Anthony Sanders has one of his short and entertaining posts (the Fed is a 97 lb. weakling, you know) about the Everything Bubble (@Biiwii)…
When you see a chart like this you (well I, anyway) have trouble with all that conventional analysis out there about the stock market like P/E ratios, P/S ratios and forward expectations due to fiscal policy. You can put conventional analysis about the economy in the same bin. GDP, payrolls, manufacturing and consumer confidence are great, but they are underpinned by that little thing we call ever-expanding debt.
So we have our 3 Amigos happily riding across the macro that has been calmed by Central Banks’ Herculean efforts at monetary engineering, for as long as the Everything Bubble expands.
Amigo #1: SPX/Gold ratio has indicated risk ‘on’ and asset inflation (vs. a monetary anchor) since 2011. I have long felt that the market’s goal was to COMPLETELY (not partially) repair investor confidence and send the masses back to the sweet slumber of conventionality.
Amigo #2: The ‘Continuum’ is there. #2 is home. He hit the limiter and there he dwells. It is hard to quantify the exact result of a break and hold above the limiter, but it sure as shit would be something different. Maybe bullish for a while, but ultimately a show stopper. Or, if decades of history hold true and the yield fails here it would likely be the old deflationary story sooner rather than later.
Amigo #3: Ah, the Yield Curve. Boom Boom Boom. The media and conventional analysts obsess on inversion when that has little to do with anything, other than painting the current time as ‘late stage’. But when that fucker turns up and steepens, we’re going to have some big changes, with the chart above playing a part in telling us whether said steeping will be under pains of deflation or inflation.
Yes, it was just an excuse for another Amigos post, but I love this stuff. So there it is, inspired by Anthony and his Everything Bubble (MOAB). Check out that post. It’s brief and to the point.
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