From the Credit Bubble analytical perspective, Treasury, Bund, and “developed” yields more generally confirm the view that the global central bank community’s so-called “tightening” cycle will be curtailed by faltering Bubbles.
Now for Doug’s “Walk the Walk” which in short means the Fed has to show us it can do something it has been unwilling to do for over a decade – stop propping up the markets.
Bubbles at their core are pernicious mechanisms for wealth redistribution and destruction. Geopolitical risk is a key Bubble manifestation, with the current most protracted global Bubble unmatched in this regard. Competing head-to-head with Covid in terms of stubborn persistency, there was similarly no relief this week from mounting geopolitical risks.
But let’s return to the “Periphery vs. Core” analytical framework. It’s certainly not abnormal for trouble at the “Periphery” to initially bolster a booming “Core.” But it is extraordinary to observe the “Periphery” falter in the face of massive global QE and generally very low bond yields. The perceived bulletproof “Core” is oblivious to this ominous development.
The Fed is trapped. They’ve been trapped for a while, but it essentially didn’t matter (in the age of open-ended QE) so long as consumer price inflation remained well-contained
Please note the book written on Dow 36,000 came out in 1999 and the SP500 found itself 60% lower nine years later.
Today’s unparalleled degree of uncertainty is anathema to leveraged speculation. There was evidence this week that central banks are Losing Control, a precarious dynamic that will spur a ratcheting down of risk throughout the global leveraged speculating community.
China Crash Watch: Existing apartment sales were down 63% YOY part of a sector that is 29% of GDP and 41% of bank’s assets and 78% of urban Chinese wealth.
Families can not live on their reduced share of the US national income. Corporations and billionaires squeezed the middle class and working class to the point of breaking. Now I expect to see a bounce back in wages. And that will lead to wage-push inflation. And the Fed is in no position to stop it.
Real Estate accounts for 30% of China’s GDP and today it is imploding along with the bonds that supported it. Before the pandemic China had 90 million empty apartments… there will be no more expansion.