T-minus 1 day, 4 hours and 42 minutes…

Eggheads assemble, as FOMC meets


Ooh, can’t you just cut the tension with a knife?

FOMC is going to hike the funds rate by at least .75% tomorrow and according to 18% of CME Fed Funds traders, potentially a full percentage point.

The Fed is taking its commands (not direction, not suggestion, not indication, not even demands, but commands) from the bond market seriously. The smart people sitting at the table above are really more simple than you might think. They sat their ample behinds on dovish policy for too long and now, following the signals that matter to them, they are sitting on their butts too long with hawkish policy. The short end of the bond market is commanding them higher.

The long  end of the bond market is commanding them higher. I don’t publicly write in detail anymore about the ‘Continuum’ because the strategy that springs from this and other indicators is reserved for the weekly report. This chart helped us foresee a lot of what is happening now. But I think the chart is still of value if you want to reflect on its messages and think about the future.

While sitting with sublime percentage levels of interest paying cash may sound boring, I am actually as excited as I’ve ever been in the financial markets. The exception is probably Q4 2008, when a newly birthed NFTRH (Sept. 28th that year; 14th anniversary upcoming!) was tasked with figuring out and managing the most dynamic events I’d ever seen to that point. That was a really fast moving event and today’s situation is a much slower process. But it has my nerdy head swimming with possibilities from here.

In my opinion, the Fed really cannot take any chances that they might flip dovish too soon because again, in my (educated) opinion, deflationary pressure is the thing they inflate against, but out of control inflation would be the thing that ends the Fed’s regime of long-term monetary control (and inflation). It sounds counterintuitive, but it’s bouts of deflation or disinflation that supports the Fed’s existence, which is to inflate. You see?

As to the ‘Continuum’ chart above, just behold it and think about the big picture changes that have occurred in 2022. The old rules may well be out the window.

Okay, now it’s 1 day, 4 hours and 17 minutes until lift off. The tension is unbearable… or non-existent.

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