The Fed doesn’t print money, they print bonds. Money supply isn’t deflating like you think. M2 measurements exclude money market funds over <100k.

by AC

M2 decline is being over stated by the transfer of funds into money market funds. (as of today the 4-week pays 6.2%)

Re: the DXY, important to understand this is really just the dollar vs euro and yen. But also, expect the dollar milkshake to play out as we saw it playing out last year and its playing out now in Turkey, and even in China.

In other words in relative terms the dollar goes up in times of crisis, as it’s safer than it’s alternatives. Do not confuse this with an increase in it’s purchasing power. The Dollar (and even DXY) could scream past 120 while its purchasing power plummets. All these currencies really are all denominators, with an asset being a numerator.

The CPLie is backwards looking. I do not know why the feds intentionally using backwards looking data. But for now they are, trueflation, which did a infinitely better job over the last 3 years has us already sub 3%.

The fed has never really claimed to control rates. They attempt to control the front end of the curve. But they lost control a few months ago. The fact that the 1month treasury (6.2%) is > Fed Funds rate shows you they’ve lost control over even short term rates. This is telling you there is a collateral shortage in the system.

in 2008 that was everyone behind the scenes saying I don’t want this MBS take it please, for now we don’t know what’s causing this one per se..
CRE, Treasuries when rates were 0% take your pick

The fed has been hiking into a GDP contraction for quite some time (recall the two quarters of negative growth that ‘wasn’t a recession’) last year.

I am fairly certain the fed is done. My recent read is that something has blown up in the system and the memo’s out – these guys seems to know it.

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But you’ll know when they’re done .. they’ll pause. Once they pause it’s over. It’s not going back up.

I agree shortly there after a double digit spike in employment, with deflation the likes of which we’ve never seen (for every action theres an equal opposite reaction) and what do you expect after the greatest inflation spike ever.

Rates will be at zero faster than anyone expects.

Heres the rub.. being short is impossible unless you time it perfect there’s no cheap carry at 5%, buying the dip in deflation will be impossible to bottom pick.

So what can you do?

I only see one thing..


You gotta buy the long bond. They’ll double when they cut rates.

I see literally no other alternative. But hey not financial advice.


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