The 2020 crash was accompanied with fear for people their own safety. Retail didn't believe assets could perform well in that environment. Reality was that bitcoin nuked the complete long side, twice and market fully absorbed it.. 1/
.. and the FED pulled open a can of $6 trillion in helicopter money and aid, flowing to assets first, then outwards.
Today's reality is the $6 trillion (and relatively similar amounts in other countries) has distributed far enough through the pyramid (FED economy).. 2/
Today's reality is the $6 trillion (and relatively similar amounts in other countries) has distributed far enough through the pyramid (FED economy).. 2/
..that the every day items - not just stocks, bitcoin, metals - experience excessive price inflation, accelerated or at least signified by supply chain challenges (labour, inflated prices & war related) 3/
The chart shows currency supply * its velocity and thus how much, over time, currency was circulating in the economy and screams overshooting 4/
As the S&P 500 sits 42% above its Feb 2020 high and the currency supply increased similarly, we may argue that asset inflation, due to currency printing & negative real rates, as a whole has peaked or is very close now QE has pretty much ended & growth stagnating 5/
Meanwhile risk/volatility reducing premia are in a flight up, showing high correlation with market corrections whilst access to short term liquidity is getting priced higher quickly relative to the longer term (yield curve) 6/
Books are increasingly messy across various assets, liquidity becoming more & more messy, supply chains (reverse payment chains == liquidity) are messy. Rates at zero + inflation means empty FED toolbox, a position they can't risk when something breaks. 7/
Markets thrive on liquidity. Hike rates in a stagnating economy will suck even more liquidity out of the markets. Without liquidity, markets are in trouble.
CPI print tomorrow, let's see how hawkish/dovish the FED policy will be on March 16th. 8/
Good night
CPI print tomorrow, let's see how hawkish/dovish the FED policy will be on March 16th. 8/
Good night
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