Systemic Stress is Building, and it’s Bullish (for now)

Using the spread between 30 year and 2 year US Treasury yields, we can gauge when policy makers are in control of market participants’ perceptions and when they are losing control to the free market’s will.

Operation Twist was announced in September of 2011 in the aftermath of the first phase of the Euro crisis as the yield curve had exploded higher, taking the monetary stress barometer, gold, with it.  Over bought on unbridled momentum, gold entered an extended correction in line with the yield curve, which complied with policy makers’ goal of calming down the system.  As shown many times in the past, gold and the 30-2 yield curve generally travel together. Continue reading "Systemic Stress is Building, and it’s Bullish (for now)"

FrankenMarket Lives (On)!

Excerpted from the September 30 edition of Notes From the Rabbit Hole:

I often refer back to my first publicly written article (FrankenMarket Lives, 2004) because it simply stated the terms by which the stock market lives here in the age of Inflation onDemand, which was kicked off by Alan Greenspan in 2001 and is ever more aggressively managed to this day by his successor, Ben Bernanke.

From the article’s opening segment: "As we enter the summer of 2004 [fall of 2012], our markets appear to be moving with all the grace of Dr. Frankenstein’s creation, staggering forward, arms outstretched and seeking sanctuary [i.e. inflation]."

From the ending segment: "This market was stitched together with debt, and it will require more of the same to keep it going." Continue reading "FrankenMarket Lives (On)!"

i2k12 Back With a Bang

NFTRH 204 went like this… Crazy talk about the Outer Limits and complete control in the opening segment (It’s All Out the Window Now) and a serious talk about the DML (Dear Monetary Leader), deflationary destruction and the Crack Up Boom in the Wrap Up segment.  In between was a whole lot of nuts and bolts functional analysis of the situation.  Anyway, here’s the other half of the bookend…

Dear Monetary Leader is ushering in a brave new world and we will have to be nimble and ever in possession of a functional filter or better yet, bs detector.  I believe this is it, the beginning of the end game.  It is funny to think that so many months ago this letter had come up with another one of its little buzz phrases in ‘i2k12’ (inflationary 2012), which I had imagined holding sway in the second half of 2012 after the deflation scare had reloaded the will of policy makers to inflate.

Now we are here and I must admit there were times when I was brought to my figurative knees with respect to that view.  That is what markets do; they humble you and challenge you to be the best you can be.  That is probably the biggest reason I love this so much. Continue reading "i2k12 Back With a Bang"

It's All out the Window Now

In the run up to Thursday’s FOMC announcement of open ended ‘asset’ (mortgage debt) purchases, ZIRP extension and Twist continuation, NFTRH had been using the average US presidential election cycle, sentiment backdrop and of course technical analysis to stay bullish (with associated rising risk profile).  We had incorrectly minimized the potential for QE right here and now in the interest of not running with an increasingly over bullish herd and with respect to risk management.

Well, that is all out the window now because the US has apparently conspired with Europe to jointly enter the currency depreciation sweepstakes with the US springing out of the gate to a healthy lead.  Sentiment is becoming dangerous, speculation is breaking out and liquidity warning indicators like the Gold-Silver ratio, US dollar, US Treasury Bonds, TED Spread and LIBOR have all been dispatched on a southward journey in the interest of greed, speculation… and desperation.  This is the moment of maximum hubris by Ben Bernanke and powerful policy makers the developed world over. Continue reading "It's All out the Window Now"

Bernanke Plays it Perfectly

From last week’s opening segment:

“Another way to look at it is that the market’s fate appears to rest with the jawbone of the man about to speak at Jackson Hole on Friday.”

From last week’s closing ‘Wrap Up’ segment:

“I think the theme now is that if you are a trader and if you have profits it is a logical time to take some or all of them.”

We know that the decelerating economic backdrop (with inflation measures in check) is supportive of a Fed going unconventionally dovish in unleashing QE style policy if it so chooses.  We also know that the political backdrop is not supportive, with Republicans sounding off about a gold standard and a soon to be former Fed chief. Continue reading "Bernanke Plays it Perfectly"