When deflation is in the air you have people getting hysterical about negative interest rates and safe haven Treasury bonds. You have people telling us that the long awaited financial Armageddon is finally here. Influencers on Twitter and other venues are pretty much shooting their wads lately. Would those be the same people who riled up the troops about the new bond bear market in 2018?
I don’t speak as a contrary wise guy, I speak as a guy who couldn’t stand the BOND BEAR MARKET!! hysteria last year and am suspect of the Treasury bonds/deflation to eternity crowd today. Here, let me prove it to you…
That was one of my early posts, before the Continuum actually broke out (orange arrow), raised the BOND BEAR din to a climax, reversed and pulled back into the first inkling of today’s BOND BULL hysteria. Here Continuum, quiet the noise for us.
Here’s another post from later in 2018’s hysteria…
What happens if global yields pull back and leave the US with all those bond bears convinced of a new bond bear market? What if it eventually proves to be a garden variety failed breakout on 30yr and 10yr yields…
In other words, what if we are thinking too hard about inflation being the driver and out-thinking ourselves with respect to this moment being the big one, the big macro change as would be indicated by a real breakout in long-term yields and bond bear market? The system has been in a macro wash-rinse-repeat cycle of inflationary excess resolved by deflationary liquidation, which then sows the seeds of the next inflationary excess.
What if the world is not ending, but just changing… again. What if it’s just the next macro lever readying to be pulled. I am not going to name him because a) I can’t remember his name and am too lazy to go back and try to find the tweet and b) it’s not important. Some global macro guy with about a million followers laid out a global doom scenario based on all the bad charts in commodities and global currencies (well, duh…). Some readers here will know who I’m talking about because you follow him.
So maybe it is deflationary doom today, just was it was supposed to be inflationary doom (or at least out of control rising interest rates) in H2 2018. Maybe I am wrong. But here is a fact. I was not wrong in 2018, now was I? In fact, I didn’t see anyone else out there rejecting the BOND BEAR!! crap at the time.
Here we wrapped up the BOND BEAR!! theme…
The Fed never was going to fall on its own sword or incinerate itself in an inflationary bonfire.
Conspiracy theorists talk about a Fed engineered economic and market correction. But it’s not really a conspiracy. If inflated markets were to continue upward unabated and unchecked, and out of control interest rates were to eventually stop the show (the US has lived off of and leveraged up to the Continuum of declining interest rates after all) one of the main reasons the Fed exists – to manipulate interest rates and thereby the financial system and the economy – would be invalidated as a new system would have to emerge from the ashes.
This way the racket can move forward. At least that’s the dime store version compliments of one semi-conspiracy theorist writing this blog post.
The Fed’s inflation gun is being loaded and the herds are once again following their influencers and pile driving into bonds. Wash, rinse and fucking repeat. The herds remain the herds because they believe the alarming stories every time.
My timing may well be off (happens often) but from today’s Trade Log…
TBT position doubled on today’s downside.
I get aggravated when the contrary alarm bells ring. It leads to emotion and possibly poor decision making. But I felt it worth a shot. The smart guys are just influencing too many herds right now. Remember bond bears Gross, Gundlach & Dalio circa 2018? Bond experts they were. It was a new BOND BEAR MARKET!!… and then it wasn’t.
Caveat to all of the above>>> Sentimentrader is not yet showing bond sentiment to be nearly as over bullish as my own two eyes see it, anecdotally. So yeah, maybe I’m wrong this time; or early as usual. Let’s see how it plays out.
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