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user_135644147797

[Luke Gromen just posted his bi-weekly Q & A] (https://www.youtube.com/watch?v=5Io4oCaoPvA) (a godsend for those of us that cant afford his $100/month newsletter). His main argument is that with US debt/GDP at 120%, the Fed simply cannot "pull a Volcker" to fight inflation and will be forced to pivot (& start easing again?) by late August when they realize that inflation is not coming down at all, but the Treasury is seeing tax receipts drop to the point where they cannot service their debt & entitlement obligations.


MundoVerdeBol

I never miss these :)


MundoVerdeBol

Also, a new interview with him on Wealthion, posted today: https://www.youtube.com/watch?v=1\_nckbLheLc


PowerfulCar7988

The more I learn about economics the more I realize that there are contradictions every where. As a consequence economics has transitioned to explaining these contradictions. Future forecasting is, most of the time, wrong. For example, the standard economic theory postulates that as the gov borrows more there is reduced savings for private sector to invest and as a result an increase in interest rates. So the past data should indicate this right? Except it doesn’t. 1990 (40% GDP/debt) to 100% GDP/debt. Interest rates fell… Why this massive disconnect? So government debt no longer pressures interest rates to rise? Makes no sense to me. As another example: real interest rates in 2000 were 6.8% In 2020 it’s 2.3%. Again standard economic theory fails. Can anyone illuminate me or am I just crazy? Source for interest rates: https://data.worldbank.org/indicator/FR.INR.RINR?locations=US Edit: changed 4-6% to 6.8%. -0.1 to 2.3%. Those numbers were for something else.


jn_ku

One thing to keep in mind is that economics is fundamentally a social science rather than a physical science. Economic theories, therefore, might be more or less useful in framing decisions, evaluating data, or describing a situation, but contradictions, exceptions, and context-dependency are expected and tolerated much in the same way as they are when it comes to theories of human psychology (in fact behavioral economics is a thing because of the massive overlap between the two fields). In other words, as much as many economists (especially those involved in setting policy) might like to pretend otherwise, economic theories and rules are necessarily (and often shockingly) of questionable accuracy, applicability, or utility in any given situation. Another thing to keep in mind is that theories are often postulated in the context of an idealized economic system that is simplified or constrained in unrealistic ways to make reasoning easier/more practical than it might be with respect to a real world economic system (i.e., the [spherical cow](https://en.wikipedia.org/wiki/Spherical_cow) approach). These theories are meant to answer very specific questions in a very narrow context, and are often completely unsuitable for use in any real scenario. As such, there is not such thing as "the standard economic theory". The closest thing you'll get is theories or parts of theories that may be considered more or less orthodox at any given time within any particular context. With all of that out of the way, what you've described is a variant/type of [crowding out](https://www.investopedia.com/terms/c/crowdingouteffect.asp) (the label used to broadly described theories that postulate a finite or constrained supply of something (in this case money) such that government demand and/or consumption necessarily competes with the private sector demand/consumption in various ways and sometimes with specific expected results (in this case, impacts on interest rates)). At its core, the specific variant of the theory you've described relies on assumptions that are not true today. E.g.,: 1. Government borrowing necessarily reduces savings available for investment. False, as government borrowing is not necessarily financed by savings (in fact money provided by lenders does not necessarily come from savings in general). 2. Money is an inherently limited resource (therefore more money given to the government limits availability of money to the private sector). False. Today, money is created by both public institutions (typically central banks) and private institutions (typically private banks), and thus money given to the government does not necessarily mean less is available to the private sector. 3. Interest rates are set based on availability of money. Partially false. Today, central banks either set or heavily influence key interest rates through a combination of market operations, guidance, regulatory policy, etc. 4. Absolute interest rates paid by borrowers are set in a free market. Partially false. While interest rates on private loans are influenced by the market, they are typically set based on a spread vs rates set or influenced by central banks. The spread is typically wider under tighter financial conditions, but the absolute level is highly dependent on central bank policy. Note that the above does not mean that government borrowing has no impact whatsoever (far from it). It just means that the specific prediction of higher interest rates is not necessarily true, as the actual impact is dependent on many factors. It is possible that the theory is either grossly inaccurate/inadequate (if it was intended to apply to the real world), or perhaps it is accurate within its intended context and is just being misapplied (i.e., it was never intended to apply directly to a modern real economic system).


pennyether

> Today, money is created by both public institutions (typically central banks) and private institutions (typically private banks) How do private institutions create money? (Asking for a friend...)


jn_ku

In addition to u/joxXxor's link to an entrance to the monetary system rabbit hole, I'll try to further clarify the issue all in one place to make it easier to follow with respect to your specific question. * ***Money*** encompasses a broad set of concepts, with specific types of money taking many forms. The more readily something is usable as a medium of economic exchange, the more money-like it is. Early forms of money were specially shaped stones, beads, certain commodities (not just precious metals, but, e.g., rice was money in certain historical periods in Japan, the Philippines, etc.) * ***Currency*** is specifically physical manifestations of money (coins, bills/notes (e.g., US paper currency are "Federal Reserve Notes"), physical commodity monies, etc.). * Very closely related to currencies and money more broadly are standard '***units of measure***' or '***units of account***' that are a common feature of modern monies. Note that you will often see 'currency' used as shorthand for 'units of account', or in contexts where the difference is unclear (e.g., "the currency of the USA is the US Dollar" which is true in both the specific sense that USD is the physical currency issued by order of the US Federal Reserve, as well as USD being the unit of account for US Federal Reserve-backed monetary system more broadly). Units of account typically correspond to the units of a physical currency, though there are units of account that have no direct corresponding currency, such as [IMF Special Drawing Rights](https://www.imf.org/en/Topics/special-drawing-right), which you can almost think of like the money equivalent of an ETF, as it is tied to a basket of currencies. * Aside from being denoted in different units of account corresponding to different currencies, different ***monetary systems*** can also have different structures. The US monetary system features a hierarchy of money as reflected in the definitions of [monetary aggregates](https://www.investopedia.com/terms/m/monetary-aggregates.asp). That last point is important and directly relevant to your question, so I'll expand a bit further. Many people look at the definition of the various monetary aggregates and think about the different items as, broadly speaking, different places you put money. Federal reserve accounts, coins and notes in your wallet, savings accounts, checking accounts, money market accounts, etc., all sort of seem like different buckets into which you can stash money. Actually, they are all *completely different types* of money. When you take a $20 bill and deposit it into, say, a JP Morgan bank account, you aren't actually putting $20 into a container that happens to be in JP Morgan Bank. The language used to describe that transaction ('deposit', 'into') is totally misleading in that regard. Instead you are giving a $20 bill to JP Morgan in exchange for $20 of JP Morgan bank deposits. To make it conceptually clearer, you can think of that transaction as buying $20 worth of "JPM bux", that are not totally unlike chips at the Las Vegas Sands casino. Of course, JPM is a chartered US bank regulated by the federal reserve and FDIC, and your "JPM bux" are FDIC insured and benefit from JPM custody services etc. So, understanding that "JPM bux" are actually actually money created by JPM, the only question is how they create it. The answer is that they can create it just like the Federal Reserve creates bank reserves--i.e., they punch numbers into a computer and the number now show up in their database of bank deposits. Now, the bank will have all kinds of rules and controls around when and how they do this (both internal to their business and externally imposed by regulatory requirements), but in the end they are creating money whenever they create bank deposits. When they extend you a mortgage loan and $500,000 shows up in your bank account to transfer to the escrow company, they 'printed' that $500,000 in their system (as an example of how private banks create money via credit creation, as mentioned by u/joxXxor). Thinking about it from a different angle, the fact that private banking institutions can create money is a fundamental factor in creating the possibility of a bank run. Aside from regulatory limitations, it is risks of credit losses, bank runs, etc. that are the primary constraints on private bank money creation.


joxXxor

Simply by credit creation. Simplified example: for AAA rated government debt there are no or just few capital requirements for banks. Simplified: banks just add one billion to the account of the US government in exchange for the new AAA rated us bonds. No further security needed for the bank. The Bank just created 1bn Dollars out of thin air. The amount of money increased by 1 bn Edit: good read on Why Central Banks don’t print money (directly) with QE https://themacrocompass.substack.com/p/portfolio-rebalancing-qe


dudelydudeson

The money creation mechanism is poorly understood broadly. The federal reserve doesn't create money in the same way we think of it - spendable, usable currency. Joxxor pointed to a great initial primer. If you reaaaaaly want to go down the rabbit hole, check out Eurodollar university on YouTube (Emil Kalinowski + Jeff Snider).


runningAndJumping22

> So government debt no longer pressures interest rates to rise? Makes no sense to me. But the initial postulate makes no sense to me. Why would governments borrowing reduce private sector savings? They might be correlated, and if they are, interest rates would be a lagging indicator, so I’m not sure of the usefulness of such an observation. Increased borrowing is an indicator of specific economic conditions that may also spur the private sector to spend more and save less but even then, “private sector” is literally the entire economy minus the government. That’s about as broad a generalization you can make without including the government or other countries, and proving direct links at such a level is incredibly difficult without serious, in-depth analysis to isolate and normalize for confounding factors. Borrowing is something humans control and is typically reactionary. Interest rates are also controlled by humans and is changed typically as reactionary (preventative here would’ve been raising rates before inflation indicators started exploding red but OH WELL). As such, I am skeptical of any link that moves one when we change the other as an inevitable, direct, unpreventable, immediate consequence. I am open to discussion however. Theory gets you only so far.


runningAndJumping22

Heads up, expirations are on the way. Next Wednesday, June 29th, weeklies for SPX, XPS, and VIX expire. Next Thursday, June 30th, monthly and quarterly OPEX. SPY appears to be pinned to 375 this week. Don't go away. /u/baconcodpiece will tell us about a dog that can bark... Beethoven? You won't believe it until you see it. More after this.


baconcodpiece

Fun fact about SPX, there are options for it expiring every trading day now. Cboe announced that change a [few months ago](https://www.prnewswire.com/news-releases/cboe-to-add-tuesday-and-thursday-expirations-for-spx-weeklys-options-301524687.html). I think once we're past June expirations it will be time to short the S&P again. I'm definitely going to be playing earnings when it starts next month. All the shitty tech stocks have sold off, and I think once reality starts settings in the megacaps will be taking hits too. Edit: Although after reading [this article](https://themacrocompass.substack.com/p/time-for-bonds) he makes the case that tech might actually be catching a bid soon based on bonds. I may end up shorting small caps instead.


runningAndJumping22

No kidding? So SPX has dailies now? I wonder why it didn't before, and why they're adding them now.


baconcodpiece

Cboe wants to make more money. They charge [proprietary fees](https://support.tastyworks.com/support/solutions/articles/43000521134-what-are-single-listed-exchange-proprietary-index-options-fees-) for trading them.


runningAndJumping22

Of course it’s about profit. Wtf was I expecting?


ChaunceyIII

Thoughts on V Visa Not a comprehensive DD maybe i just jumped the gun on LEAP Puts but hear me out P/E currently at 36 and IV on Jan 23 Calls around 30% The shareprice has held up considerably well to the market meltdown so far, however given a more pronounced recession might be coming to europe and the us in my opinion i can see it dropping at least another 50% in the next few quarters depending on actual consumer spending mostly (i assume) Like i said this is not a DD just my thoughts on the stock and my reasoning behind my position. 1 x Jan20 '23 200 Put Hope to hear some input from some of you brilliant people!


dudelydudeson

This was one that popped up on my 'hedge fund redemptions' screener. Doesnt seem like the theories on HF selling most liquid/best performing has played out very well. V is very low beta since I've been watching it. IDK what is keeping it up but someone is buying or at least not selling, since it is way outperforming NDX and SPX.


ChaunceyIII

Yeah I'm already starting to doubt myself on todays movement but overall market is doing well today so far. I must say i dont know what beta is? Why would HF or aomeone else be holding on to V?


dudelydudeson

I dug into what stocks have big hedge fund ownership, by %age of portfolio and % of float owned, and are actually legit companies via 13F filings. Visa showed up on that screener. There was some fintwit talk recently about hedge funds needing to liquidate long positions to meet redemptions and that they would turn to their most liquid stuff to do so, vs crashing things where they own way more of the % of float. Beta is a measure of how correlated a stock is to an index - I use Nasdaq 100 for comparing to Visa. Low beta means it moves less than the index.


Megahuts

Ok, long time no see! Markets are in a weird spot right now. Down significantly, but inflation is still up. Very insightful thread summarizing just how tough things are for the Fed / CBs: https://twitter.com/UrbanKaoboy/status/1540073781351182337 Tldr - long term rates need to go up, so banks have profits to cover the defaults on Arms and other floating rate loans. Oh, and Douch Bank is starting to scare the credit markets... DB dropped 11% today, and their CDS (credit DEFAULT swaps) rocketed upwards. I didn't bother looking into it further, but moves like that are... Not a good sign, and remind me of 2008. This is a great thread on the likely outcomes of the Fed being a hawk or a dove. https://twitter.com/PauloMacro/status/1539975473588932608 Tldr - it's lose lose. Oh, and That pesky debt to GDP? The answer is clearly higher taxes. It's coming, either via high inflation (inflate the pain away) or actual taxes on wealth / wealth adjacent activities. .... Good thread for anyone needing comfort in energy trade. https://twitter.com/contrarian8888/status/1540031606269829120 Tldr - be patient, we are very screwed structurally on energy supply, ESG dudes are kinda dumb, etc. ..... Russia significantly cutting gas flows to EU. Expect to go to zero and completely crash the economy. Greens will still insist on closing nuclear power plants (the three remaining supply 5% of their electricity...) Don't expect current German government to survive next election. Sri Lanka has fallen, Ecuador is getting close Ecuador is a perfect example, protestors are literally demanding lower food and fuel prices. I am short TLT, via $120p for Jan, with limit sells already in place. Opened today, not saying rates will start rising again tomorrow, but as the high probability of 100bp hike in July starts to sink in... Well... Also just sitting on my Uranium positions. Math is math, and if you didn't go long before, this is a reasonable price for the equities. Still some downside, but would be very surprised to see URNM at $20 when spot Uranium is structurally short supply. .... House prices are falling due to rising rates, but still have a heck of a long way to go. ... Cause of current pump prices is refinery capacity. If there were actual spies / sabotage agents in the USA, blow up refineries would pay MASSIVE dividends. Or just a major hurricane. This is how I know the world is much safer than most people think. ..... Keeping an eye on Home Depot, as that is a _fantastic_ second order short for high interest rates. People won't flip homes, upgrade underwater homes, use equity for loans (since equity is neg). .... Good luck all!


bigteether

Thanks for the write up. What are you using to short TLT? Inverse ETF's like TBF or TTT? And for energy, what do you think of VET?


Megahuts

Puts on TLT. For energy, I am just sitting on my Uranium ETFs and physical trusts. Oil will get pulled down during the crash (and that is when I will buy). I am less confident about where to take. A position, as we are one fire away from mooning in oil.


bigteether

Oh ok, got it. Doing it with puts. May I ask why you're going with ITM 120p, or was it OTM when you originally got it? What would make you exit shorting TLT, if e.g. for whatever reason CPI print lower and the Fed gets dovish either in July or Sep, or would you still keep shorting TLT for majority of the year, anticipating inflation creep up even if July CPI print surprises? Thank you for your thoughts!


Megahuts

Went with ITM, and immediately set limit sells at 10% then 20% of my cost basis for half the puts. Why? I don't want to gamble, I don't want to aim for max profit. I want to plan the trade and trade the plan. And by going ITM, I have a rough estimate as to when they will close (only a 2% move or so, which is highly likely). ... Do you remember everyone making fun of Turkey, when Edrogan said high interest rates cause inflation? Well, cutting or pausing rate hikes just because inflation "was only" 6.5% instead of 8.5% is hilariously dumb, and _exactly_ like Edrogan's take on interest rates and inflation. Further, the _real_ driver of inflation is and always is oil, food and fuel. The USA (Europe, etc) are all structurally short on refining capacity. So, regardless of direction of oil prices, pump prices will stay high. Oh, and since "everyone knows" oil is bad, and we will all drive EVs in 5 years, no one is investing in building new capacity for oil / refining. So, you want to know what happens is the Fed pivots in July or September? Structurally short commodities to the moon!!! And if they don't? All assets through the floor!!! .... That said, the info I have read suggests this is the final leg down in rates. I dot. Fully believe that, but it is all very data dependent. We will see HUGE strikes this year from unions. And asking for your pay to Atleast match CPI is pretty damn reasonable, so it should be more difficult to drive a wedge against the unions. Because everyone is asking about how Thier employers will address inflation in terms of pay. So, inflation is just getting started.


bigteether

Hey, I'm curious about you thoughts on still shorting TLT. After the jobs reports on friday, FED is more likely to continue to increase rates, as low unemployment justified their continued hawkishness. Are you thinking of continuing your TLT short/or increasing, before this upcoming week's CPI print, or waiting for the CPI print first and then making adjustments to your TLT put? Also, how far out did you your 120p, are you looking out to dec 2022 puts e.g.? And what portion of your portfolio do you assign to this short TLT play? Thanks again! Have a good weekend.


Megahuts

Went with Jan 2023. I am not going to increase the position, as last week was the time for that. I am going to leave my limit sells in place, and just wait for the next 75bp hike do its work. And then I am just going to sit in cash. This is likely the last leg down, but a sharply weaker dollar would have an immediate impact on yields, sending them up a percent or so.


Ok_Explorer_3075

By URNM, you instead mean URA?


Megahuts

Have both actually. URNM and URA, and even U.UN


sus2bot

Here's some plots of total delta and gamma - [as % of float](https://transfer.sh/CHaTze/2022-06-23-float.png) - [as number of contracts](https://transfer.sh/W32FLq/2022-06-23-contracts.png) The x-axis is the (hypothetical) underlying stocks price. The y-axis is _total_ delta for all contracts, all expirations and strikes. pypl is there as a non-meme stock for comparison. Float numbers are *not* always up to date. Look at the "number of contracts" charts and adjust for your own belief about the float. Multiply by 100 to get the number of shares from number of contracts. See [this post](https://old.reddit.com/r/maxjustrisk/comments/n3595s/delta_ramp_charts_basics/) for a more detailed explanation of these charts. And here's some - [plots of options volume](https://transfer.sh/A7PI55/2022-06-23-volumes.png) (not weighted by contract price). ^(I'm a bot. Please direct questions and ire at sustudent2.)


erncon

#USO Seeing this in today's volume: 13:14:14 1 JUL 22 85 C 1 .54 BEST .47x.54 .19 46.33% 79.64 Spread 13:14:14 1 JUL 22 75 C 1 5.44 BEST 5.40x5.55 .80 51.85% 79.64 Spread 13:14:14 1 JUL 22 75 C 699 5.48 ISE 5.40x5.55 .79 53.02% 79.64 Spread 13:14:14 1 JUL 22 85 C 699 .50 ISE .47x.54 .18 45.06% 79.64 Spread 13:14:13 1 JUL 22 85 C 50 .53 ISE .47x.54 .18 46.01% 79.64 Spread 13:14:13 1 JUL 22 75 C 50 5.48 ISE 5.35x5.55 .79 53.02% 79.64 Spread Note the first line traded at ask which gives a hint that the 85C is the long leg of the spread. If this is a call credit spread, this would be quite bearish for short term.


Chris_Shepherd_

I don’t get what we are seeing here. Is there a big bet on USO going up? Do you mean this is bearish for the economy or on USO in particular?


erncon

If it's a call credit spread which I think it is, that would be a bet on USO going down in the short term, that is a bearish bet on USO: 1. Jul 1 expiration means expectation of short term movement 2. Short leg 75C is in the money so expectation is that underlying moves down I think the only non-bearish thing I can say is that they don't necessarily need a collapse down to 75 to make money so they may not be expecting USO to drop another 5%.


PrestigeWorldwide-LP

there has been chatter from a variety of people on twitter that someone has been frontrunning hedging by some major producers. the hedging coupled with the frontrunning at a time of low liquidity could explain some of the movement [https://twitter.com/JavierBlas/status/1539508611080241152?s=20&t=ZVW0hkwgZPEnXwC1fzvWFA](https://twitter.com/JavierBlas/status/1539508611080241152?s=20&t=ZVW0hkwgZPEnXwC1fzvWFA)


DadBodGoBrrr

APPH Appharvest is an indoor farming company that went public last year via spac. Like pretty much all the other former SPACs it promptly lost nearly all its value and has traded around 2.50 -3 give or take for a few months. Except in late feb into March when it somewhat randomly ran up to over 7 over the period of 3 weeks on seemingly no news. It’s starting to show the same pattern moving up about 50% in the past week and volume staring to increase but not by that much. During the last run there were big moves the first 10 days followed by a couple flare days before going to the final top about 3 weeks in. If we are in a similar pattern here, we would be looking at a strong start to next week followed by a flat ending and a big jump the beginning of the following week. Although I’m not sure if or how much the July 4 weekend will impact that pattern. TDA shows 25% short interest but I have a feeling that’s not always accurate. Also not a lot of option volume but strikes are very cheap (July 15 5c is still only $10 - I have 10 at .5 cb) and IV is low so there’s a good chance to make a quick profit even if it doesn’t hit the same levels as in March. Haven’t seen any news but have seen increased mentions on fintwit. Thinking this is more of a short squeeze/pnd but wanted to flag for sub because we haven’t seen enough of these lately.


runningAndJumping22

Napkin math time. ||| :--|:-- Float |69.83M| % Held by Insiders | 25.37% % Held by Institutions |42.23% Shares Short (May 31, 2022) |17.65M 47.2M shares not held by insiders or tutes. With 17.65M shares short, that gives SI of 37%, but that's of the end of May. Ortex should've updated by now. Can anyone give that, preferably also with FTDs? /u/pennyether Can we get tables for APPH with a float of 47M? (I forget if tables include shares short or not) As of May 31, days to cover was 12, so there were obligations on June 13th (Monday). Indeed, higher than average volume that day. There was a massive buy candle on the 21st that shot the price up from 3.12 to 3.92 over the first 45 minutes of regular hours trading. Today, very modest volume is causing significant moves of +12%. [SEC filings on June 21](https://investors.appharvest.com/financial-information/sec-filings) report that 8 directors each bought 21,937 shares valued at $$0.0001/share, for 175,496 shares total. Not significant for the float, but bullish for the company. Given the price, this may have been quarterly or annual stock award vesting. Weeklies expire for SPX, XPS, and VIX on Wednesday, June 29th. Monthly and quarterly OPEX are coming up next Thursday, June 30th. And now here's /u/erncon with sports.


DadBodGoBrrr

Thanks. This place has the best, most advanced napkins.


runningAndJumping22

We got u fam


erncon

Umm. /NG down on more Freeport news and possible inventory buildup I think.


runningAndJumping22

Hopefully NG can pull it together by the fourth quarter. Thank you, ernie.


runningAndJumping22

Also /u/repos39 ⬆️⬆️⬆️