Saturday, May 16, 2015

The Fed's Potemkin Village Has No Exit

It's only a matter of time before Wall Street beseeches its Fed bukkake whores to print more money now that the recovery has been postponed until never.

Monetary Policy, at best, is a counter-cyclical tool to support business liquidity during recessions. It's not meant to facilitate 35 years of trade deficits by subsidizing ever-greater debt accumulation.

0% GDP @Max stimulus:
Fed balance sheet (red) w/Fed Funds Rate (interest rates)

Unfortunately, however, corporate profits are a function of (liquidating) the economy, not of Fed-sponsored stock buybacks, hence this entire illusion is coming to a very abrupt ending:
Corporate Profits (Year-over-Year Change)

Stocks versus Treasury yields
I expect MUCH lower Treasury yields into the collapse, not withstanding this headfake bounce similar to 2008: