In this conversation, Pascal Huegli and Ben Kizemchuk discuss the current state of equity markets, focusing on volatility, the implications of the VIX, and the behavior of 'garbage stocks.' They explore the financial plumbing of the U.S. system, including liquidity issues and the impact of treasury issuance. The discussion also touches on inflation trends, defensive investment strategies, and the evolution of market valuation towards a flow-based model. Huegli emphasizes the importance of understanding these dynamics in the context of potential market declines and the future of economic policy.
Chapters:
00:00 Introduction and Context
01:50 Why bearish in the short-term
06:08 Understanding Volatility and the VIX
13:32 Garbage Stocks and Shorts
19:19 IWM Breakout or Deleveraging
25:07 Financial System Plumbing and Tax Drain
26:07 Treasury Bill Issuance and TGA Dynamics
28:47 Reserves and Banking System Stress
31:08 NFDI Lending and Market Implications
33:52 Standing Repo Facility and Bank Liquidity
36:44 Why is Bitcoin up
41:31 How to manage risk right now
44:28 Inflation is a real risk
47:43 Liquidity Drawdowns under 4Fs Framework
53:44 The Evolution of Price and Valuation
57:34 From Narratives to Flows in Valuation
01:01:44 The Fragility of Flow-Based Systems
01:04:01 Investment Strategies in a Flow-Dominated Market
01:07:28 GDP Targeting with Reserves
01:13:34 Stablecoins as tokenized Reserves
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