MI2's Global Macro Summit

September 26-29| Vail, CO

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May 30, 2023
Since the start of the year, as our work started to flag the growing odds of a US recession, we have suggested fixed income steepeners. First, we took a stab at the front end, which, in a classic example of ‘it’s better to be lucky than smart’ and courtesy of SVB, was a slam dunk. Then, as a play on the higher for-longer element of the Fed’s opportunistic disinflationary policy stance, we went further down the curve in 5s30s.
May 23, 2023
  • Few regional banks hedged rate risk, so most need to raise fresh capital
  • At current bank valuations, that requires massive equity dilution
  • Declining NIM and increased loan losses are coming next
  • Only the Fed can prevent a vicious circle and ongoing credit tightening (and they think they don’t want to)
May 8, 2023
Even before the regional banking crisis, one of the recessionary headwinds facing the US economy was tightening credit. In that regard, few data points are more important than today’s Senior Loan Officers Survey, which is why we went as far as to suggest it could even change the Fed’s policy path. That didn’t happen, and today’s data was undoubtedly better than it could have been. However, as we will illustrate, we don’t believe it is anything to celebrate.
May 4, 2023
  • Xi to Biden: “If you force my hand, there will be war”
  • Yellen says National Security eclipses business interests. Sullivan reiterates and clarifies
  • US imports from China are both decoupling and reaching new highs. How?
  • China has started to refer to Okinawa prefecture as the Ryukyu Islands
May 2, 2023

If you are like us, your morning meetings are currently reflective of profoundly frustrating and choppy markets, which is terrible news for P/L. The good news is that it affords us the time to kick the tyres of our underlying macro views to see if anything has changed and hopefully offers some trading clarity. To the latter point, we have found a trade that not only fits well with our macro outlook but also offers an attractive risk-reward.

April 26, 2023
In a series of notes over the last couple of months, we have explained that in the US, our work is emphatically recessionary. Please don’t get us wrong, we aren’t suggesting a 2008-09 type calamity, rather, courtesy of an inventory cycle, construction slump and what appears to be worsening credit crunch, just a good old fashioned hard landing. Clearly, this should be very bullish for Treasuries. However, we have discussed our preference for steepeners vs outright longs because not only do you get the obvious bull play, but also the bear for free!
April 25, 2023
  • In 1966 inflation accelerated because of Johnson’s “Guns and Butter” policy
  • When the Fed hiked rates to fight inflation, duration mismatches caught the banks napping
  • The result was a rapid collapse in lending and serious collateral damage in real estate
  • The analogy is clear; will FOMC hubris come back to haunt them?
April 18, 2023
Mike Taylor joins Julian Brigden for a wide-ranging discussion of macro, politics and markets. Mike Taylor is a Portfolio Manager and Managing Director of CriticalMass Partners LLC (2011-2019), specializing in Healthcare Investing. For the past two decades, he managed hedged and factor neutral portfolios at funds including Millennium, Citadel and Diamondback Capital. Mike is regarded to have built and run one of the best-performing Healthcare funds on Wall Street.
April 13, 2023

At the start of the week, we explained that the most critical role of any macro analysis was identifying turns in the US dollar. We went on to explain how after a decade-plus of a virtuous reflexive appreciation, we believed the dollar could be on the cusp of a significant trend. However, having outlined some technical levels on our radar, we concluded that we still needed to see concrete evidence of a break.