Author Archives
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Doug Noland: The Acceleration Phase
I can’t emphasize enough the ramifications for what I believe is a historic reversal of speculative finance
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TSP Smart: Global Financial Quagmire
Our system faces a serious inflation problem. At the same time, Market Structure and systemic fragilities simply cannot tolerate a significant tightening cycle. It is a Quagmire. The writing’s on the wall: faltering markets will spur a major tightening of financial conditions, while consumer inflation remains elevated.
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TSP Smart: Collision Course
Everything points to powerful inflationary dynamics and a Federal Reserve hopelessly “behind the curve.” The market is now pricing in a 2.86% Fed funds rate at the FOMC’s December 14th meeting. Moreover, the Fed is expected to soon commence its $95 billion monthly balance sheet reduction (“QT”).
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Doug Noland: Losing Capacity to Stabilize
I can’t see how this adjustment proceeds smoothly. A panicked run – similar to what was materializing in March 2020 – is a distinct possibility. Credit is inherently unstable. This has been a deeply-flawed multi-decade experiment.
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TSP Smart: Stumbling into a New Cycle
This implies a major cycle inflection point for the bond market, now faced both with a secular upturn in inflation and diminished QE prospects. And a secular jump in Treasury yields would demand a long overdue downward valuation adjustment for stocks, corporate Credit and other financial assets.
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TSP Smart: Inverted Tail Spin
The previous cycle enjoyed incredible staying power, and it will be difficult for most to accept that such a rewarding era has run its course.
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TSP Smart: New World Dis-Order
The US stock market is always last to know…
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TSP Smart: Lesson Never Learned
Excellent run down of how each bubble became larger and more dangerous. And how perceived financial wealth will have an unavoidable reckoning soon.
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Doug Noland: Inklings of Secular Change
At this point, the Fed would have to dramatically tighten financial conditions to reset inflation expectations. But such a move would collapse fragile Bubbles. Going forward, de-risking will require more selling of securities holdings, rather than simply buying cheap hedges.
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TSP Smart: The US UnBalanced Sheet
Returning to 2000/07 valuations requires a 40% drop in the US stock index; returning to above mean value 100% of GDP would require a 70% drop