Risk Assets See 1st Day of Month Buyers
Some decent risk capital came out of the gate here today as most risk assets were higher on the day! We know the debt deal is going through the house and next the senate, it will be interesting to see how quickly now the FRB pivots and moves to the next rate cut cycle…we can see from the US 2Y that the recent back up in yields has now subsided and moving lower in yield again:
We also see a continuation of the shorter maturities leading the way across the board:
Now let’s look at the MegaCap Tracker which continues to plow forward:
We moved to the QQQ hedge yesterday and we will continue to use that product to offset any reversal in the fortunes of the 8 MegaCaps! We are bringing you this tracker tutorial so that you can learn and hopefully create your own ideas for longer term investing and or open you interest to researching more and more as to what truly drives our markets!
One thing we want to point out and given the propensity for the Federal Reserve to bail out our government which is now creating debt at record proportions. One of these proportions we want to point out is that the ratio of the FRB asset increases to the increase in GDP has absolutely collapsed over the last 40 years. This ratio has gone from $1 in FRB asset increase led to $28 in GDP growth, now every $1 in FRB asset increase generates only $1.80 in GDP. This is a massive reduction of over 15x!
We can demonstrate this on the following SP500 chart, which also points out an important fact, that the FRB Assets are looking parabolic much like the SP500 chart!
Do you think there is a limit to how many assets the FRB can buy? Think again, its the flip side of the unlimited debt the US Govt can take on. If the US govt can increase debt to GDP to 2x then there is no reason to believe the FRB assets can’t go 2x!
Alright thanks for listening, we hope you share, we hope you learn and we hope you realize that our system currently is awash in brand new interest money which is highly inflationary for the elite class and its a killer for the middle class. This is why Magnelibra believes the FRB will wipe out all these rate hikes in a short while and the US Govt yield curves are predicting that! When this does start to come to fruition, we will recommend full protection and reversal of this very crowded MegaCap trade and rotation convexity bid back into US Treasuries becoming a defacto self fulfilling prophecy!
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