Tag: notes from the rabbit hole

Hand Off to a New Fed Chair is Well Timed

Posted on by The INO.com Team

It is as notable as a 2nd term president handing off the big problems to the next guy, as George Bush did with Barack Obama in 2008; the changing of the guard at the Fed, that is.

Alan Greenspan oversaw the making of a stock bubble in the final phase of the great bull market ended in 2000.  He then instigated a credit bubble, which launched a housing bubble, made the credit hopped consumer feel wealthy and oh yes, built unsustainable distortions into the system through diced and sliced debt derivative vehicles of all kinds.

Then in 2006 he deftly made the hand off to Ben Bernanke.  Bernanke then dealt with the Maestro’s second aftermath as it began cropping up in 2007 and now, nearly 4.5 years into a cyclical bull market that has another 6 months or so to run if it is to match the two previous cycles (not a given), it is time once again for a hand off. Continue reading "Hand Off to a New Fed Chair is Well Timed" →

Rates of Interest

Posted on by admin

As the 10-year to T-bill yield curve chart makes clear, we are not in Kansas anymore.  We are in Wonderland and as you can see, in Wonderland interest rates and their interrelationships are at the center of events.

tnx.irx

Last week the bullish case reasserted itself across financial markets, but to argue that policy makers are doing anything better than pumping future distortions into the system is crazy talk along the lines of 'the world is flat' or… ‘the above chart is flat’.

Last week Ben Bernanke clarified for people that yes indeed the Fed will eventually taper its QE bond buying operation while making clear that Zero Interest Rate Policy (ZIRP) will remain as is.  I think that the average market participant is starting to settle in and get comfortable with the terms of our 'Taper to Carry'(T2C) plan, which sees the banks benefiting from borrowing short and lending longer. Continue reading "Rates of Interest" →

Crude Oil Breakout & Some Implications

Posted on by The INO.com Team

At the moment, crude oil seems to be acting as a free agent instead of in concert with the commodity complex that would play a role in signaling the effects (or lack thereof) of the inflation to date.  The target off this formation, if it holds, is 110 or so.  But as noted in a previous post, a drive toward 110 would load a significantly higher target, which we have been charting in NFTRH over the last several weeks by monthly chart. Continue reading "Crude Oil Breakout & Some Implications" →

QE 'Taper' to T Bond 'Carry Trade'

Posted on by The INO.com Team

The following is the opening segment to this week’s premium letter, NFTRH 242.  The balance of #242 went on to discuss the technical status of US and global stock markets, key commodities, the current status of ‘inflation expectations’, precious metals and currencies; all in detail.

Taper to Carry

Last week we introduced the theoretical 'taper to carry' scenario whereby the Federal Reserve would indeed 'have the balls' to begin the end of traditional QE and transition the inflation via a new set of mechanics.  Mind you, we still get inflation under this scenario, but it would be less stealth and more honest and obvious to the public.  Here are the theoretical components of the play… Continue reading "QE 'Taper' to T Bond 'Carry Trade'" →

A 'Carry Trade' Returns?

Posted on by The INO.com Team

As I was charting long-term Treasury yields in NFTRH 241, I ran a chart of the ratio between the banks and the S&P 500 and what do you know?  The ratio had broken out to the upside right along with long-term interest rates.  'Hmmm…'said I, 'maybe this is relevant to the analysis.' ;-)

Excerpted from NFTRH 241:

bkx.spx.tnx

BKX-SPX ratio w/ 10 year yield, weekly

"The Bank Index ratio to the S&P 500 (BKX-SPX) is breaking out to the upside in defiance of a bear case in stocks.  The BKX has modestly led the SPX since 2011.  We have noted that this is a necessary bullish factor for the financialized economy, which is quite different from a real or organic economy. Continue reading "A 'Carry Trade' Returns?" →