Macro Dragon: WK # 46 = Joe Biden = 46th POTUS…

Macro Dragon: WK # 46 = Joe Biden = 46th POTUS… 

Top of Mind…

• Happy Monday Folks & Welcome to WK # 46…
  
  
• Hope the Macro Ladies & Gents got a much deserved restful wkd – after a wk, that was the epitome of needing to make decisions with dynamic, conflicting & never perfect information… the ability to navigate that is the paragon of being a consistently profitable money manager over time.
  
  
• On the Dragon we got the Blue Tsunami Thesis dead wrong – yet, we moved on, trusting with the process (default MO), being as egoless as one can on the individual outcomes... & the process paid off on the correct pathway of price action.
  
  Reposting a segment from that Thu’s piece. Macro Dragon: Biden = 264, Trump = 214... POTUS = 270, + Fed Thu Watch, as I am sure “what’s likely next?” is the question on a lot of people’s minds.
  
  

  So from the Dragon’s perspective what can we say with a high degree of probability if the outcome is a Biden Victory (post contention) & Split Congress?
  

  • Geopolitics will be less volatile, more stable & constructive. We’ll likely see a big US pivot back to RoW, as well as firmer rules of engagement with China. Net-Net big positive for EM & in particular Asia - & in particular there, North Asia – only part of the world that is likely to keep growing unhindered from Covid-19 resurgence in 4Q, vs say Europe or the US
    
    
  • Energy likely to be an interesting space, as Biden Admin should still be able to enact quite a few environmental rules & regulations that curb future shale supply by raising environmental & enforcement standards, as well as potentially make things more optimal for the clean tech space
    
    
  • Obviously the whole $7trn Green Tech Infra dream, is dead in the water if we get to early Jan Senate outcome & Reps still in control. For now the Senate is tied at 48 / 48, with 4 seats left (North Carolina & Michigan – leaning towards each party. And two seats in Georgia leaning towards Reps).
    
    
  • The weight of any action will again move back to the Fed & whoever Biden appoints as Treasury. The delta of YCC & negative rates coming sooner & at greater magnitude has increased. This is why to KVP being short US duration from a medium to long-term perspective is suicide.
    
    
  • Either way, once things settle (post contention bubble) – relief rally for Equities, yay no taxes if Dems don’t control congress & also just mkt knows who they are dealing with. Plus big tech continue to be monopolies at least until 2022 or 2024. And we will see vol compression return, as well as the USD grind lower (KVP loving AUD, NZD, NOK, MXN, BRL, RUB, CAD, GBP to the upside for the Strategic book, yet think also near-term we could see a big pop).
    
    
  • Infra/Industrials & cyclicals in general should see quite a bit of shine come off – as should clean tech – before we get a better picture of what a Biden administration can still do there with a split congress. I.e. The US needs a relief-stability package first, before we can even talk infra. Clarity here may not fully come through until Jan.
    

• Bitcoin: Worth noting we flagged the super critical technical break up through $14K last Thu & this Asia Mon morning we are sitting at c. $15,500, after getting close to $16,000 last wk. A 2^nd consecutive weekly close above $14K, should open us up for the ATH $20K – get your lambo license plates ready folks.
  
  
• Economics: Jolts, inflation & PPI data out of the US. EZ gets flash GDP, jobs data, trade balance & ZEW surveys. China gets inflation, PPI, Money Supply & New Loans. UK will get jobs data, initial quarter GDP 15.6% e vs. -19.8% p
  
  
• Central Banks: RBNZ 0.25%e/p, MX 4.00%e 4.25%p
  
  

  Lagarde speaking Mon Nov 9 @ 1725 SGT & Fri Nov 13 @ 00:45 SGT

  Bailey set to speak 4x this wk: Mon @ 1835, Thu @ 1600, Fri @ 00:45 & Sat @ 1200 SGT
  
  

• Fed Speak: Powell on Fri Nov 13 @ 00:45 SGT, earlier in the wk we will also hear from Mester, Kaplan, Quarles & Brainard.
  
  
• Link to transcript from last wk’s Fed Meeting (yes, the Fed met on Thu Nov 5)
  
  
• Holidays: Bank Holiday in the US & FR on Wed Nov 11.
  
  
• Other: Don’t forget, Brexit negotiations are still on going. Folks are going to underestimate the move lower in the USD, volatility & the move higher in risk-assets (especially EM assets & Crypto).
  
  Plus folks will also underestimate the ability of a new Biden Admin to work with Rich Mitch – KVP can see a scenario where the dems surrender/dilute their calls for taxes & regulations, for say +$3-4trillion in fiscal packaging.

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Start-to-End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Idea.

This is the way