Since the election the market has come to value junk bonds as ever more precious. This implies that liquidity is fine, as we have noted each week in the newsletter. Go check out LIBOR and TED while you’re at it. They are and have been sound asleep all year. The deflation case is laughable in the face of this.
Here are gold, T bonds and USD going in the other direction. It’s kind of curious that when USD is rising, gold gets hit with the ugly stick (it’s a risk on asset). When USD is declining gold gets hit with the ugly stick again (it’s a risk off asset). The evidence of ‘hands on’ market management by people who despise the free markets is a little obvious, don’t you think?
I am looking forward to reading what they have to say tomorrow. Will Twist be announced over tomorrow? Supply of the real short-term stuff is running out. What, will they start puking 7 year, 10 year bonds while monetizing 30’s?
Here in Wonderland it all makes sense I guess.
“If I had a world of my own, everything would be nonsense. Nothing would be what it is because everything would be what it isn’t. And contrary-wise; what it is it wouldn’t be, and what it wouldn’t be, it would. You see?” — Alice
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