We are still in the “Not-euphoria” stage, right?

The Federal Reserve’s balance sheet is up $377 billion in last three months. Current balance $4.137 trillion

twitter.com/hks55/status/1207738164363890689

Wall Street Magic Tricks Make Banks Look Safer Than They Are: Bloomberg

Despite a decade of post-crisis reforms, financial companies still use tricks to obscure their true condition.

Investors hedge against black swan even as main fear gauge falls

Party like it’s 1999

Has the Fed been forced into the type of asset price inflation that actually will be the cause of the next recession? And may that recession be unavoidable despite everybody now ringing the all clear on recession risk? Perhaps the ultimate contrarian question to ask, but I assure you it’s not just a theorem, it’s actually based on historical precedence and that precedence was the year 1999.

2019 was obviously about avoiding the global recession and central banks went berserk trying to prevent it with the renewed liquidity injections. System failure. In the real word system failure has consequences and ironically it may well be the central banks who have planted the seeds of destruction.

Remember the Fed’s initial plan in reacting to market pressure was to cut rates and stop QT, but then they were forced into repo and balance sheet expansion.

As a result markets blew higher and perhaps too high. Far above the earnings picture and underlying fundamentals. And by blowing asset prices too high they are setting the stage for the reversion and it is the reversion that brings about the recession. The Fed knows the economy and asset prices are very much intertwined these days, hence all the intervention programs.