Aug 5, 2022
This week’s Bespoke Report newsletter is now available for members.
One of the surprise TV hits of the summer has been FX’s dark comedy The Bear, set in a struggling Chicago family restaurant beset with chaos, dysfunction, baggage, and drama. The show is an ode to work: the feel of walking into the kitchen on too little sleep, the staccato ring of a sharp knife prepping vegetables, the deep umami smell of a tended sauté pan, the gorgeous sheen of carefully frosted cakes, and the taste of a pile of family meal spaghetti. But it’s also an ode to dysfunction: fights between cousins and siblings, tragic suicides, drug abuse as a coping method, screaming at coworkers and friends, self sabotage and the sabotage of fellow chefs, or violent altercations in the workplace. The US economy and financial markets have been through a period of enormous dysfunction: manic highs in 2021 as policy stimulus and a surge in retail risk taking eventually gave way to a brutal bear market that has covered at least the first half of 2022, while the economy has bounced-back admirably from the COVID shock despite ongoing conflicts over labor supply, supply chain performance, geopolitical shocks to commodity markets, and the presence of the FOMC ever-ready to snuff out the expansion. Like The Bear’s protagonist, Carmine Berzatto, the FOMC has been tasked with keeping a fundamentally unstable situation on an even keel. Instead of struggling to pay vendors, re-organize the staff, optimize the menu, and manage utter chaos on an interpersonal level, the FOMC has had to balance strong growth in aggregate demand, high inflation, a large balance sheet, and supply-side disruptions. In The Bear, Carmine’s journey is both helped and hindered by his new hire Sydney, a woman hired to help manage the kitchen and re-orient strategy. In 2022, Sydney is playing the role of a Congress that has both helped ward off the worst outcomes (economic collapse) but hasn’t moved as fast or been as nimble as the protagonist ultimately needs. Despite being on its own learning curve, this week, Congress passed a taxation and spending bill that will boost investment in decarbonized energy, following passage last week of a bill that will generate significant semiconductors capex. The deeply divided Congress isn’t always working in perfect sync with the Fed, but the chaotic relationship ultimately does more harm than good for both. Ultimately, the FOMC is just as human in its foibles as Carmine Berzatto in The Bear: the central dramatic suspense of the show (whether Berzatto will close the restaurant…no spoilers from us!) is equally present in the question of whether the FOMC will halt what could be an unprecedented inflationary boom in favor of ‘closing the joint down’. Only time will tell, with investors left to guess just as viewers were whether the enigmatic protagonist will persevere or take the easy route out with predictable—if dysfunctional—results. We discuss all of the aspects of The “Bear-zatto” market and much more in this week’s Bespoke Report.
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Aug 3, 2022
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.
In this week’s report we discuss the differing signals being sent by credit and rates markets about the future policy trajectory.
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Jul 31, 2022
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
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Energy Policy
Department of Energy Releases New Notice of Sale as Gasoline Prices Continue to Fall (The White House)
A new Biden administration initiative will start using futures markets in conjunction with the SPR, in an effort to balance the crude market’s term structure as well as the physical market, which can allow for easier market conditions without outright selling crude from the SPR. [Link]
Resource Nationalism and Decarbonization by Miguel Ángel Marmolejo Cervantes , Martín Obaya, Thea Riofrancos, and Alex Yablon (Phenomenal World)
A conversation discussing the prospects of nationalization and national management of decarbonized energy resources in Latin America. [Link]
How London Paid a Record Price to Dodge a Blackout by Javier Blas (Blooomberg)
The UK’s metropole only barely avoided a blackout in mid-July, but to do so it needed to pay 5000% more per hour than is typical. These sorts of shocks to the grid are becoming more and more common as resilience falls. [Link; soft paywall]
Growth Tech
Zuck Turns Up The Heat by Alex Heath & David Pierce (The Verge)
The trials and tribulations of the Meta CEO, struggling to manage a sprawling social media behemoth that is being nibbled at from all sides. [Link]
Changes to Shopify’s team by Tobi Lutke (Shopify)
A frank admission that the explosion in e-commerce activity during the pandemic didn’t continue, and investments made during that period are souring amidst a huge swing back towards normal spending from consumers. [Link]
Politics
Republicans Confront Unexpected Online Money Slowdown by
While political partisans on both sides of the aisle appear motivated, recent GOP grassroots fundraising efforts have dried up at a critical period for advertising spending headed into the midterm elections, in a potential warning sign for the party that has analysts puzzled. [Link; soft paywall]
Investing
The Secret Diary of a ‘Sustainable Investor’ — Part 1 by Tariq Fancy (Medium)
A rejection of the “sustainable” or “ESG” investing movement by one of its founding members, in favor of much bigger and more dramatic interventions in how our society consumes resources. [Link]
Demographics
Study: Millennials didn’t stray far from where they grew up by Mike Schneider (AP)
A new analysis of Census data suggests that narrow economic opportunity sets mean they tend to lead their adult lives close to where they grew up. [Link]
Remembering When Bob Dylan Shocked The World By Going Electric, On This Day In 1965 [Videos] by Rex Thomson (Live For Live Music)
An oral history of the night that folk music legend Bob Dylan decided to take a different tack, switching from his acoustic guitar to an electric one and forever changing how he was viewed as an artist. [Link]
Inflation
Cheaper Beer, Cigarettes Gain Favor as Inflation Pinches Shoppers by Jennifer Maloney and Alex Harring (WSJ)
Lower-priced value brands are seeing strong sales while premium offerings suffer, a response to pinched budgets and incomes that can’t keep up with broad prices. [Link; paywall]
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Have a great weekend!
