Curve Advisor @CurveAdvisor

Thanks for your video on Thursday. That cause an "a-ha moment" on the War conclusion. I wrote about this over the weekend, but we probably made up the 20mbd shortfall already, even without a deal. Oil flowing again would crush Iran's main leverage and that is why they have (and will continue to be) amenable to a deal. The prediction markets have a 63% chance that Hormuz flows returns to 50% by the end of July. While this is not a "return to pre-conflict traffic", that should be more than enough to continue to put downward pressure on oil.

I wrote about this over the weekend, but we may already have made up the 20mbd shortfall already, without a deal. The prediction markets have a 63% chance that Hormuz flows returns to 50% by the end of July. While this is not a "return to pre-conflict traffic", that should be more than enough to get all the oil benefits.

Thanks to @javierblas for the framework for spark. Intro this week: I think I’ve done a pretty good job of analyzing the positioning, dynamics and risks of the Iran War the past few months. Of course, that doesn’t lead to a conclusion about the outcome… until now. I’ve recently had two “a-ha moments” when it comes to the War. The first was the “speculation” that we were offering a $300B reconstruction fund, which could bring the total package for Iran to over a trillion dollars. Unless a complete unfreezing of funds and/or sanctions relief are not on the table, that is an enormous payday for Iran. That tells me Trump is motivated. The second is the recent revelation that we have “secretly” been escorting ships though the Hormuz. I previously discussed the importance of escorts in past issues. Iran is losing control of the Hormuz and their leverage, and so they are also motivated. While we are only discussing the signing of an MOU (and not the full deal), I will discuss why I think even without a deal, just the reopening of the Strait solves a majority of our problems.

Thanks for this. This week, I wrote about an "a-ha moment" I had related to why the two sides finally agreed, and I think it's the fact that if you add up all of the net effects, we get those factors summing to well over 20mbd that we were missing from the blockade - especially in light of Wright claiming a 7mbd escort flow. Even if you discount this number, I think we are still comfortably over 20mbd in flows. I would love to get a contrary view. @Chigirl @joshyoung

War A-ha Moment, by @CurveAdvisor open.substack.com/pub/curveadvis…

@HuXijin_GT Yes. It would be nice if you could watch the Chinese national team compete in the World Cup. Oh wait... you didn't make it. 🤣 I assume they will have more "day games" for you on the weekends.

you would need to have a view that the 33bps of hikes are "mispriced" to think that the carry on the front of the curve matters. I don't have a strong enough view, given that the Fed will most likely go to a neutral bias and the next couple (at least) of inflation prints will be elevated.

@KobeissiLetter "It's an honor to meet you. Too bad your father, wife and kids died like dogs."

This *2021* Waller speech makes for interesting reading today. At the time, Fed doves had been pointing to trimmed mean measures of inflation to argue against overreacting to spot inflation. Waller's point was that serially excluding 'one-off' outliers assumes no new one-offs take their place—a fallacy that, in hindsight, anticipated how the transitory framing failed. "The moral of this little example is that one needs to be careful when selectively ignoring data series—be it used car prices, food and energy prices, or household surveys of inflation expectations. All of these series convey important information about the evolution of inflation, and one should exhibit caution in dismissing data as outliers. We must keep our eyes open to inflationary pressures, wherever they come from, with consistency and rigor and stand ready to adjust policy if we conclude that such a change is warranted." federalreserve.gov/newsevents/spe…

keyboard_arrow_left Previous keyboard_arrow_right Next

@Fullcarry you would expect some flattening (negative spreads) further out the curve, since deferred eases will be expected, regardless of whether the Fed hikes in the next 12 months.

Intro this week: I am flabbergasted that Trump is considering a $300B reconstruction fund. Gemini says this is ON TOP OF sanctions relief (worth a $500++billion), and unfreezing their funds (worth $100B)? So we are offering a package worth a TRILLION dollars (or more)?!? That is 3+ times Iran’s prewar annual GDP. Seriously – WORST. NEGOTIATOR. EVER! How do you get to that scenario, when walking away costs nothing, resumes the flow of oil and lowers oil prices? Given the revelation that Trump is this stupid and desperate, we are presented with several more “outs” that Trump has with Iran.

More Outs, by @CurveAdvisor open.substack.com/pub/curveadvis…

INSTEAD OF WATCHING AN HOUR OF NETFLIX TONIGHT. This 60-minute Cambridge lecture by Demis Hassabis will teach you more about the future of AI than most people will learn in the next 5 years. Bookmark it and give it an hour, no matter what.

Excerpt this week: “It’s déjà vu all over again.” This is about where we were a month ago, before Trump opened his yapper, walked back all of our promises and caused a further spike in oil. We look to a be on the precipice of a “major deal”… on a 1-page MOU, just so we can actually start talking about the details of the deal. Yogi Berra also said, “The hardest thing is to get started, but the hardest thing is to finish.” Over the past week, oil was lower on deal optimism, but fixed income (in the short end) was lower. Given that these two have been negatively correlated for most of the war, this is an unusual development. The answer is a change in the perceived Fed reaction function this past week. I discuss this and how I assign probability distributions to interest rates during this war.

Trading Rates in this War, by @CurveAdvisor open.substack.com/pub/curveadvis…

Excerpt this week: In poker, when you are behind on a hand, the cards left to be played that can still give you the best hand are called “outs.” My central view on the War is that the impasse lasts longer than shorter. However, what makes the current War difficult to trade is that Trump has the power to quickly change from the status quo – for the better (towards a deal) or worse (escalation). In particular, he has a number of outs to get out of the current Iran mess. And at least one of the outs can be implemented at any time, which makes aggressive positioning challenging. But first the week in news: · Rubio said the “US doesn’t need China’s help” [with Iran] after the first day of the China summit. Let’s try a hand-reading (aka critical thinking) exercise. What is most likely to have elicited such a comment from Rubio? 1) The US didn’t ask China for assistance regarding Iran, since everything is under control and we don’t need their help (as stated). But somehow China mentioned they would stop sending weapons to Iran and stated that they opposed tolls on the Hormuz. 2) China offered to give naval, logistical and intermediary assistance, but we declined, since we didn’t need China’s help (as stated). 3) We asked for help and Xi said, “xiongdi, ni zhen can” (Translation: “it sucks to be you, bro”) and offered us nothing. That’s right! Only the last one makes sense, unless you are still wearing the MAGA hat that is two sizes too small.

Outs, by @CurveAdvisor open.substack.com/pub/curveadvis…

The founder of Renaissance Technologies - the hedge fund that makes 66% a year, runs the most secretive trading floor on Earth, and has never accepted outside money - once stood in front of 500 mathematicians and explained exactly how he did it. Jim Simons. The Einstein Lecture. American Mathematical Society. 1 hour 20 minutes.They left it on a small university channel. Almost nobody knows it exists. No one's talking about it. Bookmark it before they do. Then read the article below.

zostaff @zostaff

a month ago

x.com/i/article/2050…

23 33 309 947K 1K

Why is Trump is bringing all these CEOs? Is the intent to swap tariff relief for trade deals? I have no idea why China would give us anything (deals) without us giving them something in return, and we don't have much to give. Is Trump expecting China to give us tribute?