The cockroach theory in Wall Street contends that for every one cockroach you see, there are 100 hidden in the woodwork. We saw four Big Tech cockroaches in this earnings season: Microsoft, Alphabet, Texas Instruments and Meta, which can be classified as a super cockroach. The US recession has not even begun, but the profit recession is definitely upon us. There are none so blind as those who refuse to see and the bullwalas must now act or forever lick their self-licking ice cream cones while their cockroaches emerge by the millions in the twilight zone of the global economy.

My weekend reading was once filled with the sensual literary delights of Tolstoy and Proust, exploring the Istanbul of Orhan Pamuk, the Dublin of James Joyce and the Paris of Papa Hemingway/Scotty. It is now consumed with mountains of equity research, strategy and Bloomberg intel analysis. Yet Boaz Weinstein’s macro views sent a chill up my spine. Boaz is one of the world’s most successful hedge fund managers and his Saba Capital flagship fund is up 31% in 2022, a tad better performance than the stock and bond indices, let alone the structured excreta peddled by private banks in town.

Boaz believes that the combination of high inflation, Europe’s energy shocks, central bank tightening, Fed’s QT horror show and the collapse of the Chinese property market are the prelude to one of history’s longest and most vicious bear markets, akin to the 32-year disaster in Nikkei Dow.

I know for a fact that Boaz was on the other side of the trade when JP Morgan’s London prop trader Bruno Iksil blew up $6bn and earned the dubious title of the ‘London Whale’. After all, his El Greco consigliere was once a buddy in Chase New York and the only guy on the dealing floor I could swap stories with about the Scandinavian Love Shack in Ayia Napa, our fav watering hole in Cyprus.

Boaz expects the global recession to lead to a tsunami of corporate bankruptcies and a dramatic widening of credit spreads in the bond market. So, he is holding the credit default swaps of cyclical/volatile companies. Boaz was one of the world’s top credit traders when he worked in Deutsche Bank New York and his $5bn AUM Saba is an excellent credit hedge fund whose LPs include the crème de la crème of Wall Street’s smart money.

If Boaz tells me to jump in anything to do with the credit markets, my only rational response is “how high?” The sovereign debt crisis in the emerging markets is also going to get a whole lot worse in 2023 and provide some fabulous money-making opportunities in the CDS of a dozen sovereign satrapies of copper, cocoa, soybeans, wheat, cotton and coal. I cannot name the countries as ultra nationalist maniacs come out of the woodwork and threaten me with fire and brimstone if I do not agree with their macro world view. Yet F Scott Fitzgerald said, “Words are an assault on the unthinking” and I say the unthinking always gets skinned alive in financial markets. That much, at least, is certain.