Say, did you know that Cathie Wood favors deflation?
Why yes ladies and gentlemen, foremost overvalued story stock picker Cathie Wood thinks deflation is coming. That is quite contrarian alright and something I favor for 2023. Problem being, she was also calling deflation and declining oil a year ago as well, with oil at $80/bbl. It then went to $130 before dropping to today’s $88.
To be fair, I’ve also been on watch for a coming deflationary episode (e.g. USD, Gold/Silver ratio and Copper/Gold ratio) for quite a while.
But in noting fellow foremost macro economic thinker <sarcasm alert> Elon Musk and wonderful bond market contrary indicator Jeff Gundlach (meet the new Bond King [the lesser], who assumed the crown of media hyped bond market contrary indicator from the old Bond King) the MSfM has arrayed a heady mix of big brains before us to tell of the deflation to come and frankly of the pause I take to my deflationary view because of it.
Here is the article, which as usual can be read by clicking the image.
Tesla’s Musk responded to a Twitter thread with Wood Wednesday that the central bank should “drop 0.25%.” Gundlach said the Fed should hike by only 25 basis points as it might oversteer the economy with a jumbo rate increase. He added that the central bank hasn’t paused enough to see what impact the previous hikes have already had.
Repeat after me class, the Fed is not going do what is best for the economy or the stock market when its lagging ass is hanging out there with the bond market flashing the signals it is flashing.
This is not about a soft landing or forward projections for them. All we have to do is recall late 2018, when Trump was haranguing Powell for rate cuts while the 30yr yield Continuum was banging the upside moving average ‘limiters’. Today the yield is above the 2018 high at 3.5% and it has broken our long-term trends by the NFTRH ‘Continuum’ chart, which has a higher near-term upside target in play.
There was no way he’d have cut in 2018 and there is no way he’s easing now. 2023, maybe. But not now. The bond market – the reputed Bond King’s bond market – is commanding the Fed the other way and the other way they shall go as long as that is the case. In fact, they sometimes tend to overshoot the bond market to the upside on yields.
Speaking of sporting Wood, the Fed will not even take a chance of incinerating itself in an inflationary bonfire because the Fed’s special purpose is to use a disinflationary continuum to inflate money supplies (and costs) over time. Without it – and it’s under great stress right now – bye bye Fed as we know it.
For the Fed to one day employ its special purpose there is probably going to need to be a lot of destruction out there to the degree that the public STFU about inflation and start to invite the Fed to inflate again. You have to invite the Vampire into your house and this time it’s going to take some hands and knees groveling after the Fed almost terminated itself on this cycle.
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Sort of off topic for this post, but: Gold. Are we there yet?
Probably not yet, because if this breakdown is real a final and glorious extermination could be at hand. The timing, w/ FOMC on tap, is nice.
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