Quick Thoughts

Ok just a couple of quick thoughts today first up, we know that many are still on the fence on whether or not we will move to a recession or not. As Magnelibra pointed out, the bigger thought is how hard of a landing will it be? Look at this chart of the the 3M/10Y and historically you can see the massive inversion is even deeper than the Tech bubble or the Housing bubble:

Maybe its the fact that our FRBs balance sheet is 10x from those points in time, maybe too many large funds trying to hold on and protect all these QE asset gains. As we have said time and time again, QT works just like QE but in reverse, which is why you see the FRB balance sheet not being reduced significantly…why? BECAUSE assets will get crushed. You see this 3M/10Y chart and what that represents is NEGATIVE CARRY. Levered players are getting smoked, from both the higher carrying costs and from a depreciating underlying asset. A lesson that has been a long time in the making.