@PerpetualValue
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Econometrician and investor. Mostly distressed debt and small caps. Rationality over emotion. Critical about corrupted 'science'. Cui bono? Views are my own.
Joined October 2015
- Tweets10.7K
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- Followers4.8K
- Likes24.5K
Pinned Tweet
I’ll cover the subject of mRNA vaccines.
I warn you.
Do not read this twitter thread if you want to stay stuck in your belief that the vaccine is your golden ticket to pre-pandemic life!
Do read it if you want to be informed about what would be injected in your body.
1/
PerpetualValue retweeted
European bank stocks are rolling over, and rising French bond yields are the reason.
France's 10-year yield pushed toward 5% as its budget mess deepened, and the Euro Stoxx Banks index sold off hard right alongside it.
Banks hold piles of their home government's debt, so a sovereign scare hits the banks first. France's fiscal crisis is already leaking into the financial system.
PerpetualValue retweeted
We are seeing a total failure of MMT around the globe.
QE and deficit spending (after 2008 and during COVID) was basically an attempt at Modern Monetary Theory (MMT). In a nutshell, MMT says that we can print and deficit spend at will without any fiscal or economic complications.
So, central banks held interest rates at zero, forcing markets to accept absurdly low rates. At the same time, these central banks printed massive amounts of money and absorbed a lot of this new debt themselves.
MMTers said we could do this with no inflation. Clearly they were wrong. Friedman taught us exactly what would happen, and it did. Inflation took off. The result, central banks were forced to raise rates and stop expanding their balance sheets.
So far, governments have resisted fiscal sanity and are still running massive deficits even though central banks stopped funding them.
The result? In the past 3 months, 10-year bond yields are up 50 bps in the UK, 90 bps in France, 72 bps in the US, and more than 40 bps in Germany.
Governments were already too big in 2008, but this crazy experiment over the past 18 years has pushed things toward a breaking point.
France proposes to freeze government pay and pensions, and raise some taxes and we should expect more movement toward austerity in other countries soon.
MMT is basically Keynesianism on steroids. It didn’t work. The fix is a revival of Austrian, supply-side economics. Smaller governments, lower tax rates, tighter money, and less regulation. Some will say this is a pipe dream. But it is the only way out.
PerpetualValue retweeted
Même Krugman le dit: « Tout ce que je viens de dire sur la situation des finances publiques françaises vaut également pour les autres grandes économies avancées, à commencer par les États-Unis. Mais la France se distingue, même parmi les pays en difficulté budgétaire, par une caractéristique majeure : son incapacité persistante à regarder en face les réalités de son système de retraite. »
In complete agreement with @paulkrugman's analysis today on France.
1. France is probably too big to save for Europe. the potential for a serious European crisis is real.
2. The problem is pretty straightforward: the pensions are unsustainable, and the extreme right and extreme left are determined to block sensible reforms. This makes any potential bailout politically impossible for its partners.
paulkrugman.substack.com/p/w…
PerpetualValue retweeted
In complete agreement with @paulkrugman's analysis today on France.
1. France is probably too big to save for Europe. the potential for a serious European crisis is real.
2. The problem is pretty straightforward: the pensions are unsustainable, and the extreme right and extreme left are determined to block sensible reforms. This makes any potential bailout politically impossible for its partners.
paulkrugman.substack.com/p/w…
PerpetualValue retweeted
Borr's 8.75% secured 2032s trading near 92, with spreads in mid-500's after widening ~100 bps over last two weeks
Wide spreads reflect ~6x leverage and ~40% contract coverage for 2027, though are quality jackups
Bonds amortize at 5%/year from July 2027 at 102.5, nice feature
CLO's with bond buckets may find these attractive for par build and spread. Liquidity is adequate with a $250mm undrawn revolver at 2Q26, though is super senior. Current B/B3 ratings.
PerpetualValue retweeted
Stanley Druckenmiller: “You need ruthless discipline.”
The ability to invest unemotionally. The courage to invest opposite the crowd. A willingness to watch other strategies outperform in the short-term.
If you don't stay disciplined, you don't stand a chance.
PerpetualValue retweeted
“If you pay people not to work and tax them when they do, don’t be surprised if you get unemployment.”
— Milton Friedman
Trusting Richard Griffiths here
French “austerity” in four charts: only 1/3 of the population is funding everyone else, government spending is the ~highest in Europe, public debt is through the roof, and retirees out-earn working people.
PerpetualValue retweeted
I regret to inform you that the discount for Canadian heavy oil has blown out again because our pipelines are essentially full, with WCS trading at almost $25 a barrel less than WTI.
The cost of re-exporting out of the Gulf is prohibitive due to high tanker costs
boereport.com/2026/10/05/dis…
Another great @hmarksofficial note
I always read them, because they are so full of investing wisdom
My latest memo discusses recent attempts to rein in long-dated government bond yields and why the only sustainable solution is responding to the underlying factors pushing interest rates up, even if politically uncomfortable.
You can read it here: oaktreecapital.com/insights/…
PerpetualValue retweeted
Another poor week of returns for HY, led both by spread widening as well as rates
Spreads now sit at just 300bps with CCCs briefly touching 1,000bps+
Index returns a measly +0.14% YTD
PerpetualValue retweeted
Merz argues that Germans must work more and become more productive if Germany is to compete with China.
* An alternative perspective is that the German government should not have shut down power plants, cut its energy-intensive industries off from their main source of affordable energy, looked the other way when Nord Stream was destroyed, imposed sanctions on so many countries, contributed to instability in the Middle East by backing genocide and the war against Iran, built an economic model so reliant on mass immigration, subordinated itself excessively to the US, stolen sovereign assets, financed yet another war against Russia etc. Or BlackRock Merz is correct: Germans simply need to work harder and accept the transition from an industrial welfare state toward a model of military Keynesianism.
PerpetualValue retweeted
@lugaricano makes clear: The "French problem is a deterioration in ...fundamentals." The ECB cannot use TPI to buy OATs. If the ECB nevertheless triggered TPI, or hinted to do so, we would come much closer to the crisis/inflation scenario we described on p.205 of "Crisis Cycle."
Le spread has reached today 150 basis points. The question on everyone's mind is: can the ECB intervene? And if so, can it activate TPI? My personal view is that it cannot. This question and the situation we have reached was the central question motivating "Crisis Cycle" , my Princeton University Press book, with @masuch_klaus and @JohnHCochrane.
The purpose of TPI is to be used "in jurisdictions experiencing a deterioration in financing conditions not warranted by country-specific fundamentals." The French problem is a deterioration in country-specific fundamentals: 5.4% deficit in 2026, debt increasing towards 122%, the undoing of the pension reform.
The ECB's text says TPI purchases end when tensions "are due to country fundamentals." So you cannot start when you are in the ending conditions.
Also, the 3rd test of TPI says: is the debt trajectory sustainable? Lagarde has said (see Klaus' tweet below) it is "not on path to be brought back under control". I think Lagarde is answering clearly the question on the 3rd test.
On paper, France passes two tests ("Compliance with EU fiscal framework? "The Commission said in June yes; And "severe macro imbalances" as given by an open excessive imbalance procedure, again ok on paper).
If France needs the ECB, there is a route: an ESM program, like the ones during the Euro crisis, requiring reforms (basically getting the pensions in order will suffice), plus the OMT which allow the ECB to act when a country is subject to a program.
If the ECB calls this current situation a liquidity problem, we will have an open route to monetary bailouts.
Link to the TPI press release (the only existing public document): ecb.europa.eu/press/pr/date/…
After announcing an unproven acquisition, IG Group #IGG reports a terrible Q3 trading update today
Apparently client retention is significantly down since the introduction of their own 'market-making optimisation measures'
Not so optimal, is it
