• 287 days Will The ECB Continue To Hike Rates?
  • 287 days Forbes: Aramco Remains Largest Company In The Middle East
  • 289 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 689 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?
  • 699 days Big Tech Disappoints Investors on Earnings Calls
  • 700 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 702 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 706 days Crypto Investors Won Big In 2021
  • 706 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 707 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 709 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 713 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 714 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 716 days Are NFTs About To Take Over Gaming?
Trade In Counterfeit Goods Hits Half A Trillion Dollars

Trade In Counterfeit Goods Hits Half A Trillion Dollars

The counterfeit market has breached…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Tesla Struggles To Compete In European Market

Tesla Struggles To Compete In European Market

Tesla continues to catch the…

  1. Home
  2. Markets
  3. Other

FOMC Minutes... Head for the Hills!!!

While the MSM instigates reasons why we should give a damn about what people who have little control over the T bond market were thinking at the last meeting, why don't we just tune it all out and manage the markets instead?

TYX Monthly Chart versus Gold

The top panel shows the 30 year yield marching toward the traditional limiter AKA the 100 month EMA. The pattern measures to 4.5% or so, so there could be a spike above and a hell of a lot of hysteria at some point. That's the collective markets; 98% hype, hysterics and emotion and 2% rational management. Either the 30 year yield is going to do something it has not done in decades (break and hold above the EMA 100) or it is not. Simple.

The relationship between long term bonds (30) and short term bonds (2) in the middle panel is currently negatively diverging gold as the ratio has dropped this month. Again, we wonder is gold (bottom panel) leading the curve this month or should gold bugs take caution? I think gold is leading the curve, but it bears watching. The relationship became distorted in second half, 2012.

As for gold, it probably bottomed at the end of June. That is because the sold out condition of the sector (read: Paulson puking GLD, hedge fund net short positions, India's antagonism toward its would-be gold buyer citizens, etc. etc. etc.) was simply historic.

Really, just dialing down all the noise of the last 2 years it was a grand and climactic panic IN to gold in 2011 by the global public in the face of the Euro's supposed Armageddon. Everyone had bought and then it was time for the bleeding out of this emotional money.

The bleeding went on longer than I originally thought it would, but that is why we do ongoing work to interpret things every step of the way. Hey, no harm no foul. A little patience and ongoing perspective and now we have what appears to be a purified asset class, free of unhealthy sponsorship.

Back to the chart's top panel. China is a net seller of T bonds. Japan is a net seller of T bonds.

Major Holders of Treasury Securities Table

As we have been noting every step of the way T bond yields are a function of supply and demand. The global system endured a solid decade of net inflows of global funds into the T bond market. Now it appears the tide may be going out. Hence, interest rates all along the curve - save for the officially manipulated ZIRP on the Fed Funds - are going up.

It is all normal to free market participants; just another phase. It is only abnormal if you buy in to the idea that the Fed is in control and can remotely operate the financial markets indefinitely; if you buy in to the idea that the Fed decides when the cycles are to change.

If you look at it a certain way, it'll tickle your funny bone as you listen to Huey, Dooey and Louie jawbone 'Taper' in the media or as you review what a bunch of bureaucratic clerks had to ruminate about at the last FOMC meeting at 2 PM US Eastern today.

 

Back to homepage

Leave a comment

Leave a comment