Grey Value Management @GreyValue

This paragraph from $META's inside 10-q filling may mark the official announcement that the funding environment for the AI buildout has turned the corner. (HT: Barclays' Alexander Altmann)

Holy shit, Indonesia raised it's deposit facility rate by 25 basis points. They then CUT the share of deposits banks must keep at the central bank from 9% to 8% from November 1 and then to 7% from December 1. Do they think this is what's going to fix everything? Let me explain. The deposit rate hike's objective is to stop the rupiah from falling. Essentially, if you pay the banks more to hold rupiah, they presumably won't sell it. Right? But a reserve cut has the opposite effect, it frees about Rp190 trillion (about $10 billion) for banks to lend. If you've caught on, they are basically trying to hold up their currency with their left hand, and then flooding the banks with their right? Governments typically do this when they have two problems and one instrument. Ok, so then if Rp190 trillion frees, who get's it? The banks. And it's the three banks the sate controls. These are the same ones that hold most of the systems deposits. (Mandiri, BRI, BCA.) It doesn't take a genius to see what they're doing: the state squeezes its banks for dividends, the stock crashes, the central bank hands the same banks $10 billion of liquidity, the stock recovers. Talk about stockholm syndrome. Let's see how this develops.

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@Winnie_xplorer 106 - because you’re in the room.

@Halia0__ 16

@UnicusResearch Unless that person had just ingested some form of poison...

@rbrtrmstrng Agreed... “Desire is no light thing.”

@RobinWigg Well deserved!

𝗪𝗵𝗮𝘁 𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝗨𝗻𝗶𝗼𝗻? A quick reminder following Sumitomo Mitsui DS' recent wholesale regurgitation of its position in French government bonds: 𝗧𝗵𝗲 𝗲𝘂𝗿𝗼 𝗮𝗿𝗲𝗮 𝘀𝗵𝗮𝗿𝗲𝘀 𝗮 𝗰𝘂𝗿𝗿𝗲𝗻𝗰𝘆 𝗮𝗻𝗱 𝗮 𝗰𝗲𝗻𝘁𝗿𝗮𝗹 𝗯𝗮𝗻𝗸 - 𝗶𝘁 𝗱𝗼𝗲𝘀 𝙣𝙤𝙩 𝘀𝗵𝗮𝗿𝗲 𝗮 𝘁𝗿𝗲𝗮𝘀𝘂𝗿𝘆. At the end of the day, the European Union isn't so unified. (This is stating the obvious.) What is less obvious is why they chose to move the money into Bunds. Fundamentally: keep euro duration, cut French sovereign risk. But they chose Euro duration over USD duration. 𝗛𝗮𝘀 𝗱𝗲𝗺𝗮𝗻𝗱 𝗳𝗼𝗿 𝗨𝗦𝗚 𝗱𝗲𝗯𝘁 𝗳𝗿𝗼𝗺 𝗳𝗼𝗿𝗲𝗶𝗴𝗻 𝗿𝗲𝘀𝗲𝗿𝘃𝗲 𝗺𝗮𝗻𝗮𝗴𝗲𝗿𝘀 𝗽𝗹𝗮𝘁𝗲𝗮𝘂𝗲𝗱? If one so suspects, mind the gap. The convenience yield is partly why the US can borrow cheaply, so its erosion feeds into a higher term premium and more sensitivity to fiscal news - particularly when it comes to the hedge funds, pensions and insurers that are now a much bigger share of the holders. Translation: Ignore that tremor you just felt at your own financial peril. (And bring on the inevitable flood of articles re. the basis trade) #investing #stocks #bonds #EU #EUro #USD #debt #interestrates #Germany #France

An addendum to my repost of @QTRResearch's excellent post. The text immediately below is from an op-ed I wrote on the same topic for the @WSJ in March 2020 (link below). "By imposing QE and forcing interest rates to basement levels, the central bankers have effectively reduced the yield curve to a ladder with all the middle rungs ripped out. The monetary authorities deliberately deprived investors of the decent returns they could once achieve with bonds offering modest yields at reasonable risk. Frustrated and in need of income, many investors have essentially surrendered, taking on more risk than they should because they see no alternatives. Their only options have been either to take on too much credit risk by lending to dubious borrowers or assume excessive interest-rate risk by owning too many ostensibly safe bonds that will plummet in value in the event that interest rates escalate. Investors have been willing to reach for yield primarily because they have been conditioned to believe that bonds are inherently safer than most alternatives, including equities. But what if that isn’t necessarily the case? Much of the risk comes down to price, and quantitative easing has inflated bond prices to the point that many are downright dangerous." wsj.com/articles/bonds…

"Maybe money was simply too cheap for truth to matter." @QTRResearch

𝗥𝗮𝘁𝗲 𝗦𝗽𝗶𝗸𝗲𝘀 𝗮𝗻𝗱 𝗦𝗽𝗶𝗹𝗹𝗼𝘃𝗲𝗿 𝗘𝗳𝗳𝗲𝗰𝘁𝘀 If you don't understand the feedback loops driving the market, you don't understand the market. When there's less demand for bonds, prices naturally fall. And when prices on bonds fall, the interest rates those bonds pay to investors rise. And when rates rise, there's often 𝘮𝘰𝘳𝘦 selling on the part of forced sellers. Consider: The U.S. market for mortgage-backed securities (MBS) is massive, holding over $11 TN to $15 TN in outstanding securities and ranking as the second-largest fixed-income market in the US after U.S. Treasuries. The Fed was once the biggest buyer of those mortgage bonds, and it didn't hedge its interest rate risk. But when it stepped back from the market in 2022, private investors amped up their buying, and those private investors 𝘥𝘰 hedge. Among the big forced sellers of long-term Treasuries this week have been hedge funds and real estate investment trusts, which hold large portfolios of said mortgage-backed securities. As borrowing costs rise, Americans become more reluctant to pre-pay their mortgages. This extends the timeline over which the mortgages are paid off, so investors holding mortgage-backed securities have to sell other long-term debt such as Treasuries to compensate for the shift. Sell-offs typically trigger the need to reduce risk in other parts of investors' portfolios. While these spillover effects are common in a big sell-off, there are usually investors willing to step in and buy bonds at cheap prices, stabilizing the market. Which leaves us with the ultimate question of the day: 𝗪𝗵𝗲𝗿𝗲 𝗮𝗿𝗲 𝘁𝗵𝗼𝘀𝗲 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝘁𝗼𝗱𝗮𝘆, 𝗮𝗻𝗱 𝘄𝗵𝘆 𝗮𝗿𝗲𝗻'𝘁 𝘁𝗵𝗲𝘆 𝗯𝘂𝘆𝗶𝗻𝗴? #interestrates #investing #realestate #mortgagerates #stocks #bonds #debt #inflation

“they didn’t regulate. They notarized the carcass.”

RNPH @RNPH288303

4 weeks ago

@business The life company is a state license. The money is in Bermuda. The fee is onshore. The shortfall shows up as a cap on your death benefit. That’s not capitalism finding a bid. That’s why insurance commissioners exist. PHL: $2B hole, RICO complaint, $300k cap. If regulators only

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This is ABSOLUTELY wild. The reverse mirror image is so accurate it's almost scary. Very scary. The inverse of the 10yr yield is.... $MCD. What a sight.

🦔A two-tower office complex in downtown Philadelphia was appraised at $471 million in 2019. A judge just approved its sale for $70 million. The 85% decline means even the AAA-rated bonds backed by the property will take losses, only the third time that's happened since the 2008 financial crisis. Pimco, one of the largest bond managers in the world, holds roughly $58 million across the deal and faces over $35 million in losses. The building was 93% leased in 2020. It's 28% leased today. Over 30 other top-rated single-asset CMBS deals are now below 85 cents on the dollar, per Bloomberg. My Take AAA is supposed to mean you always get paid. Pimco bought that rating and is about to recover 44 cents on the dollar. The building lost 65 points of occupancy in six years and the agencies didn't downgrade the bonds fast enough for it to matter. The ratings were wrong in 2008 on housing and they were wrong here on offices. These single-asset deals were Wall Street's favorite product for a decade. One building, one loan, slap a AAA on the top tranche. A KBRA analyst called it "binary." Either everything pays or everything defaults. That structure hides risk behind a credit rating until it's too late to get out. And the BofA head of CMBS strategy said this is just the start. Chicago, Denver, Portland, downtown LA, none of those office markets have recovered and the loans are coming due over the next two years. At a 5.13% 10-year yield, no one is going to refinance a half-empty office tower. The owners walk away, the bondholders eat it, and the AAA stamp was worth exactly what it was in 2008. Hedgie🤗

This is potentially huge - not an overstatement…

Jamie Halse (Senjin Capital) 🇳🇿🇦🇺🇯🇵 @JamieHalse

a month ago

For the first time in Japan a Tokyo court has upheld an activist’s request for a (provisional) injunction against the implementation of a takeover defence measure that was approved by a vote of the target company’s shareholders. This is a major win for 3D Investment Partners

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Bond gods 🤜🤛 my book launch. penguinrandomhouse.com/books/750210/a…

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@umay1s5 I see Brian May, lead guitarist for Queen - I can’t be the only one

The more revolutionary a technology is (and AI is inarguably, profoundly revolutionary), the more overinvestment it logically attracts. And the more excess capital it attracts, the wider the financial blast radius will ultimately be - precisely because so much of the money it logically attracts can't possibly generate a decent return.

@simonmontefiore Must read for this list: simonandschuster.com/books/Voltaire…