Point Roberts Capital
House View: Loss of U.S. Central Bank Independence
Agenda
Executive Summary
Scenario and Timeline
Indicators and Data Integrity
Transmission and Global Shocks
Portfolio Construction
Circuit Breakers and Triggers
Stress Tests
Operational Run-Book
Dashboard Specification
Governance, Disclosures, References
Executive Summary
Assumption: policy under direct executive control; data credibility in question; civil-order deployments; tariffs up to 45 percent.
Baseline: 1y inflation expectations toward 4 to 6 percent with high variance.
Market view: higher term premia, weaker USD versus reserve peers, wider credit spreads, episodic funding stress.
Portfolio: portable, liquidity-first allocation with explicit risk triggers.
Scenario and Timeline
Phase 1 (0 to 6 months): credibility shock; breakevens and 5y5y rise; USD weakens; bond vol lifts; official data down-weighted.
Phase 2 (6 to 24 months): adaptation; tariff passthrough to tradables; growth slows under uncertainty.
Phase 3 (24 plus months): path dependency; repair yields disinflation; no repair risks de-anchoring during shocks.
Indicators and Data Integrity
Market inflation expectations: FRED 5y breakeven and 5y5y forward.
Volatility: MOVE (rates), VIX (equities).
Activity: S and P Global and ISM PMIs; OpenTable seated diners.
Independent price series: PriceStats and BPP lineage.
Cross checks: HKMA LERS communications on the 7.75 to 7.85 band.
Transmission and Global Shocks
Central-bank independence and inflation variability link (Alesina and Summers; follow-ons).
Tariff pass-through raises import and consumer prices.
USD funding volatility transmits globally via term premia and risk appetite.
Data credibility shocks shift focus to market/private measures until reforms.
Defensive Allocation (Synthetic)
Sleeve | Instruments or examples | Weight |
Liquidity | USD, EUR, CAD bills; repo; insured deposits | 25% |
Inflation protection | Global linkers laddered | 15% |
Hard assets | Physical gold; gold ETFs in qualified accounts | 20% |
Non USD cash | EUR, CAD, HKD term deposits | 15% |
Quality equities | Global min-vol and quality factors | 10% |
Alternatives | Managed futures CTAs; tail risk overlays | 10% |
Opportunistic | Event-driven or convex options; tactical credit on improvement | 5% |
Circuit Breakers and Triggers
Risk on: 5y5y 2.0 to 2.5 and falling; 10y BE under 2.25 for 4 weeks; MOVE under 90; VIX under 16; PMIs above 50; no tariff escalation.
Hold: 5y5y 2.5 to 3.0; MOVE 90 to 120; VIX 16 to 24; mixed PMIs.
De-risk: 5y5y or BE over 3.0 to 3.5 with USD weakness; MOVE over 150; VIX over 30; PMIs under 48; tariff or sanction escalation.
Stress-Test Parameters
Scenario | Key parameters | Intended stance |
A. Stagflation | 5y5y up 100 bps; 10y BE 3.0 to 3.5; USD weaker; MOVE 140 to 170; VIX 25 to 35; PMIs 46 to 49; tariffs extended | Fortress bias |
B. Funding shock | 5y5y flat or down; USD up; MOVE over 170; VIX over 35; PMIs 45 to 48; credit spreads widen | Liquidity first |
C. Policy repair | 5y5y 2.0 to 2.5 and falling; BE under 2.25; USD stable; MOVE under 90; PMIs over 50; tariff rollback | Risk on rotation |
Stress-Test Matrix by Sleeve
Sleeve | A. Stagflation | B. Funding shock | C. Policy repair |
Liquidity | Bills up; keep WAM under 6m; raise cash +5 to +10 via bills or repo. | Flight to quality; raise cash +10; pre-stage lines. | Reduce cash -5 to -10; rotate duration selectively. |
Inflation protection | Linkers outperform; extend to 3 to 7y ladder; avoid ultra-long. | Neutral to weak if real yields jump; keep short ladder. | Trim linkers -3 to -5; add nominal duration later. |
Hard assets (gold) | Positive beta to inflation and policy stress; hold 12 to 20 percent. | Likely stable; keep size steady; avoid forced sales. | Trim -3 to -5; recycle into quality risk. |
Non USD cash | EUR and CHF likely stronger; monitor HKD peg. | Prefer USD and CHF for funding; HKD operational only. | Normalize balances; hedge where appropriate. |
Quality equities | Underweight cyclicals; hold min-vol and quality; add defensives. | Reduce beta; avoid leverage-sensitive sectors. | Increase +5 to +10 into quality and broad beta. |
Alternatives (CTA) | Trends can help; add +2 to +4. | Crisis alpha; add +3 to +5; check margin. | Reduce to core sleeve as trends fade. |
Opportunistic | Use long vol; avoid value traps. | Focus on dislocations with strict risk caps. | Shift to event-driven and selective credit. |
Operational Run-Book: EU Malta (EUR)
Accounts: EUR current plus notice or term deposits within DGS limits.
Rails: SEPA; SEPA Instant; SWIFT MT103 for cross-border.
FX: EUR pairs via bank desk or multi-currency broker.
Controls: dual authorization; daily position report; monthly fee audit.
Records: SWIFT messages and MT940 statements archived.
Operational Run-Book: Canada (CAD)
Accounts: operating chequing plus HISA or T-bill funds within CDIC limits.
Rails: domestic EFT or wire; Interac; SWIFT MT103 cross-border.
FX: CAD pairs via bank desk or broker; pre-book forwards for large flows.
Controls: dual authorization and callback verification.
Records: statements, wire confirmations, dealer trade tickets.
Operational Run-Book: Hong Kong (HKD)
Accounts: HKD current plus time deposits for ops balances.
Rails: FPS; CHATS for large value; SWIFT MT103 cross-border.
FX: monitor 7.75 to 7.85 band; avoid speculative positioning.
Controls: watch HKMA Aggregate Balance; set HKD concentration stops.
Records: FPS or CHATS confirmations; monthly recon.
Dashboard Spec: Data Sources
Indicator | Example series or source | Refresh |
5y breakeven | FRED T5YIE | Daily |
5y5y forward inflation | FRED T5YIFR or swap equivalent | Daily |
MOVE index | ICE MOVE (vendor feed) | Daily |
VIX index | CBOE VIX | Real-time or daily |
PMIs | S and P Global; ISM | Monthly |
Alt-demand | OpenTable State of the Industry | Daily |
Tariff tracker | Internal policy log and press releases | Ad hoc |
FX and pegs | DXY; HKMA Aggregate Balance | Daily |
Dashboard Spec: RAG Thresholds
Indicator | Green | Amber | Red |
5y5y forward | 2.0 to 2.5 | 2.5 to 3.0 | 3.0 plus |
10y breakeven | <= 2.25 | 2.25 to 2.75 | >= 3.0 |
MOVE | < 90 | 90 to 150 | > 150 |
VIX | < 16 | 16 to 24 | > 30 |
PMIs | >= 50 | 48 to 50 | < 48 |
HKD band stress | Normal LERS ops | Tight band usage | Persistent edge touch and liquidity drain |
Governance and Process
Weekly: indicator review and trade log.
Monthly: rebalance to targets unless circuit breakers are active.
Quarterly: review assumptions and risk budget; update dashboard thresholds as needed.
Disclosures
For professional investors only. Not investment advice.
Synthetic allocation for illustration only; all investing involves risk.
Tax treatment depends on individual circumstances; seek tax counsel.
Selected References
Alesina and Summers 1993; Cukierman 1992.
IMF censure of Argentina statistics (2013) and removal (2016).
Amiti, Redding, Weinstein 2019/2020 on tariff pass-through.
EU DGS; CDIC; HKMA LERS; TreasuryDirect TIPS; CBOE VIX; ICE MOVE; S and P / ISM PMI; OpenTable.
Appendix: References 1 of 3 - Academic and research
Alesina and Summers 1993, Central Bank Independence and Macroeconomic Performance (JMCB) https://www.jstor.org/stable/2077833
Cukierman 1992, Central Bank Strategy, Credibility, and Independence (MIT Press) https://mitpress.mit.edu/9780262514477/central-bank-strategy-credibility-and-independence/
Amiti, Redding, Weinstein 2019, The Impact of the 2018 Trade War on U.S. Prices and Welfare (NBER w25672) https://www.nber.org/system/files/working_papers/w25672/w25672.pdf
Cavallo 2016, The Billion Prices Project: Using Online Prices for Measurement and Research (JEP) https://www.aeaweb.org/articles?id=10.1257/jep.30.2.151
Appendix: References 2 of 3 - Indicators and methodologies
FRED 5y breakeven inflation rate (T5YIE) https://fred.stlouisfed.org/series/T5YIE
FRED 5y5y forward inflation expectation rate (T5YIFR) https://fred.stlouisfed.org/series/T5YIFR
Cboe VIX methodology (official PDF) https://cdn.cboe.com/api/global/us_indices/governance/Volatility_Index_Methodology_Cboe_Volatility_Index.pdf
ICE BofA MOVE Index - real-time index page https://www.theice.com/market-data/indices/real-time
Appendix: References 3 of 3 - Policy, operations, and �alternative data
IMF 2013 Statement of Censure on Argentina statistics https://www.imf.org/en/News/Articles/2015/09/14/01/49/pr1333
IMF 2016 removal of censure on Argentina statistics https://www.imf.org/en/News/Articles/2016/11/09/PR16497-Argentina-IMF-Executive-Board-Removes-Declaration-of-Censure
EU Deposit Guarantee Schemes (EC official) https://finance.ec.europa.eu/banking/banking-regulation/deposit-guarantee-schemes_en
Canada Deposit Insurance Corporation - What is covered https://www.cdic.ca/depositors/whats-covered/
TreasuryDirect - Tax forms and withholding (TIPS 1099-INT and 1099-OID) https://treasurydirect.gov/marketable-securities/tax-forms-and-withholding/
HKMA - Linked Exchange Rate System overview https://www.hkma.gov.hk/eng/key-functions/money/linked-exchange-rate-system/
Billion Prices Project (project site) https://thebillionpricesproject.com/
PriceStats daily inflation indices https://www.pricestats.com/
OpenTable State of the Industry dashboard https://www.opentable.com/c/state-of-industry/
S and P Global PMI portal https://www.pmi.spglobal.com/
ISM Report On Business portal https://www.ismworld.org/supply-management-news-and-reports/reports/