Current macro economic ideas

in #macro8 months ago

Structured products (ETFs) that short volatility (VOL) and sell options to juice returns can trigger a 2018 VOLmageddon-like event. I don't think it's likely in the very near term, but I would be careful selling options. Volatility is very cheap now. You could also hedge by going long on market makers.

US rates will go down later this year. They won't wait for inflation to come down to 2%. The low for bonds may be in. Long-term, I don't like bonds because we probably are in a decade of higher secular inflation and higher rates.

Stocks and crypto will probably continue to do well in the very near future, but we might see a pullback. I think it will be smart to buy.

We are in a period of structural high inflation because of forces like more deglobalization and populist government policies giving more handouts. You either maximize GDP or choose a policy where wealth is more evenly divided. Inflation assets will do well, such as metals, gold, copper, and oil.

China can experience a beautiful deleveraging, but I wouldn't really mess with real estate or most Chinese stocks. However, I do think Chinese tech stocks are undervalued, particularly automation and AI stocks. They are very cheap from a valuation standpoint, and an aging population will drive even more need for further automation. I don't see the Taiwan black swan happening.

I have long thought a Biden vs. Trump rematch would happen. Right now, it's looking most likely Biden will win even though the polls say otherwise. But this can still change; it's too early to call because there has not been a landslide election for a long time. You can clearly see a shift to more extreme left and right polarization on the political spectrum. I think this is partly because of the growing inequality due to the central bank policy that has favored people with assets (the rich).

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Underinvestment in energy while population still rises and we need more and more energy to fulfill demand. Think about all those servers running AI that will need to be powered. Even crypto mining is very energy intensive.