The credit cycle hasn't even started🧵 We are beginning to see the...

The credit cycle hasn't even started🧵

We are beginning to see the underlying shifts of a massive change

This will cause larger moves in Bitcoin, memecoins, equities, and everyone is being distracted by tariffs

The chart below is the amount of high yield issuance that is taking place. Just notice that on a YTD basis, we have issued more credit than in 2022 and 2023. This is taking place as equities are down YTD and credit spreads are elevated.

If banks are leaving the credit spigot on in the economy even when credit spreads are off their lows, what do you think they are going to do once credit spreads move back down?

On top of this, crude prices are going off a cliff since Trump took office. No one believed that Trump coming in would create more geopolitical stability in the world and actually push crude down.

When energy prices are collapsing and banks are pumping the system full of credit, that is a massive recipe for goldilocks.

In a goldilocks or reflation regime, is where you can get the biggest melt-ups in risk assets. On top of this, you have Trump and Bessent talking about tax cuts and deregulation which would would take growth and put even more fuel in the tank.

All of us know the main risk si the tariff dynamic blocking exports. This is a chart of the weekly data of all imports into the US. When this is blocked off, it creates large supply-side risk and the US economy isn't able to retool fast enough to make goods domestically.

But here is the thing, once the tariff dynamic gets resolved and trade deals get set up between all major countries, the US is going to turn on the credit spigot, slash taxes, and create an environment people couldn't even begin to fathom.

Countries like Mexico are already rallying aggressively off the lows in expectation of this because they are the largest beneficiary of this new trade dynamic with the US.

Right now, IPO deals are at a low we haven't seen in a while. The entire point about this is that IPO deals are at a low and we aren't seeing any cracks in the system which means as soon as credit gets a little momentum, the IPO market is going to kick off again and potentially get back to 2021 levels.

Every day I am watching the credit markets and issuance. Every day I see deals like this come across where everything is beginning to flood the credit market because they don't want to miss out on the upside that will take place.

These large corporations know exactly how to play the market and investment banks.

Once micro cap financials begin making a run for all time highs, you will know that the credit spigot is clearly on

Russell 3k Financials are the same story:

Just remember it has been years since all of the low-quality junk names have rallied with actual momentum. Many names remain in the dumps. You can see in the chart below the low quality names of the Russell 3k remain below 2021 highs and have gone off a cliff recently. This sets the stage for the credit flows laid out above.

There are always risks, things change fast, and we never know the future but the flows are clear. The risk reward is compressing and if credit increases, tax cuts happen and deregulation takes hold, expect a melt up even greater than 2021.

The important think will be mapping these macro impulses and positioning against the actual price of assets. This is what were doing and updating daily for ES, the 2 year, gold, and Bitcoin. We will be expanding these strategies even further over the coming months.

The main question to ask is, HOW am I managing the risk around this macro theme. The strategy breaks this down and dynamically shows the drivers as well as the probable skew based on those drivers.

For example, the macro drivers for Bitcoin are decomposed as follows:

If you are trying to understand more of the HOW and WHY behind these macro drivers, I have written extensive educational primers on Bitcoin, equities, interest rates, and positioning here:

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This is THE greatest time to be alive with the innovative technologies, wealth of information, and opportunities in markets.
Manage the risk but stay far away from all these cynics and pessimists

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And never forget how the world works:

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All of the research = link in bio and you can follow @Globalflows as well as the AI quant I am working on: @MacroAIQuant

Be relentless

@MacroAIQuant “You wasted $150,000 on an education you coulda got for $1.50 in late fees at the public library.”