Opening buzz

Risk off today: gold up, bonds up, equities down, VIX up. Dollar ($DX) up, especially against emerging market currencies.

Bailout money goes to shareholders and creditors of already insolvent company

Well, who would have guessed that might happen? Here are the gory details.

What I read today

In this interview Russell Napier, of the Solid Ground Investment Report states the usual arguments that increased real money supply (created by commercial banks) will result in inflation. His pick is Swissies (CHF), on the basis that Switzerland has well-capitalized banks, and not much of a fiscal or current account deficit. The problem is with this that it’s not clear what trade will take advantage of this: if all countries are debasing their currency, what should I buy? Seems eminently reasonable!

It’s certainly more sensible than shorting equities, as Kuppy explains.

This article suggests that copper, and copper miners, are under-priced relative to gold miners. Antofagasta is considered a buy. Reasonably interesting thesis, although it does depend on China’s reopening and reconstruction boom continuing.

This longish piece from Nordea argues that Biden will be bullish for the dollar, and bearish for risk assets, and this might start soon. He also points out (as did Druckenmiller a month or so ago) that the US Treasury is about to drain a massive amount of liquidity from banks through UST issuance. The article quantifies this: $1.65 trillion UST issuance, with $0.483 trillion in June alone. A trillion here, a trillion there and pretty soon you’re talking real money, as Reagan almost said. Nordea argues that this has to flatten the yield curve. I haven’t had a chance to read the article in detail, but I think that Andreas Steno Larsen and Joachim Bernhardsen make some well-argued and compelling arguments. How risk assets have held up so well is a mystery to me. The bulls always say, if they are asked how they think that the FAANG can keep going up, they tend to say “The Fed, Bro.” But the Treasury is in some ways a bigger beast when it comes to impacting the money supply, and it’s draining it like Trump promised to drain the DC swamp. Unlike Trump, it’s actually happening, and will continue to happen as more of the real economy stalls, IMHO.