Well done as usual. I appreciate the detail that you lay out. The excess liquidity in the system is not discussed anywhere, but here. Clearly this has caused the recession to be postponed, not cancelled!
Sep 20, 2023·edited Sep 20, 2023Liked by Florian Kronawitter
Impressive write-up; thank you for the analysis. You mentioned you expect "high nominal and real growth first, later followed by higher nominal growth only, a.k.a. stagflation" and indicated Large Cap Tech as the sole asset class that could benefit from both environments.
Given Large Cap Tech's valuations and regulatory risk, along with it potentially being a crowded trade, are you looking to buy value, small cap, metals, and energy because they offer greater potential upside?
What do you view as the largest risk to Large Cap Tech's investment outlook? Do you see Large Cap Tech as a possible low-risk, low-reward setup going forward?
Thank you. These are just my thoughts which may be wrong. I included "some large cap tech" as these have monopoly positions that likely capture all NGDP growth, and some of them are on reasonable valuation - not all!
Great piece, thank you. Treasury projects interest costs to be $865B for 2023, 1.4T for 2024 would be a gigantic jump. What drives that 1.4 figure - you assume increased bill issuance and Fed Funds rate at 5.5% all year? https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0823.pdf
Thank you! Yes, simple calculation, assumes 5.5% rate for whatever needs to refinanced next year. This also implies yield curve flattens, if issuance were predominantly 10/30yr would be somewhat lower
I guess this scenario implies a significant debt monetisation by the FED (and potentially runaway inflation)? As the size of the forecasted fiscal deficits would push most investors away
Thoughts on how this will effect FX? Surely hugely dollar positive vs. rest of world. Thinking about the dollar smile - outperforming US growth / exceptionalsim while ROW lags.
Well done as usual. I appreciate the detail that you lay out. The excess liquidity in the system is not discussed anywhere, but here. Clearly this has caused the recession to be postponed, not cancelled!
Thank you Phil!
Really enjoying your work Florian!
And I promise its not just because I tend to agree with you ;)
Thanks a lot! And agree should be good USD, though FX forecasts come w very high error rate…
Impressive write-up; thank you for the analysis. You mentioned you expect "high nominal and real growth first, later followed by higher nominal growth only, a.k.a. stagflation" and indicated Large Cap Tech as the sole asset class that could benefit from both environments.
Given Large Cap Tech's valuations and regulatory risk, along with it potentially being a crowded trade, are you looking to buy value, small cap, metals, and energy because they offer greater potential upside?
What do you view as the largest risk to Large Cap Tech's investment outlook? Do you see Large Cap Tech as a possible low-risk, low-reward setup going forward?
Thanks again!
Thank you. These are just my thoughts which may be wrong. I included "some large cap tech" as these have monopoly positions that likely capture all NGDP growth, and some of them are on reasonable valuation - not all!
Great piece, thank you. Treasury projects interest costs to be $865B for 2023, 1.4T for 2024 would be a gigantic jump. What drives that 1.4 figure - you assume increased bill issuance and Fed Funds rate at 5.5% all year? https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0823.pdf
Thank you! Yes, simple calculation, assumes 5.5% rate for whatever needs to refinanced next year. This also implies yield curve flattens, if issuance were predominantly 10/30yr would be somewhat lower
I guess this scenario implies a significant debt monetisation by the FED (and potentially runaway inflation)? As the size of the forecasted fiscal deficits would push most investors away
Thoughts on how this will effect FX? Surely hugely dollar positive vs. rest of world. Thinking about the dollar smile - outperforming US growth / exceptionalsim while ROW lags.