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Bill Ackman’s Bombastic Bond Short
This is the part where I'm supposed to tell you US bond yields are destined to trek higher because the world has changed.
It's fair to suggest that's the unofficial consensus by now. Everyone's a political scientist, a foreign policy buff, a geostrategist (I don't even know if that's a real thing, but it could be!) and a passive aggressive fiscal hawk. All of that imaginary expertise and tilting at deficit windmills is leading everybody who's anyone to call for sharply higher long-end US yields
Love the Chipotle bit.
SPR is from another era, before Fracking and the shale boom, that is just a scare line. We are not at the mercy of OPEC like the 1970’s.
Agreed, and now the US is the top producer of natural gas and the main supplier of LNG to Europe.
As Mr H points out, Ackman’s disingenuous rhetoric is less amusing than misleading which is challenging because some facts are woven into the narrative…. everyone’s selling something (often their own “book”).
exactly. Google “freedom from OPEC” you’ll find me. And, to be very clear, the Conoco deal in Alaska IS the new SPR. We’ll buy a little more from Canada and maybe a bit from Venezuela for the heavy sour and then at some point, when EVs are ramping up even faster, think 2026-7, the gub’ment will do a refill deal with the XOM, CVX, OXY aka Berkshire, Pioneer and Conoco to refill the SPR for no apparently necessary reason at that point so that they can add it to the mountain of carbon capture credits earned for doing something that is less effective than growing trees.
the reasoning I have heard from the bond longs is that the US and world economy can’t sustain high interest rates because of the high debt levels. they are counting on central banks to start up QE again when the economy goes into recession. Their actual narrative is the central banks will be forced into QE eventually, no matter what to drive down rates. Or maybe AI might save us. The bond bulls aren’t betting on that.
Funny you mention Bill and Chipotle. Because I work in NYC and ran into Bill in Chipotle….no one recognized him but me. I can see him running into a CIO there…that is actually believable.
No love for the silver fox, eh?
here’s where debt and dollar hawks have been wrong, well, forever. The UST is cash to most banks, nations and companies. As long as there’s liquidity, it’ll always be as close to cash as you can get without being cash. The dollar is strong not because rates are normal again, but because the U.S. economy with a little reshoring, infrastructure investment and strategic planning, think clean energy, EVs, semiconductors and 500k Venezuelan work visas is stronger than any other large economy on earth, not by a little, but by a lot. Think Hank Aaron vs some random platoon or 4th OFer, i.e. China or Europe. I guess Japan is pretty good because they help each and invest in each other between panty sniffs, but I digress. America has no peer, that’s why the dollar is strong, and when the interest rates fall to a 2-3% handle on Fed funds with the 10 year a point higher, the dollar will still be strong. Why? Because we don’t really have a debt problem. AI will actually save us from trillions in healthcare expenses as doctors can prescribe the right thing without slow walking from least intrusive to most while you get sicker, because AI will assist and importantly, AI mitigating legal liabilities. The next immigration wave will be a million nurses assistants from anywhere people want to apply from. My guess is quite a few from Mexico and everywhere else folks want to get away (not a Southworst spot). The U.S. will be running a balanced budget in the 2030s as Millennials are in peak earnings, Boomer healthcare isn’t so expensive and most of the Trump tax cuts go bye bye. We don’t even need to raise rates, just let the loopholes expire and probably limit the stupidity of carried interest and 1031 exchanges without real investment.