Sunday, November 22, 2015

FedPlosion Visualized aka. Monetary Policy By Police Squad

"The Federal Reserve now looks set to raise rates in December, partially based on expectation that inflation is set to finally rise to its 2 percent target. There's only one potential problem..."

U.S. Inflation Deflation expectations w/USD inverted (black)
Treasury Inflation Protected bonds / Treasuries (red) with $USD inverted  (black) 

Real interest rates are rising...
Short-term interest rates (black) with deflation expectations (red)

Second problem...the credit cycle is over...

"Low oil prices are leaving many oil and gas companies with difficult debt loads, causing them to default at an extraordinary rate...Moody's forecasts the default rate will increase... The energy sector remains the most troubled, accounting for almost a quarter of the 79 defaults so far this companies boosted their borrowings to between $250 billion and $300 billion, compared with the $100 billion at the start of this year."

Junk bonds:

Leveraged loans aka. Stock buybacks, Mergers, Special dividends:

Third problem - the time to raise interest rates is when stocks are rising, not falling

We've never seen anything this asinine before...
Value Line Geometric stock index with interest rates