I hope everyone is having a good weekend. We had an enormous amount of data last week that we need to unpack, but before we do I have a couple housekeeping items to share. We also have Jackson Hole on Friday that should be interesting given the data we just received.
I will be on vacation from Tuesday to Sunday, visiting beautiful Italy for a family gathering. I will be mostly offline, but will open the daily chatroom for everyone to discuss markets (and whatever other nonsense that is usually discussed as we run a no filter trading room). There will be no week ahead next Sunday.
We have a number of new subs who joined recently, and many are very interested in the Bitcoin model. I update the model for paid subs in the chatroom every Tuesday (this week will be an exception but there is an update at the end of this note), but will always send a note for any model update that generates a trading signal. Bitcoin Model Update was a signal and it hit our target a day later. A new signal was generated on Thursday and I will share it below the paywall.
Also, this note Housekeeping for Readers is a good welcome note for anyone new. It described how notes are published into sections and you can filter to ensure you only get the notes you want to your inbox.
Onto the main event. I have been warning about inflation and it is safe to say the Reckoning is here. If you are new and want to read old thematic notes where I discussed what was coming, here are some good ones:
The Final Tantrum was a look down memory lane for market tantrums this cycle and discussed how inflation expectations getting unanchored is the final one.
Beware the Doom Loop discusses how important the dollar dynamics are this year and how this will be the constraint for policymakers. The scary part is they still haven’t figured it out yet.
Les Paralleles discusses why Trade Wars is more akin to a permanent Brexit style supply shock than a transitory oil shock.
The Crisis To Come summarizes all the indicators pointing to an inflation spiral ahead, and even worse, the fact that nobody is taking it seriously.
Financial Conditions Reborn is my updated FCI framework and one that you will see regularly in my notes.
The Case Against Rate Cuts an explanation of the various shocks hitting the economy and why rate cuts are the wrong medicine.
The Bottleneck is a note on the capacity constraints that may hold back AI development and the investments needed to support the exploding demand. As always I am ahead of the curve, and this article discusses some of the capacity issues as well AI experts return from China stunned: The U.S. grid is so weak, the race may already be over
The Tokyo Trilemma outlines the dilemma that Japan finds themselves in. If you followed the trilemma logic, you were not surprised by the NKY rally. It provides a good warning system for what may lie ahead now.