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#199: Don’t Cry for me Argentina

#199: Don’t Cry for me Argentina

micksonmatch
December 12, 2024

S2N Spotlight

“The deficit was the root of all our evils—without it, there’s no debt, no emission, no inflation. Today, we have a sustained fiscal surplus, free of default, for the first time in 123 years. This historic achievement came from the greatest adjustment in history and reducing monetary emission to zero. A year ago, a degenerate printed 13% of GDP to win an election, fueling inflation. Today, monetary emission is a thing of the past.”

The above quote is from Javier Milei, Argentina’s brilliant, eccentric, economic professor-turned-politician. Javier is a libertarian economist and understands the Austrian school’s model better than most. His plan of austerity to get the house in order is working. Inflation, as you can see below, is also coming down off its ridiculously high levels. Argentina’s annual inflation rate reached approximately 211% in December 2023 right when Milei took office.

S2N Observations

US inflation numbers came out yesterday. I don’t usually show the month-on-month numbers (MOM) but thought it was instructive. Both headline and core YOY inflation are rising, and we should not dismiss the fact that inflation is up a cumulative 21% since 2020. That is a lot. I am sticking with my view that interest rates are poised to rise, not drop further.

As we continue to witness a bull market in all its fury, busting to new all-time highs almost daily, it is worth noting that momentum and market breadth (internals) are weakening. It is always tough calling a top. The market is expensive and overbought with fading momentum. You decide if it is a good idea to reduce exposure.

Market Breadth chart with the number of S&P 500 constituents above their 50, 100, 200 day moving averages.

I had never heard of Texas Pacific Land; it is in second place for the top-performing stocks in the US over 15 years.

Another company shooting the lights out making new ATH (all-time highs), none other than, Tesla.

If you were wondering why everyone wants a piece of private credit, these comparative returns to the fixed income traditional players help explain it. Fixed income is all about seeing your capital returned; if you are receiving double or more the average, then realise there is a decent probability you won’t see all your principal returned.