Deficits, Uncertainties and Tax the Rich?
NQ, Bonds, Tapering and AOC
The equity markets took a little break from the recent sell off which shouldn’t be of any surprise given the veracity of the run up we’ve had since June. With the headwinds that lie ahead, both from prior monetary ramp hangover to the impending declination of bond purchases from the FED (which we always laugh at) to the uncertain trajectory of Covid variants, the markets are trying to discount those uncertainties. However, much like the projected never ending upward budget trajectory via the OMB every year, the FED too plays visual tricks on the fools known as the masses. We all know the asset purchases and bond buying can never end else the games end, the monetary fakery of value ends and thus as Econemotions always puts a little dose of reality into their “expected path” charts. All those PHDs at the FED and they never really do much but tow party printing lines. Anyway we have you covered and we added a nice little notation to Zhedges Bond market tapering “Expected” chart:
Ahh now that’s more like it, that’s objectivity with clarity, simple binary constructs if this then that.
If equities fall throw projection away and reinstitute old levels of purchasing ad infinitum.
Without the monetary printing how do we solve our budget issues? You mean we can’t just keep printing and pretending? Oh yes we can and here is the chart that proves it, deficits “DON’T MATTER”, well that is until they do!
Much like the rest of the world we are stuck in this constant malfeasance of fiscal irresponsibility by which our political and monetary overlords tell us all is well and that wealth can purely be created via debt. Unfortunately they are right and for the overall masses, well too bad either you are in or you are out and in order to be in you either have to work yourself to death or find income producing assets and be fiscally responsible. For those that don’t you can opt for credit induced senses of being in, only till you default, then fortunately or unfortunately depending on your outlook the quasi-socialist state will be there for you to dictate your every move.
Sorry we aren’t all winners that’s just a construct the haves dwell out to make you believe that we live in a utopian unicorn reality - we don’t and its not. The reality is printing to no end which creates massive and disproportional wealth disparities and always leads to Socialist/Authoritarian type structures, why?
The answer is simple, those that have make all the rules!
Those that have, have the resources to buy all the regulators, dictate policy and generally play by a completely different set of rules. What policy are they most fond of, the policies that keep their wealth and power of course. Why is it Gates, Bezos, et. al are so inclined to running every aspect of our lives from technology to biology to political ideology?
The carrot that’s being tossed around to the masses has come in the form of higher equity and housing prices, yet whose really buying? Blackrock? Wealthy? Realtors with an inside look artificially raising the cost of living for everyone by buying before the home hits the market? Yes all of this leads to inflation and all of it leads to a decreasing purchasing power for the consumer. Are low rates to blame? No!
Low interest rates are a byproduct of a system of debt. We have spoken for years about how increasing monetary debt accelerates the zero bound of interest rate by lowering the equilibrium level of all interest rates. It’s a conundrum of course or should we say conun-dumb. Because it really is counterintuitive.
Anyway enough of the rant, back to reality for the traders here. We know the tapering is coming, its not a shock and the short term sell off has easily absorbed such news. The monetary printing press is still on and as long as it is, the assets have nowhere to go but up. Yet Covid and all its new found variants which we can blame many things but we won’t get into that, rather we know the possibility of a replay of 2020 is possible and with that we have to discount that possibility. For us obviously flu season is the ultimate time period we need to fight and that’s coming. So smart players will obviously hedge, liquidate or both here to reassess these risks. So the tapering combined with covid = hedge until further data provides adequate breathing room to go long again. There are a multitude of ways to play this game and that’s what makes trading and or investing a challenge as the goal is the same, but how you get there is completely inherent to the individual.
So let’s look at the tech charts, first up the Nasdaq, yes we see a sell off, but we also see the clear trend and the fact that these do not last very long. However as we just discussed the risk period has become clearer and this recent move is just the first wave and obvious profit taking by a few players:
As for the SP500, the 50 eMA always provides good entry points for the patient and no doubt bottom fishers are here and should put a short term bid into the market:
The DAX has stagnated and hasn’t gone anywhere since June. Any tapering would hit this index hard and with all the civil protests going on around Europe we can’t help but think a few hands are nervous here:
Speaking of that bond tapering, the trend since April is pretty clear, the more you print, the more money seeks safety and the bond since April has dropped nearly 60 basis points off its highs that’s a hefty 24% move! The 1.80% level is the key level for the next panic bid level for the bond market, the only thing standing in the way is time itself, you get the picture:
Finally let’s leave with the biggest conundrum of all plastered right in front of our faces and when an Ultra Left Liberal like AOC who clamors for equality then goes to a gala in a grossly overpriced outfit with “Tax the Rich” on it, nothing throws egg on the commoners face more than this. Actually its what we expect from AOC, why not do as I say not as I do seems to be the Congressional model these days in the U.S. We wouldn’t expect anything less, then again we have always known the truth, its all fake, a movie if you will, politicians are actors, some of the best in fact! Anyway here is a beautiful display of hypocrisy (she looks good ill give her that):
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-Magnelibra Econemotions
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