1.Clash of the Titans: Ed Yardeni is credited with the term "Bond Vigilantes". Clinton's Admin got a taste of them when 10y yields went up from 5% to 8% a rise of 60% in 6 months which was called"The Bond Massacre". He reacted with alacrity & in next 4 years they dropped to 4 %
2. Clinton political adviser James Carville said at the time,"I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 Baseball Hitter. But now I would like to come back as the Bond market. You can intimidate everybody."
3.Those were the days when 'Free Markets" existed & normal biz cycles of Inflation/Deflation happened. However in the 1st Decade Inflation gave way to Deflation & CBs could banish the Vigilantes to oblivion.
4.Emboldened by the onset of Deflation,CBs & Govts went berserk with Both Monetary as well as Fiscal Policies for a decade & half,essentially mimicking Japan.
5. This is how the Global Debt/GDP chart looks like. As per World Bank prolonged periods of the ratio greater than 77 % could lead to Recession
6. Meanwhile Inflation has been raging for last few months, so much so even Fed had to permanently retire the word "Transitory". Here is how US Core Inflation has moved
7. Europe & Rest of Asia also has moved in tandem, while India has remained an outlier ( your guess is as good as mine as to why it is so😷) Eurozone Inflation is the highest since the records were kept dating back to 1997.
8.This environment is a fertile breeding ground for the Zombies(Vigilantes).Can they be stirred from the Netherworld & will CBs be bothered?.Remember Soros & his bet against the BOE. It looked impossible that 1 Man could lead the Vigilantes.Cometh the hour Cometh the Man, anyone?
9. Ed Yardeni in his recent Interview expects Inflation to come down in the 2nd Half but not significantly enough msn.com/en-us/health/a…
10. So is there a possibility of a Policy Error by the FED just like 1929 ?.Remember that the FED is still doing QE ($ 60B this month & $ 30B next month). 2022 would be Interesting. Grab your popcorn & Watch this space. Clash of the Titans is coming soon.
1.The"Perfect Storm" of "Backwardation" & "Gamma Squeeze". Backwardation in an asset class happens when far month Future prices are lower than Spot prices, which is rare, since Futures are expected to be higher than Spot to take care of "Cost of Carry".
2. Backwardation can occur as a result of a higher demand for an asset currently than the contracts maturing in the coming months through the futures market.
Traders use backwardation to make a profit by selling short at the current price and buying at the lower futures price.
3.Take the case of Oil,Backwardation has been prevailing for quite some months & it has been as high as 5-7 %. Traders seem to have been very confident that Demand will fall off with the end of winter but that has clearly not happened. Now there is a scramble to cover.
1.Calm before the storm?:Way ahead for the markets. Excerpts of CH disc yesterday. Eerie calm in the market.All strategists looking for New Highs,based on Govt policies,Corporate Results,Low inflation, Retail/MF fund flows, Sentiment etc. My take:Are we in the "Eye of the Storm"
2. At the peak of every Bull Market except 1992, all the above factors were present. In 1994, Pvt Sector MFs & FIIs having just entered the market, Budget being very good, Record Corp results & sentiment very high, no clouds on the Horizon.
3. 2000 & 2008 too had the same set of positive reinforcements. To some extent even in 2010 & 2015 it was the same scenario. Yet all of them topped out on LIQUIDITY being withdrawn overtly & covertly.
1.The Anatomy of a Bear Market: Yesterday, someone asked me as to how could this be a Bear Market, when Nifty is just 4 % off its ATHs. Remember All Bear Markets start from ATHs & All Bull Markets start from ATLs. Let's examine data to come to some probable conclusions.
2.The TOP 10 stocks in Nifty have a combined weightage of 60 %. Reliance which has a weightage of 10.5 % topped out in Oct'21. Recent Jan highs did not cross the Nov 21 secondary high.
3. HDFC,HDFC Bank, Kotak,ITC & HUL which are part of the TOP 10 in terms of weightage on Nifty are trading below February 2021 Highs.
1. Old thoughts rehashed : Fundamentally, In my experience since 1991 , every Peak of Bull Market, barring 1992, is accompanied by the best of Corporate Results, Fund flows, Govt policies etc, yet when the last bear meets the last bull then the market reverses.
2.Have been pointing out that the market has cyclical pattern , have also pointed out that the recent rise was a BULL TRAP.
@Jai_hyderabad@vka27 . A thread on Health & Sport. "If I can do it, anyone can do it ". Just like the Stock Markets. Running a Marathon requires the same kind of skill sets as Investing in the Stock Market. Here I am just describing my Running Experience (1/n)
2. In early 2015, when I was around 54 years, the running bug bit me when I saw a friend of mine running on the Marina Beach. He introduced me to Marina Minnals one of the many running groups which are based out of Chennai.
3. In College I was into Sports, mainly short sprints having represented college in various Inter-Collegiate Meets, but anything above 400 m was Hell for me. In 2015 my Running group friends helped me to navigate Hell.