Closing Market Comments

Dollar and Bonds Continue Decline

With the US Dollar and Bond markets falling, we can’t help but think that the Equity Complex will have to at some point “be put on notice.” We know the Central Banks continue to plow QE through the global financial intermediaries and yet, we continue to see an uptick in REPO usage. Why?

We know the ECB is on printing press over drive and in fact when we look at the massive 3.8x growth in total Central Bank Assets over the last decade, well its no wonder nominal asset prices continue unabated.

The reality is, all this printing means more and more debt and more and more interest. There’s zero chance that we will ever return to solid sound organic savings growth, for any good economist knows bad money drives out good money and when you have a coordinated effort like this, well, the only thing you can do is punish cash holders with negative rates, until they willfully subject themselves further and further out the risk asset curve, shame on your prudence!

Even today the FRB H4 balance sheet saw Federal Reserve total assets hit $7.165 Trillion, up 0.95% adding $68.22 Billion in the last week:

We thought it was interesting that the new Municipal Liquidity Facility saw a chunky $16Bln opening salvo. We heard Illinois was one of the first recipients, no wonder they let the looters loot and the degenerates vandalize and destroy things, some juicy Fed money is on the way, just don’t worry about those under water pensions!

Well, with all this debt needing to be financed, we can’t say we are surprised at the breakout of the US 10YR as it broke higher today, settling up 5.9 basis points with a yield of 0.82% the highest yield in over 2 months:

With the yields rising as the dollar is falling, the US yield curve continues to steepen and rightfully so as short rates are well anchored and the long end continues to be the laggard of the bunch, here is the US 5s30 with room to run most likely out to the 145/150bp area over the next few months, we can see a clear trend line break reinforced with a bust out over the 200 wk MvAvg:

We spotted another great cartoon from Hedgeye:

JPowell is just another enabler in a long line of central bank chair QE monetarists. The markets are now beholden to this massive debt stimulus and if its debt the controllers want, then by golly its debt they shall receive. Its no wonder the Millennial’s are so willing and openly clamoring for change, they sense the economics perhaps, maybe that gives them too much credit, maybe they just realize that in a world dominated by so very few, that the masses, well are simply being left behind and we think they sense it.

-Magnelibra Econemotions

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