I have a sad announcement for all of my #fintwit friends who post frequently about real yields and the market's long term #inflation expectations
It's fake, and its staring us right in the face
The @federalreserve
is in near full control of this "market based" signal
Proof
1/
Anyone who needs a reminder, the breakeven rate is the yield on a nominal treasury bond less the yield on treasury inflation protected securities
It's an approximation of the market's expectation of future inflation over the duration of the bond
Yield and price move inverse
More buying of nominal bonds pushes nominal yields lower
Same for TIPS
When more buying power comes in, the price of any asset moves up
Powell continually says that he's only concerned about inflation if long term inflation expectations become "untethered"
The way we measure those expectations is by looking at long term breakeven rates
If the market thinks that future inflation will be higher, they will buy more TIPS and less nominal bonds, driving the TIPS price up, bond prices lower, and the breakeven rate higher
Tons of algos and models utilize these breakeven, real rate, expectations
But what happens when the signal that Powell is looking at is captured by the fed? How is it a market signal if it's not a free market?
Lets look at 20-year breakeven rates
Using bonds with maturities 18-22 years out, at the end of October the fed owned:
57.5% of the 18-22 year treasury bond market
53.0% of the 18-22 year TIPS market
The controls over half the market at the 20yr maturity
And why is there a gap in ownership of bonds vs TIPS?
If they dont intervene equally, then they are impacting the signal of breakeven rates
Breakeven inflation rates would be higher if the fed had to either sell some of these normal bonds or buy more TIPS to equalize holdings
But here's comes the best part:
Walking backwards in 6-month intervals just a few steps, the impact of this intervention becomes clear
Here is the percentage of each market the fed has controlled over the past 2 years:
If you subtract fed ownership of 20-year TIPS from that of 20-year bonds, you get the orange line shown below
You can plot this next to the 20-year breakeven rate in blue,
Then you see this is a fed controlled and captured market
Let's talk #Gold and #Silver price targets for the current bull run, follow along and see if you're picking up what I'm putting down
Start with long duration TIPS ETF, $LTPZ
Just broke out of a perfect cup and handle, and using the basic extension puts it on a path to $99
Next look at #Gold relative to long duration TIPS,
the $PHYS / $LTPZ ratio
It's been on an steady uptrend since 2015, and if you ignore the covid period, has a solid upper resistance as well, which if it touched in the next 6 months, would be a ratio of roughly 0.1750
Combining these first two elements you'd get roughly $2200 for #Gold
And if we look at the Gold / #Silver ratio, plotted with fib levels, you can see the red trendline would get us to the 1.618 extension in late Q1 2022, or a 51 GSR
The fact that @PeterSchiff defended unallocated #silver accounts again on his show, but without adding anything of substance, shows what a great job the true precious metals community is doing
Keep educating people as to what these accounts are, get a refund, buy real metal!
I’m clearly not alone in saying this, but the metal just isn’t there
You are lending money and paying a shitload of fees to do so
You have little to no rights in these contracts. It’s simply a terrible product
@PeterSchiff and his bank EuroPac collect massive fees to push you into it
Just because he says you should diversify doesn’t mean he didn’t recommend putting part of your money into the single worst precious metals product that exists, for his own gain
$BTC longs looking to park money during the bear market should consider #silver
Another dollar-bear, inflation hedge, scarcity asset play
21 million total bitcoin, only 2 million of the 1000 oz silver bars. Respective prices are ~$50k vs ~$26k
10x as scarce, 1/2 the cost
not to mention the fact that a majority of annual silver that gets mined is used in swiftly growing high-tech industries such as EVs, solar, chips, batteries, satellites, etc
It has a baseline demand that's functional and burns supply
As you will prefer a highly liquid, digital form, $PSLV is one of the easiest ways
Some sites do direct crypto to silver when ordering physical, or keep it tokenized and go with Kinesis or other crypto-focused platforms
I listened to you discuss oil on the Silver Fortune podcast @SRSroccoReport
I have a couple of questions on that energy outlook
1. What about the countervailing trend of increased energy efficiency, better MPG, reduced electricity usage in lighting and AC, electric vehicles?
Over the last decade alone I saw in another report the ‘bite’ of higher oil prices has been reduced by 30% due to the last decade of progress, why will this not continue?
2. As oil prices rise, it incentivizes renewables to proliferate faster, and scale makes them cheaper
3. Impacts of increased remote and virtual work?
4. Impacts of high density indoor farming, and localized energy production via solar/wind reducing need to transport food and carbon based fuels?