Economist Lays Out The Next Step For The Fed

Mr. Steven Ricchiuto, he of a Masters in Economics from Columbia, has laid out the proper plan for the Federal Reserve in this oh so noisy environment in which an unassuming and fairly quiet man is trying to tune out a personal bully on Twitter, tune out the stock market’s daily whipsaw and do what he perceives to be the right thing.

Today, the academic named above throws in with Trump and politely harangues Chairman Powell thusly in an open letter. You can read it by hitting the graphic…

Stagflation this, Volcker that, deflation the other thing… blah blah blah. But then he gets to the interesting parts, the money parts. Of the post-Volcker era he states…

To rein in excess money supply growth, the Fed trimmed bank reserves — high-powered money — which resulted in dramatically higher short-term rates. This shift in policy served to dampen inflationary expectations, and thus inflation, while increasing central bank credibility. The dollar strengthened and elected officials became strong supporters of an independent Fed as a result.

Indeed, in microcosm, these periodic drives to the lower rungs of the Continuum are all about Fed credibility. Credibility rebuilt after events like last year’s break of the monthly EMA 100 limiter (red dashed line) on the 30 year Treasury yield.

In H2 2018 while the supposed bond experts were uniformly aligned in a BOND BEAR MARKET!!! posture and market participants were wondering why Jerome Powell was being so stern amid the stock market wipe out NFTRH noted that the Fed was not going to self-immolate in a blaze of inflationary expectations (featuring out of control long-term yields). Credibility would need to be rebuilt and here indeed it has been, and then some. Continue reading "Economist Lays Out The Next Step For The Fed"

When The Bond Bubble Blows Up

Amazing isn’t it? It was only back in H2 2018 when everybody but you (because you are as smart as I think you are or because you read NFTRH or nftrh.com) and I was unbelievably bearish about the TREASURY BOND BEAR MARKET!!!

Today… not so much. The herd is absolutely pile driving bonds right now.

tlt bond

I know this all too well because while my SHY (cash equiv.) position is doing well it’s not anything like the above, and is basically – given relative position sizes – offsetting a position in this, which I am still holding with all the stubbornness of a pissed off contrarian. Continue reading "When The Bond Bubble Blows Up"

Are We Really In A Bond Bear Market?

George Yacik - INO.com Contributor - Fed & Interest Rates


The U.S. bond market took it on the chin again last week. The question is: Was this is a harbinger of even higher yields to come or just an overreaction to some potentially scary headlines – some of which turned out to be fake news – and therefore a potential buying opportunity?

“Bond King” Bill Gross started the fun on Tuesday when he tweeted out these ominous words: “Bond bear market confirmed.” He did tone that down in his market commentary to his Janus Henderson clients, saying, “We have begun a bear market although not a dangerous one for bond investors. Annual returns should still likely be positive, although marginally so.”

Still, that’s not a whole lot to be happy about, unless you’re heavily invested in stocks, where the returns may be even worse, i.e., negative. The other so-called Bond King, Jeffrey Gundlach of DoubleLine Capital, predicted that the S&P 500 Index would end the year with a negative return. He also said that if the 10-year Treasury yield pushes past 2.63% – which it almost did last week – it will accelerate higher.

The news got worse after that. Continue reading "Are We Really In A Bond Bear Market?"

S&P 500: Any Juice Left?

Lior Alkalay - INO.com Contributor


The S&P 500 (CME:SP500) closed for the week at 2,472.10, after hitting an all-time record, after gaining 10.5% year-to-date. The S&P’s forward Price-to-Earnings ratio, a key ratio for investors, is 17.8 above the 10-year average of 14. And this brings up the inevitable pondering; is there any juice left in the S&P 500?

In searching for an answer, the intuitive starting point might be the S&P’s valuation. We’ve already pointed out that the S&P 500 is trading at a high valuation compared to its 10-year average. Furthermore, according to Factset research, earnings for the 500 companies which comprise the S&P 500 are expected to rise by 9.3% as compared to 9.26% in 2016. Now, while that is a solid figure, it also suggests earnings growth is not accelerating and may even suggest the acceleration in earnings growth is over. And if earnings growth is likely to decelerate in the coming years it cannot account for the S&P500’s 17.8 PE ratio. So, there’s no valid reason why the S&P’s valuation would be the catalyst for another surge. Why not? Simply because it's too high. In fact, the real catalyst isn’t within the S&P500 or even within the stock market; instead, the real reason lies within the Bond market. Continue reading "S&P 500: Any Juice Left?"