• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

Leading Indicators to Credit Contraction, Round 2

Excerpted from the November 29th edition of Notes From the Rabbit Hole (NFTRH61)

The junk bond etf HYG is a good indicator of the mood of speculators and their confidence in policy makers' ability to keep the inflation going because the fundamentals of the companies represented here boils down to the fact that money is created out of thin air (inflationary debt creation) and targeted toward keeping enterprises destined to fail, that should fail, alive. This is part of the wasteland where money goes for very unproductive means, other than to enrich speculators taking in interest income while playing a game of musical chairs with the public trust.

The lower panels show that damage has been done to HYG's ratio to safer 7-10 treasury bonds (IEF) and higher quality corporate debt (LQD). These breakdowns, if they follow through, are expected indicators to the next round of credit problems that would attend another deflationary impulse.

Of course, it is the ratio of the historical honest monetary anchor, gold to various assets that would be the ultimate gauge of speculators' urge to continue gaming the system or perhaps cash out of the game.

The gold-silver ratio (GSR) continues to be the stubborn holdout to gold's otherwise good looking bottom-making stance as measured against a whole host of other positively correlated assets. The short-term uptrend continues but the intermediate downtrend line has not yet been broken.

Gold continues to do impressive work against the stock market, oil and copper in establishing fledgling up trends after fanning through the various bottoming processes. The NFTRH stance remains that, as with the explosion of fear that was Armageddon '08, gold's upside explosion in ratio to these things was unsustainable. The entirety of Hope '09 has seen a downward consolidation of these ratios in anticipation of the next upward leg. This will happen along with the next credit contraction and deflation impulse.

 

Back to homepage

Leave a comment

Leave a comment