Wayward Equities
This weeks action may only be described by the word trepidation. The equities seem quite wayward as they struggle with decades of central bank QE induced buy everything on every dip, to now a hawkish sentiment and QT regime. We don’t believe the Federal Reserve will win this battle vs the global bond markets as the disconnect seems quite large. We also know the debt ceiling is here and this will force the US Treasury and Federal Reserve to make a few adjustments depending upon the outcome. We have seen CDS on US debt jump here but in reality the US Treasury can never default as the FOMC will just provide the necessary dollars. Yet we all know that the debt pile is so large now, and with rate’s higher, that a large chunk of the US budget is now going to interest costs. $775 Trillion per year and rising fast:
We have a major debt problem the world knows it and well, at some point dislocations and disruptions will become the everyday norm as the sheer size of this debacle is well, unfathomable and well outstripped the natural equilibrium of markets. Printing more and more debt to solve debt problems is like giving a junky more smack and pretending they will ween themselves off. We can tell the markets don’t have a clue, they lack any real direction, and we know that the whole system is teetering on the reality of a full blow recession combined with massive geopolitical problems in almost every corner of the globe. We find it comical that the SP500 is pricing in only a 60% chance of a recession. The global bond markets inversion tells us the real story and one by which historically has never been wrong, we suppose time will prove this story once again:
The world leaders are in Davos this week and we aren’t really sure why this is such a big deal every year. Honestly do people think its anything more than self fulfilling prophecy or narrative spin out of the elite crowd? They have different rules, play different games and for the most part, their ill conceived reality has nothing to do with everyday problems, everyday common reality for the majority of mankind. Why bother even covering such an event, they never say anything of substance, for Godsakes Al Gore is there still telling us the earth is burning up, when in reality, Greenland’s ice sheet is at 40 year decadal highs!
What the real person worries about is why the hell eggs are $8 and Gas $5 and why housing is still so absurdly priced? The real person wonders why we are sending billions in aid and now fighting an obvious proxy war, which it seems our administration is hell bent on turning it into a hot war? As if this NY Times snippet doesn’t make it obvious:
Look we don’t care about your opinion on Ukraine, or Russia or any other war, what we do care about is the fact that so many are blind to the potential, Russia is not some rag tag operation, it has twice as many tanks, it has hypersonic missiles and China is its ally. If any American feels comfortable with a war with a country like that, well then maybe we have lost all sense of reality, maybe go watch Wargames from the 1980s, see how the AI felt about a thermonuclear war back then. Then again maybe I will ask ChatGPT who will win this war. I asked and it didn’t provide an adequate response to the outcome, but gave this response:
WE COULDN’T AGREE MORE!
OK So with the markets obviously wayward and without a catalyst for direction, we are stuck with the parameters below in the Nasdaq. We feel that this area has been a magnet for the last few months and we still believe the market will make a stronger move once these parameters below are breached (11500 or 11250):
As far as the SP500 3895 is still key for the bulls, we are ok above that, below it, we risk a run back to that 3835 and a deeper probe possibility:
We also believe Crude Oil is curiously strong and makes us wonder if the market is anticipating an escalation of tensions in Ukraine???
Ok that is it, not much on tap today, housing number at 10am and a few FOMC speakers. Until the equities decide to move outside those parameters we discussed, its pretty much just chop!
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