Anatomy of the New Tamagotchi!
Potential Trades around Scott Bessent's appointment + a new addition to the “Memes that Make Money”™
Finally. White smoke emanated from the roof of the Vatican…errrr…the While House. A new Tamagotchi has been chosen. Scott Bessent it is.
Tamagotchi Background
1-minute summary for those who missed the origin of the Tamagotchi:
“Tamagotchis” are those virtual pets that you have to keep “happy” by feeding them just enough food and petting them once in a while
Here at Shrubstack, we visualize Policy Makers as simple creatures, like Tamagotchis, in order to figure out their Reaction Function and distil it into the simplest form possible
It’s elegant, it’s simple, and frankly … it’s hilarious
Tamagotchi Yellen was first introduced nearly a year ago in this seminal piece, "Wealth-flation vs Pleb-flation".
Luckily, we figured out Tamagotchi Yellen’s Reaction Function early on:
“Do everything in your power to get your Candidate re-elected …and If he doesn’t get re-elected, who cares, at least get your friends rich along the way!”
“After all, It’s not about the President we didn’t elect, but about the Wealth we accumulated along the way"! (“The Re-Election Cycle”)
…Nailed it!
As simple as this Reaction Function sounds, Tamagotchi Yellen’s actions were anything but simple. In fact they were genius. One could even compare her to the financial equivalent of a James Bond super-villain. After all, Yellen managed to inject liquidity in the system DURING QT and WHILE Rates were at 20-year highs as she:
Drained the TGA (Treasury General Account) and pumped markets
Tweaked the QRA and pumped markets
Introduced the BTFP (Bank Term Funding Program) and pumped markets
(* Purists among you will argue that the Fed was partly responsible for the above. Please play along and let it be, thanks in advance).
Basically, this sneaky Tamagotchi managed to hijack the Monetary Policy from the Fed (I wrote an article on the topic called “Tamagotchi Reboot”. H/t to my friend, Steve Miran).
Figuring out Tamagotchi Yellen’s Reaction Function almost a year ago and actually believing in the Power of the Tamagotchi, has been perhaps the single best Portfolio Construction decision I have taken all year:
It kept me Long throughout the year, taking swings with short-term hedges, booking profits from hedges quickly and buying dips when they appeared.
For that, we give thanks to Tamagotchi Yellen for her service. I will miss you. Truly.
Enter the New Tamagotchi
Now we must figure out the new Tamagotchi, the sooner the better: