93 East Capital, LLC

We just published our February 2025 investor letter: Tariff Detox Please reach out to [email protected] to get on our email distribution or to discuss any topics covered. ? In this month’s letter, we focus on the Tariff pronouncements from the new administration in an attempt to keep up with the pace of announcements and develop early insights into the full impact. ? In our opinion, beyond arriving at broad conclusions that goods prices will be higher and growth will slow, it is too early to gauge the full impact because of: 1) the frequent changes to announcements 2) incoming and varied responses from trade partners 3) yet unknown circumvention measures by exporters and importers 4) implementation of measures to counter circumvention such as entrepot trade and leveraging de minimis exemptions that mitigated the impact of 2018 tariffs 5) ability of firms to absorb costs 6) yet unknown offsets to domestic industry 7) noneconomic drivers of certain actions (border security, fentanyl) 8) monetary policy response to tightening financial conditions (notwithstanding the dual mandate employment and inflation) ? Markets initially leaned towards taking President Trump figuratively. Since then, investors have moved towards taking his words literally, and then seriously. But pronouncements and opinions have been changing daily, or hourly driving significant market volatility ? In a sharp departure from precedent, the administration views tariff policies from a multipronged perspective, seeking to achieve asynchronous goals (fig. 2). These include: - Correcting unfair trade practices to address trade imbalances/deficits with trade partners - Rebuilding US manufacturing and other domestic production capabilities - Raising revenue - National security to lower reliance on non-domestic production in certain sectors and to counter China’s use of its industrial policy - Leverage in negotiations in noneconomic matters like immigration and border security (Columbia) or Fentanyl (Canada and Mexico) ? In recent public appearances, the administration has acknowledged possible economic discomfort, addressing tariffs as a "little disturbance," the need for a "detox period" away from public spending to private spending, and an economy "in transition," suggesting some capacity or expectation to tolerate adverse markets. ? As always, please reach out with any questions or to discuss any topics covered in this letter.?

Tariff Detox. 93EC Investor Letter. February 2025 https://wix.to/A7KymVS

2025 Economic Outlook: AS-DF. 93EC Investor Letter. November 2024 https://wix.to/MItfljD

Here is a summary of our October 2024 investor letter: Are we there yet? Awaiting clarity on US Elections, FOMC, and Bond Yields. To receive the full monthly letter, please email to [email protected] or sign up on our website. In this month's letter, we include two previously published notes on 1) The recent increase in bond yields and 2) Our view on the US Senate races. These were also posted on Substack: Macro Maverick and our page on X, and on LinkedIn. ? After a 50bps rate cut, US Treasury yields have moved higher, and the curve has moved in a manner more consistent with a tightening. The average 30Y fixed rate mortgage fell to 6.13% before climbing back 60bps to 6.73%. The main driver of the mini-tantrum is the overall trajectory of the US Economy based on various economic indicators that point to ongoing resilience. To a lesser extent, regardless of the election outcome, bond yields appear to be signaling concerns about the fiscal outlook and structural deficits to the next occupant of the White House and to incoming congress. ? On the Election, our interpretation of underlying polling data shows increasing clarity on the composition of the US Senate in 2025. With the obvious caveats on polling errors (including the failure of the projected red wave in the 2022 mid-terms) and possible unknown events and surprises, the US Senate appears to be moving towards narrow Republican control. ? In Markets, equities hit new all-time highs in October and credit spreads rallied to 17-year tights before giving up some of the upside into month-end. Accordingly, financial conditions bounced off two-year lows to levels last seen in August. ? On the economy, October data showed an economy on a steady path supported by a resilient consumer. We fade the +12k October Payroll print due to the low-quality data and low response rates due the worker strikes at Boeing and the drag from the hurricanes. The response rates to the BLS survey on the labor market fell below 50%, a 33-year low. This is likely to come up during Powell's press conference on Thursday. It will take another 1-2 months of data to understand the true trajectory of employment.

Here is a summary of our September 2024 investor letter: China Stimulus: Doveryai, no proveryai, (Trust, but verify). To receive the full monthly letter, please email to [email protected] or sign up on our website. In this month’s letter, we discuss the Fed's 50bps rate cut that arrived with hawkish tone for 2024, but dovish for 2025 as noted in the SEP, statement, and comments by Chair Powell at the presser. Following an unusual runup into September’s meeting, as described in our substack post before the Fed's announcement, the US Fed embarked on the post-pandemic rate cut cycle calling it a ‘recalibration’ rather than a response to slower growth or any particular concerns on the economy but added ‘maximum employment’ as a goal in the statement. ? We also summarize our views on the stimulus measures announced by China in response to the continuing deterioration in the real estate sector and overall economic malaise. The stimulus announcement is a “whatever it takes” 1-3 quarters, not a “whatever it takes” moment. ? In our view, the September 2024 monetary package is more substantive than prior announcements and, for now, acts to limit further economic downside. However, the impact on the real economy will take several months to play out, and the initial market euphoria may be premature. The announced package mainly targets liquidity via monetary policy. A stronger fiscal package is needed to boost the effectiveness of recent measures. The key to success this time is the demand-side response. Specifically, meaningful credit demand. As always, timing of implementation and execution of the announced measures are critical. To quote President Reagan, "Trust. But verify." ? In Markets, equities staged a remarkable recovery in September, the UST curve bull steepened with an aggressive rally earlier in the month on weak data and expectations for a larger rate cut than expected. The aggressive rate moves earlier in the month resulted in the 2/10 curve uninverting for the first time since July 2022. Accordingly, Financial Conditions eased to two-year lows.

Is a 50bps easing really in play this week?

We just published our August 2024 investor letter: Jackson Hole 2022: “until the job is done” vs. 2024: “the time has come”. To receive our monthly letter, please email to [email protected] or sign up on our website. With inflation on a moderating trajectory, over the past few months, we have focused our attention on the labor market and have been parsing the various metrics to gauge the extent of the slowdown. Last week we refreshed our version of Yellen’s Labor Market Dashboard on our Macro Maverick Substack, and on our page on X. ? In this month’s letter, we compare Chair Powell’s 2022 (9 min) speech at the Kansas City Fed’s conclave in Jackson Hole, to his 2024 (16 min) speech. In 2022, with the Funds rate at 2.375%, and having misread the 2021 inflation spike, Powell promised to stay focused on price stability, “until the job is done” (fig. 1). +300bps, and 2 years later, and with a $1.8trn smaller balance sheet, in 2024, the attention has clearly moved to offset early softening in the labor market with the announcement that, “the time has come”. ? One outcome of a dovish US central bank juxtaposed with a hawkish BoJ and the small narrowing in the TSY/JGB yield differential was the rapid appreciation of the Yen and the unwind of the carry trade that manifested in a one-day 12.4% decline in the NKY followed by a selloff in US Equities. In this month’s letter we take a brief look at the decline in the US$ and expect the greenback to stabilize here.

In light of Chair Powell's recent focus on Employment, we update former Chair Yellen's Labor Market Dashboard: Please subscribe to our substack for updates on markets and economics.