Transitory

In the end, isn't everything?

Have been busy the past week setting up a revamped dashboard. It’s more of a “fill the gaps” affair where I built what I couldn’t find elsewhere. It aims to add rather than replace existing resources. If you have any suggestions, do drop it on chat or comments below.

Markets this Week

Dashboard: fixed income, currencies and commodities.

Links

Inflation is rolling over. Yay!

Over the past five months (June to November 2022), inflation has slowed to a crawl. Whether measured by the consumer-price index, or CPI, which most people watch, or the price index for personal consumption expenditures, or PCE, which the Federal Reserve prefers, the annualized inflation rate has been around 2.5% over these five months. (WSJ)

An “inflation surprise” is the difference between the actual inflation rate and the median of forecasts collected a month before the data release. In early 2022, those inflation surprises kept getting bigger. But now the gaps seem to be getting smaller. Over that last few months, global inflation surprises have swung broadly negative, indicating price increases have cooled more than many economists expected. (@acemaxx)

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“Free” trade never existed.

Diva Jain @DivaJain2

This “India needs Free Trade and lower tariffs” is one of the most egregiously misinformed screeds that ignorant western commentators subject us to with nauseating regularity. Here is a little lesson in Economic History for Mr Dhume. 1/n

wsj.comOpinion | India’s Middle Class Needs Free TradeThe country’s market for consumer goods isn’t nearly large enough to lure foreign companies.

Agathe Demarais @AgatheDemarais

"The world's third-largest computer maker by shipments told suppliers late last year that it aims to "meaningfully lower" the amount of China-made chips it uses, including those produced at facilities owned by non-Chinese chipmakers."

asia.nikkei.comDell looks to phase out ‘made in China’ chips by 2024‘This trend looks irreversible,’ supplier exec says of tech industry’s production shift

Michael Pettis @michaelxpettis

1/10 "Chinese state media appear to be downplaying concerns that countries such as India could steal China’s crown as the so-called world’s factory." They cite one economist who notes that “India’s land-transport logistics costs are... sc.mp/k1oz?utm_sourc… via @SCMPNews

sc.mpWhether China can maintain ‘world factory’ moniker remains hotly debatedDisparaging comments in state media about India’s ability to supplant China in manufacturing come as multinationals have increasingly been diversifying supply chains.

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Aswath Damodaran doing God’s work.

Aswath Damodaran @AswathDamodaran

My data update for 2023 is up and running. I update risk premiums for equity and bond markets, industry averages for risk, profitability, leverage and dividends, among other variables across publicly traded companies.

bit.lyData Update 1 for 2023: Setting the table!A blog about markets, finance and all things money related.

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You only think you know…

Brandon Beylo @marketplunger1

As investors, we assume that we'll spot the tell-tale signs of an impending revenue growth slow-down. That's not true. The fact is that most companies that stall NEVER restart growth. Here's a thread on "Stall Points" & how to spot them before they destroy your capital ... 🧵

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Level 2 thinking…

Tyler Hayden Kling @tylerhkling

Fed Study confirming what most traders have known for a long time. Trading is about analyzing other people's behaviors. Study poker not economics. bloomberg.com/opinion/articl…

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Your higher Sharpe could be just a liquidity & transparency premium.

Clifford Asness @CliffordAsness

An alternative working title of this piece was “Schrodingers Equity” meaning equity you don’t know the price of until you open the box and look. But ultimately I went marginally less nerdy. #VolatilityLaundering II came up with another very good title. https://t.co/mJa88THO0z

The problem of having liquid wrappers around illiquid assets has been flagged ad nauseum. But hope prevails over experience. Exhibit A: BREIT

Investors find out that the fund is grossly mismarked and run for the exit…

Since the fund repurchases redemption requests at their most recent quarter’s net asset value, it became a rare asset investors looking to raise cash could sell at annual highs. (FT)

… the fund manager closes the gates…

Blackstone Inc limited withdrawals from its $69 billion unlisted real estate income trust (REIT) on Thursday after a surge in redemption requests. (reuters)

… waking up the SEC…

The U.S. Securities and Exchange Commission (SEC) has reached out to Blackstone Inc following an increase in investors pulling money from its real estate fund. The regulator is trying to understand the market impact and circumstances of the events. (reuters)

… and then comes the bailout…

The tl;dr is that the UC is handing BREIT $4bn of cash for six years and getting a guaranteed minimum net return of 11.25 per cent in return. The endowment will pay higher fees if BREIT hits that hurdle — in practice giving up some upside — and if it doesn’t then Blackstone will compensate it from a $1bn backstop of its own BREIT shares. (FT)

… but the fees are forever.

BREIT has two fees: an annual management fee of 1.25% of net assets and an incentive fee of 12.5% if the annual total return is 5% or higher. These fees totaled $1.4 billion so far this year. (barrons)

Meme of the Week

Chris Bakke @ChrisJBakke

This is why mortgages are 7%, your portfolio is down 65%, and everyone is getting laid off.