Fed's Kashkari says he would not panic if he saw a 4% inflation rate-BBG
— LongConvexity (@LONGCONVEXITY) April 8, 2021
Wall Street’s “everything is bullish” mantra is why the U.S. stock market cap to GDP is now close 200 percent (almost 50 percent above prior bubble peaks) and why we now see no way out of this rabbit hole but to print, print, print. And print some more.
Asset valuations are so out whack, the Fed has lost control of the markets. Just a hint of normalizing rates — a positive real interest rate across the curve — would cause stocks to correct 50 percent, in our opinion, and throw us back into the “ice age.”
The policymakers are “up on a tightwire, one side is ice and one is fire.” Ice as in deflation, fire as in hyperinflation, the ultimate corner solution. Write it down.