Stabilization, Inflation, and Rotation
What in the world is driving this market? Answers across Twitter have become complex monetary and fiscal theories with fancy charts and academic writings flying around. But what if the answer is much more simple than people assume?
What in the world is driving this market? Answers across Twitter have become complex monetary and fiscal theories with fancy charts and academic writings flying around. But what if the answer is much more simple than people assume?
What if, theoretically, the Fed/Treasury had called upon the biggest market makers & directed them to buy equities to manipulate the market into a artificial recovery? This strategy is not new. This was done in 1907 & 1987(Buffett & Goldman Sachs were involved previously) 
Crisis situations will need crisis solutions, whether political or economic, the system circles the wagons to protect itself. Most of the equities in this “theory” would be distributed across market makers however you could “theoretically” see such action by a fund with an
insider in one of the groups called in to carry this strategy out. I will call such a fund “Confoederatio Helvetica National Bank”. One can simply look at the Q1 and Q2 US equity buys and compare them with the 2019 buys. You should see a noticeable difference of about a dozen.
Look at a few equities in question: Tesla, Nvidia, Netflix and others I won’t “guess” here. There is nothing rational or fundamental about their rise and call option behavior since March, unless you consider this option detailed in this thread.
Short sellers will scream, but the other option facing the Fed/Treasury was depression era economy with mass layoffs for a decade. The QQQ is the new market indicator in this case. You are watching a total systemic rebuilding of the economy in real time.
Financial stability was stated as one of the principal aims of the Fed & acted by starting to prop up the markets. Mester has discussed this for years. Now you may debate how “stable” this would be, but the reality is that the economy was faltering globally & action was needed.
The Fed is the worlds lender of last resort so protecting the US economy was a necessity no matter how you debate it. The dollar reserve status is not in question, in fact, this only solidifies it for the foreseeable future.
As a trader, I would begin to hedge bets on Trump victory and you better be on the right side of trades concerning this election. There are dollar issues, geopolitical and trade issues at play that will affect the markets in dramatic ways. Many are convinced of a Biden victory
but much of that is due to Wall St being in an echo chamber and not properly hedging their bets in case Trump wins and GOP holds the senate. Just because you give politicians a check, doesn’t mean you’re privy to inner circle machinations to keep power long term for them.
For next steps of this “theoretical model”, you will need inflation. Almost on a perfect schedule, Powell will be speaking about this very issue at Jackson Hole this week. But you cannot simply get hot inflation by boosting equities. You need bank lending for this. @Halsrethink
This is where a rotation will come into play, where banks will be fully capitalized & government guaranteed loans play its part to spur lending.
Stabilization: Fed/Treasury financial stability actions
Inflation: Bank lending
Rotation: Agriculture, Financials and Retail in 2021.
Stabilization: Fed/Treasury financial stability actions
Inflation: Bank lending
Rotation: Agriculture, Financials and Retail in 2021.
