Tracker Update Plus Yields vs SPX

We just wanted to share one chart with our subscribers today and it has to do with US interest rates, in particular the US Govt 10Y yield vs the SPX. We always see people trying to correlate these, especially when yields jump the main thought is equities should fall because bonds are becoming more competitive. Fundamentally, yes this does make sense, however the given time period in regards to specific monetary policy, fiscal policy and dollar FX flows also play major roles. So we cannot really simplify something that is quite complex and just blanket it and say as yields rise equities fall, its not that simple. So we just wanted to share this chart to prove our point that in certain times, yields fall and equities fall and yields rise and equities rise. We use the green and red arrows to demonstrate this effect.

Overall the level of US Govt 10Y yields determines from our purview, the amount of excess leverage that can be refinanced and rolled cheaply, but post 2008 the FRB got silly and started buying up private assets with money out of thin air "QE", which led to a massive run from then till now. The FRB shouldn't be fooling anyone, they are non zero sum players acting as agents in a zero sum world competing against private investors, all the while enriching a very few subset of private players closest to the spigot, its a centralized control mechanism designed to concentrate wealth to create dictatorial power structures, which are obscure to the general simple public, but obvious to keen market observers and players.

The current regime continues to punish the main street all the while the main street continues to plow their savings into inflation discounted passive buy and hold schemes which after 25 years loses half its purchasing power equivalent, but none the wiser...So look at this chart and realize rates are a function of dollar FX excess/shortages and equity prices are a function of FRB intervention via asset purchase expansions on their balance sheet. Which if the FRB is intent on shrinking its balance sheet, well good luck being long equities at these lofty prices with dollar FX shortages increasing because of the super high relative risk free rate.