by Alex Mark
I think Fed is screwed. The market keep pricing in unrealistic inflation like stocks never go down. Look at USD, it keep crashing. It will eventually force Fed to take a dramatic turn on easing. The market is pricing in negative rate, yield control, major policy shift in fed(this one seems confirmed by bloomberg, but fed hasn’t confirm it)…. The world is panicking fleeing from dollar. it explains why silvers went up like crazy. If this continue a couple of wks, u will see price stuff in dollar term will go up, fed will forced to punish the market or it will cause a fake inflation in a already deflationary economy. so its stagflation which will make this recession even worse. Look at USD, and 10yr, and gold/silver. USD crash = equity goes up in similar pace, but it didn’t. USD never crash this fast. 10yr yield plummet like shit, money going into 10yr means ppl expecting fed will implement yield control and negative rate(even the fed denied this one), they are front running the fed. the market is front running the fed into a corner. they don’t think the fed can let the rate raise again consider the current deficit and debt load of country and corporations. market won’t listen even the fed denied those inflation policy. (e,g market keep pricing in negative rate when fed officially denied). Fed will force to stop easing when everyone jack up their price in a deflationary economy. its understandable for market to place in such crazy inflation bets considering fed already buying bonds for govt and public companies. Keep ur eyes on USD, if it keep plummeting in the same pace for a few more days or to 2wks, a sell off will happen. fed will forced to do something to the market.
My reasoning is actually based on today’s insanity of the market. the monster created by fed will eat the fed alive. The only way to stop the market is to crash the market by destroy their fantasy of a fake inflation. if my theory is right, fed will reverse easing at a very quick manner to give a market the msg in next few wks. which is exactly what happened in 1987. yes, 1987 market crash is very real. the only difference is this time, fed is tightening to fight a fake inflation which is already spiraling out of control. Tech will crash if Fed is forced to curl inflation. Hot money will rotate out from techs. Techs raise both bad and good news because the inflation prediction. bad news, fed will keep brrrr, inflation drive investors into techs so is pandemic, good news, inflation will run hotter. Only when fed forced their hands to fight inflation, tech will go burst.
Just breaking from marketwatch:
Mnuchin aware of USD issue and market is anticipation about inflation. however USD continue to drop. The fed will have to step in eventually. 1987 crash could repeat.
The “Black Monday” stock market crash of October 19, 1987, saw U.S. markets fall more than 20% in a single day.
It is thought that the cause of the crash was precipitated by computer program-driven trading models that followed a portfolio insurance strategy as well as investor panic.
Precursors of the crash also lay in a series of monetary and foreign trade agreements that depreciated the U.S. dollar in order to adjust trade deficits and then attempted to stabilize the dollar at its new lower value.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.