Drawdowns & Runaway Budgets

Now that markets have fully recovered, it feels like many across retail have significant public equity exposure and don’t realize how much risk they are taking. 40-50% drawdowns are about a once in a decade event. Common enough that you should be prepared. Investors have been conditioned to expect the plunge protection team will be there for us, maybe rightfully so. (link)

It is hard to imagine the S&P 500 dropping and taking 15 years to recover, yet it has happened before and other global equity markets have experienced much worse. Prepare for the worst, hope for the best. (@Schuldensuehner)

Gold offered strong downside protection compared to Equities and Bitcoin in March and April. (The Daily Shot)

There are few constants in this world, one of them is that the Fed balance sheet will continue to expand. As the bond market hits speed bumps, speculation is that the Fed will have to engage in QE soon. (@MikeZaccardi)

I’ve been reading a lot lately about how the current trajectory of government finances is unsustainable and financial repression inevitable. I agree but timelines matter and it’s difficult to say if this starts in the next 2 or 10 years. Own some inflation/debasement hedges. @Aureliusltd28

When was the last headline you saw about DOGE? They made a small dent, it isn’t enough to move the needle. If Elon couldn’t cut the budget, who will? The answer is no one. (Cembalest)

DOGE found most of their savings from headcount reduction, cutting grants and terminating contracts. (Cembalest)

Even if you cut all non-defense discretionary spend, the US would still be running a deficit. The West spent like their populations would grow forever but the calculus changes once growth begins to plateau and you quickly realize this is unsustainable. (Cembalest)

Small businesses are the most important employers in the US economy. 77% of job openings in the US are from organizations smaller than 250 people. (Apollo)

Another good visual illustrating the increasing demand for minerals over the next decade. (BCG)

Hedge funds have been dumping energy stocks at the fastest pace ever. (@Barchart)

Canada possesses the largest proven oil reserves of any free country at 170 billion barrels, yet it underperforms, with less than 40% of US production and significantly slower growth. (Energy Talking Points by Alex Epstein)