Caveat Emptor, LIBOR Anyone? Weekly Update 3 27 18

With the plethora of market action since last week we are going to keep this letter short and sweet. As we suspected last week the FED did indeed raise rates and move the upper bound range of the Federal Funds rate to 1.75%. As we pointed out with our IOER chart last week, the FED now pays domestic and foreign banks some $47 Billion dollars for not lending money out of the system. (Zerohedge used our chart btw) So QE is alive and well, no matter how much the FED says they are shrinking balance sheets, hogwash we say…
We also highlighted the potentiality of a fake out move in the SP500 toward the 2750 area, we like to pat ourselves on the back when we see such antics, because the algo’s that do it are becoming complacent in their linearity. Maybe the HFT brains should move to playing Texas Holdem and press their luck in that arena, see how well their odds calculating scripts work then. Anyway the fake out played out as suspected and not even month end window dressing can stem the selling that just keeps coming.
What seems obvious to us is that the BTFD is #OVER and we are certainly glad. We knew it was only a matter of time and being the fixed income bond arb aficionado’s that we are, the yield spreads become our crystal ball and when funding gets tight, Caveat Emptor! LIBOR, anyone?
See dear reader and this is why you read our letter, because we try to break your cognitive dissonance and in doing so, we enlighten you to the kind of logic and thought process that can only come from countless hours, days, weeks and years deciphering and decoding the ever changing financial market places. This knowledge is in fact “priceless” and we are giving it to you for free, for now at least. As always we will keep you informed because we are believers in common collaboration, especially the type that breaks down esoteric financial jargon barriers. We want our readers to be well informed, and not just in the subject matter of financial markets, but investing, trading, risk and life in general, because it is all connected. Trust us when we say your emotions not only affect your wellbeing, but they affect your economic decisions, this we are certain.
Ok enough of the lecture, here is what you need to know. First the #MAGA movement is taking the world by storm and you can bet your bottom dollar the globalists and those that have been in power over the last few decades are certainly up in arms. The America first policy flies right in the face of this one world, borderless, frictionless, cheap labor and supply side arbitrage system. Good or bad Trump has made no qualms about disrupting this status quo and the system is in damage control now. The mockery of all this Russian collusion is flat out preposterous and all will come to light soon enough, but the big repercussions are hidden well under the radar.
You see dear reader, the things you don’t read about in the news, the real info that the bobble heads on the left and the right never discuss because they are too busy forcing their opinions and false narratives, the real news has to be uncovered. We uncover it and bring it to you and the reality of this situation and why the markets are in upheaval is because the #MAGA movement is about cutting off global funding networks that operate far outside the jurisdiction of any government, and these dark pools, these shadow ops, whatever you want to call them, they are being slammed shut by the new administration and this in coordination with a higher rate seeking central bank in the US is quite a matchstick for the overinflated gas bubble of a market. This all ties in to this gigantic monetary printing press that has blown wealth disparities to epic proportions and now all the paper wealth cannot be supported once the interest rates start eating into their economic funding models. Bottom line, there is an actual limit to all this global printing and we are witnessing it, debt that can’t be repaid back, won’t and who ever goes first will set off a daisy chain of events that will make 2008 look like a walk in the park.(Deutsche Bank???)
It’s all tied the markets, the sentiment, the emotions playing out all around the world, just look around you. If you got off your trading screens and smart phones once in a while to pay attention to your surroundings, you will start to see the world is a very different place, physically and naturally. So look up and take notice, what’s going on in nature around the world, the tides, the oceans, the weather, snow in the Sahara, Red iron oxide snow in Socchi. If it hasn’t become obvious by now that our very world is changing before our very eyes, moving swiftly in ways we haven’t seen before, well then start paying attention, because it’s all tied together. This is one gigantic closed electromagnetic system and all parts play a key role and our financial systems are a major component in all of this. As goes the money, so goes the attitudes and emotions and things can get heated quickly when they go south, certainly much faster than in a decade long linear up trend. Patience runs thin when the tide runs out, this we are quite sure of and those not wearing any suit are certainly exposed!
So where do we stand, we have been warned quite steadily from the fundamentalists, like Jim Grant, Ben Hunt, Hussman, Mauldin, Stockman, you name it, they are on it, but like active management, they have fallen on deaf ears as investors have been lulled to sleep by the central bank’s monetary debt IV drip. Well, we know they will be proven right, the Minsky moment comes for you like the grim reaper, asking not a single question, but a swift cut from the scythe and then game over. Once one domino falls, the fallacy is exposed and this time there will be no TARP!

Well maybe there will be, but Econemotions.com came up with what we think is a dot plot to rival the FEDs own predictive prowess, one which we think better sums up the future of our monetary slide:
Ok sorry we got too far off tangent, but we couldn’t help ourselves. The markets are trying desperately to hold the 200 day moving averages, because they are the line in the sand right now. So let’s look at a few charts, first up the SP500, in all honesty we don’t like making predictions, but the Fib 38.2 and the trend line converge at 2468 and this just seems to juicy to pass up:

The NASDAQ looks quite ominous as well and we have seen some chunky ranges, this is a testament of large institutional selling being mopped up by SWF and Central Bank money printers in our humble opinion:

We picked on Facebook enough, so let’s look at Google, $931 is obvious and we suspect any probe below and sustained close, should mark the end of an era for now:

Flipping to the US government 10 year note sector we can see that the yields continue to probe the upper 2% area, but have not been able to crack that 3% threshold. 2.79% will see some heavy resistance at first but we suspect any close below will open the flood gates in a desperate panic mode with not enough life jackets for everyone:

When we move over to the Ten Year Futures we can see that the 121-00 is really the resistance point that is going to decide the next move. If they cannot build sufficient momentum to break higher above, than 3% yields will beckon. Our take is any further equity deterioration will push the central bank hawks to the sidelines and interest rates will turn lower and catch a very large speculative short base well offside:

OK, that does it, we tried to keep it short, but there is so much we would like to convey, yet we can only give you bits and pieces. We delve into areas that are not main stream and thus we don’t want to take you down a path of question, but rather enlighten you as we see the timeline forming. We are all on the same journey and we hope you continue to support our work and as always feel free to comment and send an email if you feel it’s worthy. Thank you and happy trading this week, cheers!

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