Friday, March 10, 2017

Make America Reflate Again

Re:2014 Hedge Fund Manager Is Taking The Blue Pill Now
"There are times when an investor has no choice but to behave as though he believes in things that don't necessarily exist."

"For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully. The good news is that mankind clearly has the ability to suspend rational judgment long and often."

In other words, "it's not our money, so let it ride on the blue pill..."

Where was I...

The phantom reflation of the opera continues to haunt today's gamblers. They see reflation behind every corner. Unfortunately, what they have conveniently forgotten is the eight years of debt accumulation at 0%. A rise in interest rates at this late juncture can be anything but inflationary. Rate increases now are self-destructing time bombs with a lit fuse. But, gamblers bought reflationary assets hence they and the sycophant Fed now only see inflation while the freight train of deflation bears down on them from the other direction.

There can be no reflation because there are no "wages". A minor detail to a dedicated Idiocracy of course:

Wage CPI with Commodities

With that context, let's look at TrumpPlosion:

Whenever the Fed signals that it's ready to raise rates imminently here is what happens to junk bonds (red) and oil (black):

10 years, 1 year, 3 months (time between Fed rate hikes):

Here is what the Fed is doing to the corporate bond market after an 8 year corporate debt binge. The blue line is money flow:

Mortgage REITs aka. "real estate"

Municipal Bonds are clinging to their 2009 trend-line:

 And of course Treasury bonds, which is what everything else in the world gets priced off of, yes including stocks...

Imagined Realities 2017: "Make America Reflate Again"

"I think I can, I think I can..."

Casino charts:

Breadth momentum:

Risk appetite aka. "RISK OFF"

52 week range of average S&P stock:

The U.S. Oil ETF aka. Final burial

OPEC next meets on May 25 in Vienna to discuss supply policy, and is expected to decide there on whether to extend supply curbs implemented on Jan. 1.