I think the oil prodcucers in the states are core trump donors. and they may not like it. so the chance should be low. even if they do, according the trump's dealmaker image, he probably will introduce something like an export tariff to claim the winning of the country.
yes. net energy importers get hit harder. but isn't on the DXY level. if the 10Y breaks 5% and if DXY is still falling that's the market rejecting US sovereign credit. basically the sovereign credit might play a bigger role here. then other currencies also gold etc. would have to "rally against DXY".
1) what do u think of the odds of a possible export ban in the future?
2)
and given relative pricing of all currencies, wouldnt DXY simply go up even if
a) treasury yields going up
b) risk assets collapse
since other countries arguably suffer more (both on A and B) given that the world’s oil is still priced in dollars and that america is still a net exporter and banning oil exports arguably strengthen the dollar even more (as relative to importers currency?)
Thanks! Great financial breakdown of what I argue on a much more aggregate level. A question: you see a wealth transfer from citizens to government - I agree but see that as a ‘station’ on the way to private/industrial pockets. Basically, the state being the one organising the transit of funds from the regular man-in-the-street’s savings to industrial (oligarch) accounts. No?
Great article. I think Path A remains the most credible path (No Ground Invasion) and should be the base case instead of your current base case (Path B). I’ve laid out the reasons why a ground invasion, although possible is still not the base case: https://asymmetryfinder.substack.com/p/a-ground-invasion-of-iran-would-be?utm_campaign=post-expanded-share&utm_medium=web
in which case:
1) what do u think of currencies over here, longing dollar basket for a sustained upside (20% over few months for currencies sound extremely good to me- from these levels) given oil is a 2x / -50% in both respective scenarios
and
2) would u say that the weakening dxy against rising yield would be a trigger for a long GOLD trade/ investment - redenomination of the world’s currency.
3) after they invade, i do believe that it is a moment of reckoning so probably the risk assets go down rather than up (i think most ppl are still in denial of reality and thinking deescalation is coming or rather thats how they are allocated)
1/ i wouldn't long DXY though i agree it could spike in short-term since it is against my longer term view.
2/ yes, we are bullish on gold. any short term dip would be nice to have.
3/ we have been shorting risk assets for a while and believe they will go lower. however there could be short term bounces when markets in extreme fear. but it doesn't change the bigger picture
i see the sovereign credit crisis point but
1) isnt dxy pegged against a basket of other countries, majorly euro? in which case euro probably drops hard against usd first (the shorter time frame)
2) after which i would imagine OIL
has a blowoff top in which the only asset worth holding in the risk assets collapse in light of correlation-1 scenario is the dollar?
this is the nuance i am thinking about, thanks for your thoughts
1/ yes, in the short time frame, DXY will be strong and your scenario would play out. the weakening DXY is the story afterwards. that's why i frame the iran war is strengthening DXY but killing the reasons it would be strong,
2/ i also agree oil is the most obvious play here. i think the playbook of oil could be a rise and spike into the “boots on the ground” event. once the market is in fear. probably we will see a top of oil and a bottom of risk asset in a short term because people start to imagine US will be winning the war in days. once the hope vanish, the trend will resume. (simply a bold guess of the playbook)
Hi Garrett,
1) what do u think of the odds of a possible export ban in the future?
2)
and given relative pricing of all currencies, wouldnt DXY simply go up even if
a) treasury yields going up
b) risk assets collapse
since other countries arguably suffer more (both on A and B) given that the world’s oil is still priced in dollars and that america is still a net exporter and banning oil exports arguably strengthen the dollar even more (as relative to importers currency?)
I think the oil prodcucers in the states are core trump donors. and they may not like it. so the chance should be low. even if they do, according the trump's dealmaker image, he probably will introduce something like an export tariff to claim the winning of the country.
yes. net energy importers get hit harder. but isn't on the DXY level. if the 10Y breaks 5% and if DXY is still falling that's the market rejecting US sovereign credit. basically the sovereign credit might play a bigger role here. then other currencies also gold etc. would have to "rally against DXY".
Hi Garrett,
1) what do u think of the odds of a possible export ban in the future?
2)
and given relative pricing of all currencies, wouldnt DXY simply go up even if
a) treasury yields going up
b) risk assets collapse
since other countries arguably suffer more (both on A and B) given that the world’s oil is still priced in dollars and that america is still a net exporter and banning oil exports arguably strengthen the dollar even more (as relative to importers currency?)