Yesterday we noted 3 sectors very interested in and benefiting from the cyclicality of rising long-term Treasury yields for a day at least. But what if the move is real, or as real as the Continuum’s limiter will allow it to be? What if the 30yr yield is headed for 2.6% or so?
Well, below is a disgusting picture of the USA’s long, degrading journey to extinction (as we know it) ranging over decades. The limiter has been the backbone, the mechanism keeping an intense inflation problem at bay every time it is pinged by the yield. The last inflation alarm went off in Q4 2018 and you will recall that most market participants were puzzled, even angry about Powell’s hawkishness. We were not.
This chart does two things. 1) it shows why all the politically activated people hating each other in America today are out to lunch* and 2) it shows some real estate between today’s 1.75% and 2.6% to 2.7%, by which certain asset classes may out perform. Surely you’ve heard all the noise just lately about a market rotation to value. Well, why not look at some of the mechanics in play behind the scenes?
Some future day we can question whether this is the time inflation gets out of the barn for real. That answer will again come at the gently declining limiter and I don’t see why the thing will not end in some kind of liquidation… again. But as always, open minds. We don’t need to know that yet. Meanwhile, know where you’re going to deploy and why as 2020 and its Corona effing virus and political effing rancor recede and the latest inflationary operation takes hold into 2021.
* They’ve all got their eye off the ball in favor of political diversions; conservatives who’ve aligned with Trump come hell or high water, and liberals who tout this as the time we take back Democracy for all that is good and righteous. You, Trump’s base; you have been disenfranchised by inflationary operations past, promoted by the Fed under both Republicans and Democrats. You, liberals; those people scaring and taunting you are driven half mad by the seemingly never ending implications of the Fed’s operations along the Continuum, where a deflationary backbone is inflated against every damn time the yield tanks and inflation expectations tank. A country in Trillions of dollars of debt (and counting) cannot have deflation. Nor can an entity living off its ability to inflate have runaway hyper inflation, because said entity would incinerate itself. So, those are my effing politics (not feeling super well today, if my mood comes through). :-(
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