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The oil shock due to the conflict in Iran is becoming more permanent than anticipated, and it’s bringing unintended consequences. 66 days into the conflict and the strait of Hormuz continues to be effectively closed, and we’re just one missile away from a re escalation of the conflict. Brent is up playing with $120/barrel, and there seems to be no clear solution to the glut in the short term. The two charts below are self explanatory: no ships crossing the strait imply higher

The S&P 500 index dividend yield (sum of the dividends of all components divided by the price of the index) just touched new all time lows. Companies prefer buybacks to dividends, since they are tax efficient for investors and push the stock prices higher. Dividend payouts are no match for the incredible run up in price, stocks have had. In times of turbulence, dividends can be a meaningful share of total return for an equity investor. Not today. Additionally, the Earnings yi

The global macro economic context keeps evolving. It’s not clear it’s moving to a better place. After the WWII, the world’s major economies got together at Bretton Woods to create the modern monetary system. The U.S. imposed the rules: all currencies pegged to USD, and the dollar pegged to gold at $35. The major condition imposed on the U.S. was to keep the monetary base stable. After almost 3 decades, the U.S. could not hold its part of the deal and in 1971, Nixon broke the

The impact of AI in the US and the world, continues to be mind blowing. The capital it has attracted, the scale and the growth are just insane. The chart below is eye popping. It simply segregates US goods imports between AI related and the rest. If you only look at the overall headline, you would not see how massive it is. But in the chart you can see the imports of AI related goods are up 80% YoY. The rest of imports into the U.S. economy have contracted 25%. We’re all in o

Yesterday, the U.S. published the PCE for the month of March with a YoY growth of 3.5%. This has been, during Powell years the preferred inflation measure used by the Fed to fulfill the price stability mandate. With 3.5% inflation, it will be difficult to justify a rate cut. The Q1 first reading of GDP was also published. The U.S. economy grew 2% (it may be revised lower), which is not an eye popping growth rate. What’s important is that 75% of that growth was produced by AI

As expected, there was no rate cut after yesterday’s FOMC, the last one for Jerome Powell, that will continue as governor, but will pass the chairmanship to Kevin Warsh. And the market thinks that with everything that’s going on in Iran, the Fed will not be able to cut this year , according to Polymarket (see chart below). Bonds didn’t like the conclusion and yields spiked up. The 30 year Treasury touched 5%. It’s a psychological mark, but at this juncture, is important. On t

Open AI did not reach its internal goal of 1 billion weekly active users by 2025, and missed revenue targets for Chat GPT. The goals were very aggressive, and also its valuation. But more importantly, its commitments were even more aggressive. Capital commitments to data centers. Now Open AI will not provide exclusivity to Microsoft on certain licenses, and Microsoft will not share revenue with Open AI. Now take a look at the chart below: what happens if Open AI cannot meet i

Interesting developments in the Private Credit space. Investors in Blue Owl Capital Corp. II (OBDC II), a non-traded business development company (BDC) managed by Blue Owl Capital Inc., largely rejected a tender offer from Boaz Weinstein’s Saba Capital Management and partner Cox Capital Partners. Less than 1% of shares were tendered when the offer expired at the end of last week. The offer was tendered for 8 million shares or 6.9% of the outstanding, with a discount of (drumr

Negotiations between Iran and the U.S. continue. Hormuz is closed (or open depending on who you ask) and oil is being bid again. But this week is Monetary policy week: officials from the Fed, ECB, BoJ, Brazil, Colombia among others will meet on their respective committees to decide what is the adecuate level of interest rates, and the appropriate size of their balance sheets. You can see that in the top chart below. Now take a look at the bottom one: with very few exceptions,

Asset allocation is one of the biggest challenges today. Diversification is very difficult to achieve in a global market where money flows link markets almost instantaneously. The backbone of wealth management has been the balanced portfolio for decades. But there are instances, like the current one, where correlations between bonds and equities are high and positive, which presents a challenge. One solution is to include liquid alts (long/shorts, CTAs, etc), which usually wo

China has made an important move. It has taken a significant step to further open its local bond market to international investors, specifically by allowing qualified foreign investors to trade government bond futures starting April 25, 2026. It is no surprise that this move happens when gulf countries (and others) need liquidity lines in case the IranIan conflict continues. China is opening its massive bond market a little bit more with futures offering, still with Chinese c

The disruption caused by the conflict in Iran has not fully permeate into the global economy yet. It’s an oil shock in first order, but the second and third orders affect agriculture, transportation, and Trade, to name a few. Take a look at the chart below. China has just published a massive trade surplus of $1.18Tn over the last 12 months ending in March 30th. Despite tariffs and conflicts, China continues to build and export an incredible amount of goods to the world. They

The AI race is taking place also outside the US and China. South Korea and particularly Taiwan are the epicenters of the movement, particularly in terms of hardware. And their respective stock markets are reflecting that reality. Taiwan stock market cap has surpassed the UK, and South Korea’s has surpassed Germany’s. Think about that for a second: with 23 million people, Taiwan has been able to create more wealth than the financial powerhouse UK, with 68 million people. And t

The new Fed chairman confirmation hearing took place yesterday, and as expected was highly politicized and lacked real substance. The Trump’s “sock puppet”, as senator Warren described Mr Warsh, will in all likelihood be confirmed. While the Washington circus was on, the situation in Iran continues to change every few hours. Blockade on/off, attacks on/off, rhetorics on/off. Another circus. These distractions may have the final objective of making the market numb to the real

Today, Kevin Warsh, the Trump nominee for chairman of the Federal Reserve will go to Congress to be “grilled” by the special committee set up for this matter. Kevin Warsh is supposed to be very different from prior Fed chairmans. He has his academic background, but has worked in the private sector and is actively involved in investing for others and his own. He’s perceived as a hawk (tough with inflation) but advocates for low interest rates and small Fed balance sheet. He th

Iran’s Foreign Ministry spokesman Esmaeil Baqaei said Tehran has no plan for another round of negotiations with the United States, stating that any US delegation travelling to Islamabad is “their own matter”. Baqaei also stated that transferring Iran’s enriched uranium stockpiles to the US or any third country has never been part of talks and is not under consideration. And just like that we are in War mode again, with reports that the U.S. may be sending troops to Iran to ta

Perhaps we have forgotten about the other wars we are immersed in. Aside from th military conflict, we’re in a technological war regarding AI, and we’re on a trade war, mostly with China, to close the trade deficit and restore manufacturing capacity in the US. It is still too early to confirm the U.S. is back at making things home, but the chart below is encouraging. Installed capacity, has been steadily growing for 5 years now. First to avoid contraction, and since 2022, wit

An interesting development is occurring in parallel to the Iranian conflict. Perhaps because of it. The trading volume in Chinese, remimbi denominated bonds has picked up significantly. These bonds trade in the Hong Kong North bound bond Connect and, although there is no breakdown by investor type, all of them are international investors: asset managers, pension plans, or central banks might be diversifying away from U.S. treasuries. China is the second largest debt issuer a

Investing in the current environment is becoming challenging. If you apply pure rational analytics, perhaps you should have a big portion of your portfolio in cash (for instance like Warren Buffett), but if you look at equity indices, we have regained all time highs. Also, inflation is picking up, so perhaps cash is not ideal when it comes to a long term investing plan. In the charts below, you can see that, using the S&P500 as a whole, the case is not compelling: CAPE Schill

US equity markets have re conquered all time highs. Perhaps it’s due to optimism on the end of the Iranian conflict, even though it’s still not clear when and how it will happen. Perhaps investors have decided to move on when they saw oil tankers coming to the US for oil. But it’s the debt market that requires attention. It’s also at an all time high. Debt keeps piling up. US Debt has grown almost 10X over the last 26 years (as of today national debt is $39.1Tn). For China, t