"The aim of the Fed’s purchases over the past decade was to boost asset prices, she said, and there could be a “symmetric reaction” once the assets roll off. “It is hard to know because we don’t have experience”
Fool me all the time, shame on me
This coming week's Fed meeting put a false bid under risk all this week. If that's what you want to call it:
Amid the worst macro data since 2009, anyone who can fog a mirror might ask why bond yields and the dollar were bid all this week. And the answer is because this coming week the Fed is widely expected to begin balance sheet "rolloff". Which means that instead of reinvesting maturing bond proceeds into new bonds, they will use the proceeds to reduce the Fed balance sheet. The last time they tried this was in 2011 during the debt ceiling negotiation. Bond yield traders covered their shorts into the event, now and then. Emerging markets were leading. Hello, is anybody home?
In 2011 the net effect of reducing liquidity was a bond rally and global RISK OFF. The exact opposite of how dullards are positioned. But don't take my word for it...
Let's do this...
"We need to go on trouble watch a year from now"
Gundlach's favourite bond indicator rolled over this week:
Because China's economy and copper rolled over this week:
"A sharp drop in asset prices would not necessarily be troubling to the economic outlook"
Asset prices ARE the economic outlook
One of my counts is working:
Now this one needs Fed assistance...
