11 Jan 2022

MarketWatch

9:50am AEST

Here I get to showoff our Price Journey tool, you can set any start date and place up to 5 symbols on the chart. The Plunge Protection team had to work overtime they even managed to take the Nasdaq from -2.7% to positive for the day, well done boys beers on Uncle Sam.

The Fed

SELL now. BUY now.

Call me a conspiracy theorist but you don’t simply resign as vice chair of the Federal Reserve when you have 2 weeks left on your term, unless you are in big dodo and someone in high places has offered you a chance to go quietly into the night. It all goes back to a sell he did on the 24th Feb 2020 and then repurchasing again on the 27th with Powell announcing the Fed stood ready to help markets the next day. We talking insider trading on a whole new level here. Most people get pinged for knowing something going on at company level, these super heroes play with inside info at the economy level – a whole new level.

If you picked up my reference above to the Plunge Protection team saving the day and you have been watching markets closely over the past few decades then you will know that the markets have become more and more manipulated with intervention all over the place. There is even a formal definition.

The “Plunge Protection Team” (PPT) is a colloquial name given to the Working Group on Financial Markets. Created in 1988 to provide financial and economic recommendations to the U.S. President during turbulent market times, this group is headed by the Secretary of the Treasury; other members include the Chair of the Board of Governors of the Federal Reserve, the Chair of the Securities and Exchange Commission and the Chair of the Commodity Futures Trading Commission (or the aides or officials they designate to represent them).

The name “Plunge Protection Team” was coined by The Washington Post and first applied to the group in 1997.

You have also had Fed Chair Jerome Powell, when he is not playing with his trading terminal, in his prepared statement for the Senate Banking Committee state, “We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.” Talk is cheap I want to see what he does.

I rate the PPT runs the worlds biggest hedge fund and all this time we have been saying its Bridgewater.

Market Thoughts

I am interested to see how the labour shortages caused by people sick with Covid or their close contacts play out in the economic numbers. You are seeing report after report that flights are being cancelled because of a lack of staff, the same for retail stores, etc……

I have to admit that I still don’t understand The Great Retrenchment. Unemployment is nearly back to the point it was pre the pandemic and we are seeing record number of people resigning, the numbers don’t all add up I will need to do a deeper dive to truly understand if this is just statistical musical chairs. I think my conspiracy frame of mind is on high alert here.

JP Morgan strategist Marko Kolanovic said yesterday it was time to start buying the dip. “The pullback in risk assets in reaction to the Fed minutes is arguably overdone.” OMG is he serious the pullback all of 2% for the year is overdone. (head shaking)

Negative Yields

There is apparently more than $10 trillion invested in negative yielding bonds. I noticed something very interesting the yield on the German 10yr bond is now within sniffing distance of peaking above zero. Watch this space.

Once upon a time the idea of negative yields was impossible to contemplate. People would actually pay the borrower to lend from them. Clearly Europe is starting to realise this inflation is potentially more serious than Lagarde would like us all to believe.

To close out today’s letter with more from the absurd. Do you remember Austria sold a 100 year bond with a yield of 0.88% in June 2020 that was 10x oversubscribed. The bonds price peaked at 137 and is currently trading at 81, a 40% drop in value. Talk about being stuck in a relationship when things are not going well, only another 98yrs before you can redeem.

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