10 Year Note Yield - Short / Intermediate Duration
Inflation has been mispriced in excess of 16 months. The Federal Reserve should have
begin to reduce Liquidity by Mid 2020 as Fiscal Stimulus had taken effect into July into
September when Fiscal Stimulus began Peak.
The Fed's Balance Sheet continued to expand with the Purchase of RMBC/MBS/UST/Corp.
Debt, while Shadow operations under FASB 56 continued to increase nearly matching the
Fed's accumulated Holdings. $8 Trillion in combined Net exposures, provided outsized
gains for Equities.
Bonds began a revolt in early 2021, only to see the Fed step up and employ YCC in early
April, attempting to stem the fastest rising rates in US History.
The Fed and US Treasury can control all Points on the Yield Curve as the Buyer of last resort.
Clearly, the Short End used to require far less effort when re-fundings were under 30 Months.
This is no longer the case, as they expand funds from 5-7s out to the '30s where we have seen
multiple "Auction Failures". Buyers simply refused to participate.
A Creep effect begins to enter the equation with respect to expectations.
The Long End of the Curve begins to flatten, traditionally indicating a recession ahead according
to conventional Bond Wisdom. And therein is the issue, this is not the 1970s and StagFlation
is not the Environment.
We are within an Inflationary Depression and have been for some time by any real and
credible Metric.
Economic Activity began to lag in Q1 2021, by Q2 the results were Peak consumption for
the US Consumers. It will be downhill for into Q3 and worsening into Q4 as we indicated
in July, all metrics were showing clear signs of another Global Slowdown as occurred in
Q2/Q3 2019.
Excess Capacity was quietly, but quickly becoming underutilized, as well as under-reporting
of Global Economic prospects.
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For 2022, I see a rapid and substantive decline gaining Momentum.
Economic Activity was pulled forward into 2021.
Inflation Numbers need to be brought to heel with BLS Recalc for Inflation, taking effect
in January 2022. This extraordinary measure will fail. The headline Numbers adjusted by
this tampering will not change Prices Paid.
Malcontent - the result as What is purported and Reality will diverge to create further distrust
and increasing Loss of Confidence - Quickly compounding.
Quietly, absolutely not... as Monetary Policy will not be alone as the "Build Back Better" Fiscal
Policy has been delayed. Further Stimulus down the road... only serves to compound the problem
and stave off the Pitchforks and Lanterns.
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Covid Variants continue to expand - 19/ Epsilon / Delta / Omicron / New Variant TBA
The Fed indicated in their most recent FOMC Meeting Minutes and Press Conference, Omicron
is an "Uncertainty" and why the FED called it out within their Policy Statement.
Indicating the US Economy could handle the "Omicron" Variant at present while acknowledging
the FED is a "Long Way from knowing what it will turn out to be..."
"It is unclear on how the New Variant would suppress Demand and Supply."
"Wave upon wave, people are learning to live with this..."
Vaccinations, according to the Raven reduce the "Economic Effect."
Timeline for Variant assessment - 3 to 6 Weeks... Omicron doesn't really have an impact on the
Taper as the Chair wants participants to believe.
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The Stock Market is and is not the Economy - it depends on which way the wind is blowing. A
Northern Gale changes arrangements, this is what the Raven is laying the groundwork for into
Q1.
An overextended Credit based Financial Economy has a great number of hurdles ahead in addition
to a Central Bank which may or may not embark on further meddling.
That is immaterial to a larger extent as Global Markets for DEBT are Tightening at a time when
the compound effect of all Economic activity is waning... instructs us all as to how "intent" will
reprice DEBT / Inflation / Expectations and Sentiment.
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Factors that lead to growth in 2021... the plug is being pulled.
Q4 rebound is a seasonal pattern, and yet Holiday sales will prove to have been DISMAL.
The Dollar remains at risk to the upside, clearly holding its own, the Dollar will move higher
at least to 100.
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The Fed can do plod along - Markets will adjust as they permit the Net Drag to do their work for them.
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Regional BAnks are showing two consecutive quarters of Savings Drawdown from Q3 thru Q4.
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The Inflation/deflation debates have always amused me as an Economist. This is best framed within the
context of Credit Malfeasance again the expansion of Moore's Law to an Exponential Function.
Technology is deflationary, it reduces a great many Economic functions while increasing efficiencies
in ways, most fail to understand.
Monetary Policy is the Inflation component with an added twist, the Supply Shocks and shortages due
to the Shut Down of the Global Economy. An extraordinary time in Humanity's History.
This will be discussed at length in follow-on commentary.
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Moral hazards abound and are plentiful at precisely the wrong time.
A Nation of Gamblers - www.tradingview.com
PS. - the House always wins
