JR = Julian Rimmer (Resident Boomer and former EM markets pro, turned writer.)
DGG = Dario Garcia Giner (Resident Zoomer and former corporate investigations pro turned meme stock-watcher and in-house drone expert.)
ChatGPT Provided TLDR
- Fed’s Rate Castaways: Market reactions to the Fed’s bond decisions.
- Powell’s Policy Perspectives: Rate cuts, yield curve analysis, oh my!
- Turkey’s Currency Tango: Interventions and economic repercussions.
- Taiwan’s Tightrope Act: Geopolitical insights in a high-stakes scenario.
- Crypto Chronicles: Bitcoin, Ethereum, and their digital destinies.
- Lagarde’s Digital Dazzle: Unveiling the digital euro and its impact.
- Musk’s Galactic Gadgets: SpaceX orbits and Tesla’s recall roadblocks.
- Newsom’s Fiscal Fandango: California’s fiscal policy and its sway.
- Russia’s Economic Riddles: Strategies and implications in the global stage.
- Arms Amigos or Foes?: Comparing Western and Russian arms manufacturing.
- Investment Adventures: Suggestions for defense-related endeavors.
- Vintage Vino Vibes: Wine recommendations and personal stories.
- UFO Whispers and Whistleblower Wonders: Extraterrestrial talks and secrets revealed.
welcome to the penultimate broadcast of SML for the year but the final output with dario
as tomorrow I will be joined by Izzy
and on this valedictory note, I would like to thank Dario for illuminating many of my blind spots (dear reader, they are legion) in recent months, in particular crypto, Reddit, meme stocks, tech and the geopolitics of obscure parts of the world. For this Dario, I thank and salute you.
good moaning
nunc tempus loquendi
Hello!
I haven’t had this much fun in literally years. Little compares to Julian’s writing flair, his hard-earned (and oft-denied) wealth of knowledge, and ability to find something hilariously wrong with pretty much everything.
Our show is far too good to be halted – if you guys have any word or ideas on sponsors we’d love to listen. Boomer versus Zoomer must continue!
Lets start with some markets miscellany!
The VIX just hit its lowest level since Jan 2020 on December 12, as markets correctly anticipated the FED’s pivot
UST10 @ 4%?
Never mind Redditors going YOLO all -in on crypto, how about bond traders?
(see the effect you’ve had on my diction, Dario)
The yield curve is the best economist.
always
The mkt now pricing in 6 rate cuts in 2024 rather than 4.
Here’s what Powell is forecasting… (and by the way is the birthday of Nostradamus)
At this point I’d like to make a case for the return of the obscure word ‘palumbine’ to the modern English vocabulary,
I’m hoping for a recurrence of the Baader Meinhof syndrome where this world will now suddenly start appearing in unexpected contexts.
After Powell’s palumbine display then mkts are expecting smthg similar from the ECB. Markets have repriced ECB expectations for 2024 by almost 20bp.
Markets are pricing -157bp for next year.
DXY 5% off its highs but still essentially unchanged on the year
Doing a lot better than Turkish lira
which has declined from 1.48/usd in 2006 to 29 now despite the CBRT’s stealth currency market interventions, only just revealed, at $256 billion Jan 2022-Nov 2023.
the extent of it i mean was only just revealed, everyone kinda suspected it
Straightforward illustration of how Erdogan impoverished Turkey merely to be re-elected.
What was the Sun Tzu quote?
‘an evil man will burn down his whole country to rule over its ashes’
Taiwan’s central bank left its rate unchanged @ 1.875%, no move since March
Inflation there is ~3% but the risks to the DPP govt of not getting inflation back down are existential.
in terms of being voted out of office and then it’s game over for Taiwan given the chokehold of the CCP on Taiwanese opposition
A weakening economy will open the door for those other masterful economists and administrators (ahem) from the mainland to criticise and make a case for pro-Beijing candidates in the 13th Jan elections.
Lai Ching-Te’s lead is shrinking in the polls.
there’s an article to be written here about the stealth takeover of Taiwan by the Chinese. No war is required if you simply buy the opposition
It seems the green transition is decked in the world’s best camouflage
Adding fuel to my personal fire – that a planned forced change to renewables by 2030 isn’t just farcical, it’s a full fledged attack on the Western poor by the bureau-rats and their ratty supporters in mainstream news and corporate PR desks
And speaking of adding fuels to fires
Some interesting data to complement yesterday’s chat about the benefits of renting
It’s never more expensive to buy a home versus renting it in the United States
I have a couple of things gold and bitcoin related to impart
Superb piece from the redoubtable Jeroen Blokland on substack
‘In the case of Bitcoin, investors are eagerly anticipating the next ‘halving,’ where Bitcoin miners’ rewards are halved again. My recent study on previous Bitcoin halvings suggests that economic and market conditions in April 2024, when the next halving is expected, could be fairly comparable to those around previous halving’
‘Decreasing supply is an important factor likely to influence Bitcoin’s price development during the halving cycle. The Glassnode chart below shows that the share of Bitcoins held for over a year has risen to 70%. And although rising prices will convince more investors to sell, the 30% share of short-term supply is exceptionally low.’
Similarly with gold…
A recent survey by Bank of America indicates that 71% of American investment advisors recommend a gold allocation between 0 and 1%.
That’s almost nothing.
There’s an immaterial, almost divine power to shiny things other people covet
And speaking of immaterial things other people covet
It’s been a big week for all things crypto
The first thing was JPMorgan analysts who wrote yday that Ethereum will outperform BTC and be next years star crypto
Look at what people do, not what they say. JPMorgan’s been getting into crypto more and more while saying the opposite. I’d say it sounds like someones trying to keep their purchase prices as low as possible
So, Julian, i know very ltitle about anything technical
But I suspect I may know a little bit more than our audeicne
So I’ll channel my inner frank abagnale junior to stay just one page ahead of them and, heh, those suckers will never know
BTC will always be the ‘pureplay’ crypto because it’s the OG + its blockchain is independent (it has no true ‘master’ and can’t)
Ethereum’s use cases have distinguished it as the clear runner up
That’s because of a thing called DeFi – decentralised finance – and NFTs.
Both of these were a cornerstone in Ethereum’s dramatic rise in price and prominence
But it had one critical issue – transaction or ‘gas’ fees
For an all-digital system promising efficiency, the ridiculously high ‘gas fee’ price spikes occurred when the Ethereum blockchain became clogged (and it clogged often, just like my toilet)
Which has been encouraging radical changes to the ETH blockchain
So “Protodanksharding’ shoudl allow systems to trade ethereum and process the transactions much more efficiently
But
I would be wary of banking into Ethereum
From the way I see crypto, Bitcoin is the Gold, Ethereum is the FIAT
Bitcoin is impractical, expensive to move, but widely coveted for its timeless value (like Gold- BTC’s value of liberty doesn’t rust)
Ethereum is multifaceted, modern sleek and well designed
But to get there, it’s also had to sacrifice the independence of its network
This is because of the transition to proof-of-stake
Technical moves in crypto – deciding on reforms, updates, fixes, transactions, are done by individual verifications of the blockchain
In the traditional system – called ‘proof of work’ – a ‘block’ was validated and put in the ‘chain’ by verifying the solving of a mathematical problem, essentially
“Proof of work is literally proof that work has been done to validate the network’s transactions and generate new bitcoin. It is the consensus mechanism and algorithm that uses computing power to verify transactions and add them to the Bitcoin blockchain. Such a mechanism allows the Bitcoin network to be trusted and remain decentralized.”
But such a system is REALLY not efficient
Which was leading ETH to have these really high gas fees
Proof of Stake on the other hand means the Ethereum verification will only verify whether the verifier holds Ethereum
Whether they hold a ‘stake’
The clue is in the name
But placing validation at the mercy of ethereum owners rather than computational power it makes the network vulnerable to control by its major stakeholders – it loses the decentralisation shrine at which crypto bulls have prayed since their inception.
If I could predict anything its that while ETH’s value and use case will easily outstrip Bitcoin, and probably sooner than later, when the inevitable crash comes at the next cycle, Bitcoin will hold while ETH may crash.
Personally – remember – I don’t really understand any of it! But I put my money where my mouth is. And I have 2k more BTC than ETH
And speaking of crypto – little side news
Lagarde came in with some spooky news
What do you make of her, Julian
CBDCs are the ultimate solution looking for a problem – but that’s best left to Izzy’s hands
Key is CBDC implementation that it’s BTC-bullish
If major economies start officialising sovereign cryptos, it renders digital transactions the new norm, making them the default marketplace @peter, and thus rendering the OG, uncontrollable, decentralised Bitcoin as the definitive ‘gold’
a bit on NApolElon
SpaceX will sell insider shares at $97 apiece in a tender offer, a price increase that boosts the value of Elon Musk’s space and satellite company closer to $180 billion,
‘ according to people familiar with the matter’ – ie Elon
but on the other hand, he had some bad news
TSLA will fix more than 2 million vehicles — its biggest recall ever — after the top US auto-safety regulator determined its driver-assistance system Autopilot doesn’t do enough to guard against misuse.
excellent analysis here from JL Cauvin
and just one thing that probably pertains to the US presidential race next year
Interesting to note Gavin Newsom’s latest manoeuvre to establish a fiscally responsible position… spending freeze on budget deficit of $68bn.
Less tax revenue as high-earners desert the stat for lower-tax regimes elsewhere in the states.
and any time we mention California, we are obligated to remind viewers it is 14x the size of Belgium
The gross domestic product (GDP) of California was about 3.59 trillion U.S. dollars in 2022
I must preface his comments about bringing good news with my own views of news…
No news is not good news; it is often bad news of which you are not yet in receipt
Good news is often bad news in disguise
And bad news?
Bad news is bad news.
Anyway, Albert wants to tell us: “I bring you good news’.
China’s economy is sliding into deep deflation. Why is that good news? Well, the ‘West’ wants lower inflation, while China (and Japan) wants higher inflation. There is a deal to be done and maybe all parties can benefit”
for Albert the big surprise of 2022 was not the US avoiding recession but the Chinese recovery that never materialised.
11:10 JR:
‘Without that rebound, China has had to grapple with excess debt, excess capacity and the consequent ever-deepening deflation, especially in consumer goods (see chart below). But isn’t this good news for the ‘West’ as policy makers surely must want to import some of China’s deflation?’
China needs to learn from Japan: devalue and export deflation…
today occasions Putin’s televised press conference and national phone-in show
The most god-awful event imaginable, stage managed within an inch of its life and featuring crazy baboushkas calling in asking him if he likes pelmeni and if he’ll ever get married.
Putin says there will be peace with Ukraine “only when we achieve our goals […] and those goals have not changed.”
They still include the “de-Nazification” and “demilitarization” of Ukraine – i.e. a total capitulation to Russia.
he is trying to call the west’s bluff, doubling down and threatening to conscript another 500k men
It sounds like he may be right in calling our bluff
Firstly, share of oil and gas revenues in Russia’s budget fell below 29% to 28.3% of total revenues, while revenues mostly have returned to pre-war levels.
Which is below their 34.2% goal – they want to wean off the easily sanctionable stuff
More confusingly, Moscow is now earning more income monthly from oil exports now than before the invasion of Ukraine
John – what the heck more do you expect him to do?! A ritualistic sacrifice of Putin?!
But there’s more to Russia’s eventual win
Agreed Julian – but weapons are very valuable!
So as we often say Russian arms production not only far outpaces the West in quantity
More critically, they are also outpacing us in ‘philosophy’
truly
By mass-manufacturing effective weapons that are disposable and made of cheap materials, while remaining technologically supple, the Russians have demonstrated their arms manufacturing base is in-line with their military philosophy.
“NATO doesn’t exploit this (battle testing) opportunity. Russia is significantly improving its defense industrial base. NATO doesn’t. NATO is hoping that its existing military advantage in technology and training will last. But hope is not a strategy. Instead, NATO must innovate and test”
Instead, NATO arms are still extremely high-quality, high-tech and low-output.
Which does NOT work in modern warfares ultra high attritional environment
everything dies, and dies quickly. So you need a lot
While this may work (just about) for an American economy that still holds a strong manufacturing base, it is making a de-industrialised Europe, which relies on this American philosophy for military strategy and technology, even more dependent on American imports.
This leads to pathetic events as shown by the meme below
While it’s not exactly accurate that ‘everyone is suing each other’ in the EU, it is true that European arms manufacturers have been extremely reticent to ramp up production lines without rock-hard guarantees from the European Union:
https://www.consilium.europa.eu/en/press/press-releases/2023/07/07/asap-council-and-european-parliament-strike-a-deal-on-boosting-the-production-of-ammunition-and-missiles-in-the-eu/
In fact, Western arms companies totally failed to ramp up any production capacity in 2022
This has meant the EU’s pledge of sending a mere one million rounds of ammunition to Ukraine is falling short of the March 2024 deadline- only 300,000 shells have been sent so far to Ukraine as of late November.
“The outlet said Kuleba attributed that to the limitations of Europe’s defense manufacturers, rather than a lack of enthusiasm.
The unnamed EU source echoed Kuleba’s statement, saying that the EU’s main problem was its production capacity, per Politico Europe.
11:17 DGG:
European top manufacturers have struggled to keep pace with Ukraine’s daily ammunition consumption, estimated at 6,000–7,000 by Estonia’s defense ministry.
This, in turn, means Ukraine has struggled to keep up with Russia’s firing rate of 20,000 to 60,000 per day at the height of its barrages this year, the outlet reported.”
Well not exactly Julian
Because
While some estimates claim European ammunition production may reach parity with the United States output by the end of next year, there are two problems with this
The first is that more EU help is needed for European arms to keep this pledge/expectation
In total terms, september saw figures show that Russian manufacturers ammunition production capacity is more than SEVEN TIMES the combined total of Western countries.
Or Russia’s continual lunacy
Broken clock and days, after all
What this makes clear, at least to me, is the future of Western arms manufacturing likely lies in the United States rather than Europe.
Buy Lockheed Martin, Raytheon (RTX) , Boeing, Northrop Grumman, and General Dynamics.
The ETFs I’ve seen that aren’t half bad and include these are:
iShares US Aerospace & Defence ETF
Invesco Aerospace & Defence ETF
SPDR S&P Aerospace & Defence ETF
Or you could go for some more niche, tech-focused defence ETFs:
ARK Space Exploration & Innovation ETF
The last one is particularly interesting, it includes some companies we’ve bene highlighting here before
Particularly KRATOS
to the second-last of my top ten wines for 2023
and the cheapesst
nunc est bibendum
this humble, little blanqutte de limoux
Blanquette literally means, ‘little white wine’.
It’s only £15 a pop
Sometimes a wine and one’s enjoyment of it, is not about the wine itself but rather a time, a place or a person and this fairly pedestrian, sparkler does exactly that.
it transports me back to happier times
Mostly chardonnay, light and refreshing, bit of almond, and white stone fruit, nothing complicated about it but it is steeped in memories for me and I had half a bottle of this last night with some burrata and cherry tomatoes
and almost felt christmassy for a moment. That moment soon passed.
It doesn’t have a purple cork, that’s a silicon champagne stopper – that works.
now Dario, your final hero of 2023?
One Dave Grusch
I was fortunate enough to hear about Grusch’s claims a full month before everyone else
During a chat I had with Ross Coulthart around then as I investigated the consequences of UAP transparency on aerial safety for commercial airlines
Thank you for the nomination Peter! Any more are welcome!
In short, he also claimed a crashed vehicle of unknown origin in 1933 in Magenta, Italy, was the source of this program – which was further boosted by the Roswell crash
Now – this may sound bonkers. It even did to me – and I was familiar with all these claims (they’re all VERy old claims)
I’m not commenting on the plausibility of the claims
What matters
Is not whether he’s a whistleblower etiher, or if he’s just being put up to it
But that a US intelligence veteran testified UNDER OATH to Congress, and that the IC Inspector GEneral called his claims ‘urgent and credible’
That is the ONLY Thing that matters – and the only proof you need – to know that UAP intrigue is real and fully “in-system”
I’m well past convincing people about the reality of UAP
It’s like wanting to talk and discuss on the earth’s rotation with people still convinced its flat despite all evidence to the contrary
But for bringing to light these ancient claims in a vetted context, Grusch gets my plaudits
What does Trump exploit? The yokel’s congenital and incurable hatred of the city man—his simian rage against everyone who, as he sees it, is having a better time than he is
12:30sir mark rowley sounds like a worthy cause and we are open to hearing left field suggestions for others and while we wait for that, please make a note if you can to send us any feedback or suggestions
we’d love to hear what people think (although in my experience this tends to merely open the floodgates on a cloacal deluge)
nunc tempus taciendi
