Tap Dancing with TINA & a Moment to Remember in US Monetary Policy
Macro Investing: The Rising Pressure of a Decade of Fiscal Profligacy
KCR’s investment process does not use macro inputs or engage in macro trading. We use historical security-level data around valuation, profitability, quality, and other metrics to identify opportunities for short sellers and long investors alike. Macro investing can be a challenging endeavor.
A great example is the enormous bailout of Wall Street used to end the Great Financial Crisis. Many people thought a brutal bout of inflation was inevitable. Instead, the world proceeded to borrow and spend ever larger sums. And the more governments borrowed and spent, the lower interest rates fell.
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A piece by the always-wonderful John Authers explained how the recent tax cuts in the UK detonated a Lehman-like crisis in gilts. His walk-through of the stunning -24% collapse and subsequent rally of the 30-year British bond was a terrific reminder of how the big picture doesn’t matter until it is all that matters.
This piece is not designed to wow macro investors or macro hedge funds. KCR was simply stunned at our own complacency on what is, ultimately, a very basic issue. The world has gone from pillorying the Fed for keeping rates too low to screaming bloody murder for taking them to 3.25%. In many ways, the agonies a meager 3.25% have caused global markets is a testament to the enormous leverage and fragility of our financial system.
We also believe the very simple analysis below is at the heart of why the Fed must shatter inflation.
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October 7, 2022 |
| Authors: Matthew Malgari, Nathan Przybylo, Dr. Sanjeev Bhojraj and John Durkin
October 7, 2022
Authors: Matthew Malgari, Nathan Przybylo, Dr. Sanjeev Bhojraj and John Durkin