Andy Constan on Hard vs. Soft Landing, Fed Reaction Function & Higherer for Longerer

Feb 1, 2023

This week we welcomed back Andy Constan (CEO / CIO of Damped Spring Advisors) and thought-provoking commentator on financial markets. His deep understanding of the global macro landscape and structure of markets, as always, made for a fascinating conversation that covered:

• A disciple of two completely different and complimentary schools of global macro excellence
• Navigating his portfolio in 2022 through the Twitter looking glass
• Listening between the lines and hearing the drumbeat of quantitative tightening (QT) early on
• In the old days, understanding inflation and growth was enough for capital allocation
• The game is now mostly about policymakers’ toolkit, stimuli, and their impact on flows
• The driving force of equity derivatives and their huge impact in the second half of last year
• Under normal circumstances, commercial banks account for the lion’s share of money creation and liquidity
• Issuance, roll-offs, and duration management – the mechanics behind the Fed’s balance sheet
• Credit and leverage as a function of banks’ ability and willingness to expand their own balance sheets
• The role of duration in the Fed’s balance sheet activity
• Why Japan, the original QE trailblazer, was ineffective in its efforts to support asset prices for many years
• Compression of risk premia, asset inflation, and a weak transmission mechanism towards wealth effects and increased consumption
• Valuation multiples as the inverse of risk premia
• Multiples expansion as the primary mechanism for QE-driven asset bubbles
• Debt monetization as the medium-term bogey on the radar
• How the Fed relinquished control of QT duration to the Treasury
• And so much more

This is “ReSolve Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management Inc.

 

*ReSolve Global Inc. refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global Inc. is a registered person with the Cayman Islands Monetary Authority.