Talked about "talking about talking about tapering"

[kmiklas]

I think that the nasty reaction in the repo markets in 2019 serve as an excellent example of what can happen when Fed liquidity is removed from markets.

Basically they turned the taps off, and overnight repo rates spiked up to 10%!!! The Fed left a void where counterparties and price discovery should have been.

See attached excerpt; reference follows.

Ref:
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr918.pdf

 

[Nine_Ender]

Did we make the turn yesterday?

- There was a hawkish tone
- Mortgage rates are up
- Inflation spiked to 5%.. "Came in hot" --jPow
- Unemployment benefits end in Sep for many
- Markets flat today
- Expectations for 2023 rate increases moved from one (March) to two.

Yesterday we talked about talking about talking about tapering (I think that's right).

Is this the first screech of a fledgling hawk?

Is it after midnight? Last call coming?

You just seem to be constantly fishing for a reason for markets to drop when there is nothing substantial going on. GDP is growing at least 6.3% and corporate earnings are huge right now. It's going to take a lot more then "inflation" to derail markets in any lasting way.

The real "inflation" play was long commodity stocks and that's been a really good trade since October 31st. You just have to be mindful of the short term trends in each area.

 

[kmiklas]

You just seem to be constantly fishing for a reason for markets to drop when there is nothing substantial going on. GDP is growing at least 6.3% and corporate earnings are huge right now. It's going to take a lot more then "inflation" to derail markets in any lasting way.

The real "inflation" play was long commodity stocks and that's been a really good trade since October 31st. You just have to be mindful of the short term trends in each area.

I'm not fishing, my spider sense is tingling. I feel like we're built on a sand castle; like the economy is a house of cards... but everything just keeps going up!

There IS something substantial going on; namely: a plague, 120B+/Month in QE, high unemployment, and a 0% FFR. I wonder how much of that GDP is smoke and mirrors. Is there a limit to this money-printing?

Maybe WSB is right... stonks only go up!

Maybe my friend is right... they're just padding the pockets of the insiders.

 

[Pricechange]

I'm not fishing, my spider sense is tingling. I feel like we're built on a sand castle; like the economy is a house of cards... but everything just keeps going up!

There IS something substantial going on; namely: a plague, 120B+/Month in QE, high unemployment, and a 0% FFR. I wonder how much of that GDP is smoke and mirrors. Is there a limit to this money-printing?

Maybe WSB is right... stonks only go up!

Maybe my friend is right... they're just padding the pockets of the insiders.

Your senses are tingling for a good reason. They tried to raise rates in 2018 and Tech took a dive. They immediately turned the whole narrative dovish shortly after. They have hesitated for sooo long to confront this issue...now waiting til they are virtually forced by inflation that has very little to do with recovery and MUCH more to do with massive printing, stimulus, payouts, aid programs, debt spending ect ect ect...

If your senses weren't tingling, I would be worried. This hesitation to confront inflation. This hesitation to normalize...it will all end badly because it is being botched. Yes, we STILL have 2009 based QE layers today! And yes, many of the Dow components are zombies propped by long time Fed printing and zero interest rates. I really cant believe Coke is still a thing (I would have at least changed the name of the company by now). And others beside Dow...GM, GE many others are zombies. Natural recessions followed by natural recoveries used to clean all this stuff up.

 

[Nine_Ender]

Y They tried to raise rates in 2018 and Tech took a dive. They immediately turned the whole narrative dovish shortly after.

That's not what happened. The first US interest rate hike was in 2015. There were many more hikes during which markets did just fine. The first hike was followed by a mild correction. Some of the bears on here insisted they couldn't possibly raise the rate it would trigger a market crash.

 

[nitrene]

That's not what happened. The first US interest rate hike was in 2015. There were many more hikes during which markets did just fine. The first hike was followed by a mild correction. Some of the bears on here insisted they couldn't possibly raise the rate it would trigger a market crash.

If it wasn't the rate hikes then what was the cause of the December 2018 collapse?

 

[Nine_Ender]

If it wasn't the rate hikes then what was the cause of the December 2018 collapse?

Again, rate hikes began in 2015. I wasn't aware that there was a December 2018 "collapse" so I checked the chart. The QQQ drop fully recovered in January 2019, one month later. Markets continued higher throughout 2019. Pull up a chart of the US Fed rate hikes.

 

[SunTrader]

Mortgage rates are .... down. Not up.

 

[longandshort]

If it wasn't the rate hikes then what was the cause of the December 2018 collapse?

Growth scare out of China.

 

[Pricechange]

Growth scare out of China.

I'm not sure re-writing an event to fit your present day theories will really work in trading. Although it does work with MSM fake news reporting. Fed reports and Fed monetary policy changes are my first and foremost concern as a trader. I try to block out the other white noise during these times.

Short memories by Americans is an epidemic of its own. Blind thinking and reinventing the wheel at each new turn. Its just amazing. And its usually political... China, Russia, Iran are all great diversions when the US makes a structural decision. I stay far away.