Global Macro Monitor

QOTD = Quote of the Day

h/t: Donna Brazilie 

After Chinese tech giants, Alibaba Group Holding Ltd. and Tencent Holdings Ltd., experienced their first-ever quarterly revenue drops and cut jobs by the thousands in 2022, hear this:

Xi Jinping has tamed the wild horses of the private sector… But the problem is that he did such big damage with his policy that the confidence of some entrepreneurs and foreign investors is already destroyed. – Ming Xia, City University of New York.

Merry Christmas and Happy Holidays, folks.

Thanks for tuning in to GMM, and stay tuned as we plan to ramp up the content big-time to make 2023 our best year ever.

The following Holiday ad is awesome and never gets old.  The little boy looks a lot like Tom Brady, no?

QOTD = Quote of the Day

This aged well.  We are empathetic with the pain out there but, just as in the case with the anti-Vaxers and COVID deniers, stupidity has consequences.  

Tesla (TSLA), the poster child of the latest leg of the bull market, which began in March 2020, is again testing what has been its unpenetrable support at the 200-day moving average. The stock has to hold here. Maybe, maybe not.

Tesla stock is now in a bear market, down 31 percent from its January 4th high. 

Crypto Crash

Moreover, Elon’s crypto hobby isn’t faring much better. 

Bitcoin is down 47 percent from its wait for it… 9/11 high, and down 13 percent from the Crypto Super Bowl just eight days ago.  Where art thou Tom Brady and Matt Damon? – GMM,  February 21, 2022

The pain is palpable with many of my millennial bros. 

The markets have once again become a social movement and everyone is now a genius.

I was lectured the other day by a friend, who said  I knew nothing because I didn’t understand that millennials are taking their stimulus checks and buying Bitcoin.  I tried to explain that was my point,  then asked if he knew what a price-earnings ratio was or what is the stock market capitalization to GDP.

He dismissed me and said something to the effect,  “Nope, doesn’t matter, you’re an idiot.”  Credibility is all about timing, baby, but timing is impossible…

I then tried to explain to him that markets don’t reflect a true fundamental reality because the government, via the Fed, has basically nationalized most of them through endless bailouts creating an alternative reality.  I conveyed that my investment philosophy is to buy low and sell high.

We then had a debate over Tesla, the stock that is minting money for him.  So he says.

He couldn’t distinguish between Tesla the car (we agreed the best in the world),  and Tesla the stock.  –  GMM,  January 11, 2021

This is a big deal, folks, which should be front and center on your radar. 

Without the central banks, including the Federal Reserve, taking down a large chunk of the effective net new issuance of Treasury notes and bonds (indirectly w.r.t the Fed) to finance the budget deficits, risk markets will struggle.   Central banks have morphed from the largest buyers of Treasury securities over the past two decades into the largest net sellers. 

Japan and China Selling

Last week’s TIC data confirms foreign central banks are still dumping their Treasury note and bond holdings.  Japan and China, both private and official, and the two largest foreign creditors to the U.S. Treasury, reduced their note and bond holdings by $217 billion from August to October, the largest three-month dump on record (see chart below). 

There are several reasons for the foreign selling,  such as central banks raising dollars to execute fx interventions to ease the pressure on their home currency and a general diversification away from the U.S. currency after the West weaponized reserves as part of the sanctions against Russia’s invasion of Ukraine. 

Zero-Sum Game

Flows into the various markets are a zero-sum game without the central bank injections and purchases or a substantial increase in private sector leverage. 

Why Are Treasury Yields Moving Lower?

Why are Treasury yields currently moving lower with the central bank selling?   In large part because the markets are selling stocks to buy Treasuries as a safe-haven trade and the duration jockeys betting on a U.S. recession. 

Keep this on your radar.  We suspect it will soon begin to dominate the tape. 

O.M.G!   

Just when you think the crazy stupidity of markets has bottomed, it just keeps digging. 

As my old boss, who helped blow up the “Queen’s bank,” used to say,  “ship ’em in.” 

Be careful of a “pump Trump and dump” scheme. 

h/t:  King David Of Mexico