Looks like will lose half of what gained yesterday so prior better fess up. The outside gains for yesterday's PL was not from my framing but that Trump backed down and added some spice with bombast. I did nail that the setting was there that is forcing Trump to back down, that he blinked, but the backbone to my spiel that Trump is a chimera a media event or even a media fantasia is not absorbed yet.

1) By effectively ending the funds and reducing the manpower required to spend if available - Trump has done great damage - some irreparably - to the network of US soft power that was developed starting with the Marshall Plan. This was done by EO. It is unconstitutional. 2) By leveling a 25% tariff against Canada he has done great damage to the US "northern flank" national security needs. It is also unconstitutional as was based on IEEP Act citing fentanyl as the cause. Either the Senate or SCOTUS will nullify this act.

there are some "brandy salesmen" Jean Monnett types in Europe, somewhere. Ok this is what will go down in Europe if Trump isnt pulled back from the cliff clutching the US from his chest. A new institution is formed called something like the "European Bank of Security"
1) Capitalized with 500 billion from several combos with Norway sovereign wealth fund in lead. The capital not just Europe but also Japan, Taiwan, Singapore, Philippines. 500 bil easily met.

ok let us accept I am a nut out to lunch a meme guy but for your sake why dont you do some what if models and see where your risk is now based upon this criteria:
1) the US Treasury 10 year is not the risk free rate
2) meaning the yield curve all use (especially ... ....the Fed is not the yield curve that provides any macro economic insight.
3) the Fed is not restrictive now and never has been therefore given above is a non entity for last decade but especially since Jan 2022
4) that the risk free rate and resulting yield curve is not

On February 7 Trump Executive order was to cease NIH fiscal funding and to impose a ceiling of 15% to overhead costs of the various research sites. Prior to this EO, rolling annual level spend on NIH was set for 46 billion per year. After the EO, the NIH sent notice to all recipients of grants that funding frozen and when restart would be 15% ceiling for overhead, basically a cut of 46% of all grants going forward. Few research centers and universities could survive this cut.

Equity prior to 1979 traded to not a monetary cycle but a business cycle. Hence the quip "the stock market has forecasted 5 of the last 3 recessions". With Volcker this all shifted to being synched with monetary policy reaction function keyed to inflation/potential real growth. That was codified as the Taylor Rule. The market still strives to that state, a monetary cycle.

Yield Curve - part II.
All that changed with the GFC and the Federal Reserve changes in monetary policy implemented by Bernanke. Bernanke changed the Fed completely shedding a Fisherian understanding, getting rid of a reaction function with a rule that had the Fisherian rate. instead Bernanke moved the Fed to a static command monetary economy model, basically imposing the regulatory grip of the banking system that existed pre Volcker. Instead of massive passive holding of the banks of US Treasurys post WWII, Bernanke replaced that required holdings

this is what and how for understanding of the risk free rate yield curve and resulting term premium. once Volcker applied monetarism , the curve went crazzyy and all the old ways of understanding were tossed. what is strange is all those old ways are now back in vogue. the post Volcker way to understand the yield curve and resulting term premium was to understand the relationship between macro economics and the US Treasury yield curve. second to understand the term premium is derived from the yield curve, a derivative of the yield curve.

sorry my roadmap for 2025 is simple - it is still fiscal fiscal fiscal with the complexity trying to forecast the political developments in terms of the effect upon the ongoing fiscal spend started in 2022. where Trump's slow burn coup attempt trying to
....subvert the constitution via having the powers of the house and senate come under his control. sorta a repeat of Andrew Jackson who laid the setting for the civil war. but....

Hunch that the reason Harris lost is the Fed meme which became and is still popular that the econ was/is shaky and did not step aside and allow the econ truth become apparent caused error in how people answered "are you better now than 4 years ago". If the Fed had been rule based with a reaction function would have raised rates Fwd Funds towards 7% by late 2021, causing a recession but then would be at 3% by QII 2024 - fiscal would still have kept NGDP in good shape.

the steps to understand the risk free curve of the US - and only the US.
1) Fed Funds = inflation + real interest rates
2) real interest rates = real GDP
3) Fed Funds = NGDP
4) standard bond math determines STIR Fed Funds then long term Fed Funds forwards are... 4) ....compounded ON Fed Funds plus drift [ volatility]
5) these forward Fed Funds are forward term structure of NGDP
6) forward term structure NGDP of overnight readily converted to semi annual yield which is the curve

The market is about to get a re- education as what the US risk free yield curve prices or how it is priced and the relationship US Treasurys have to risk free. The industry had to do this end of 1980s to 1990s then Taylor codified relationship to the Fed and then the Fed to NGDP But then from early 1990s or US Treasurys traded to risk free so all forgot the work on the curve and simply always just used US Treasurys.

Optimal for me is Harris wins handily in way impervious to SCOTUS and yet under 53% popular and only 15 or so electoral college. Trumpites go bananas scare the hell out of folks, pickup trucks in convoy rear end Prius drivers with Harris bumper stickers. Markets down 10% . Then will go max long and use leverage. Keep PHM (residential construction employment headed to 1 million) add some leverage. Back into JPM with leverage seeking 300. Long IWM. Stay away from tech which will be hammered by Harris govt.

Personal income (PI) and PCE deflator along with initial claims 8:30 today. Most will focus on deflator but as Fed is not impacting the economy but for sentiment, it is PI which counts. Exigency to see ongoing strong economy refect in both. The main issue had been pretty well the same since 2020 Covid, wartime like emergency powers handed to POTUS which included the power of the purse granted Congress.

ok think this worth a thread. let me run the machine. i am getting better and better at communicating. first rule: there is only one risk free price per maturity time. second: forward risk free is drift of Fed Funds (Itto and all that).

https://twitter.com/dbaeza13/status/1851652263250722945

if one accepts that there can only be one risk free rate per maturity - makes sense to me - then let us start with a risk free rate no one can argue with. Fed Funds.

ok @aoc I am buying how about we dine and discuss why you are a Republican with federalist values and how we take over the GOP party, purge the Taft to Trump riff raff and start the GOP II. End objective is you POTUS in 2048 and Senator 2028 then NY Governor 2034 you nailed it years ago - social democrat based on federalism is the future of the GOP or GOP dies like the Whig Party before Lincoln. you go to shed all your shallow progressive babble though sorry.

the crisis for the US is not immigration but that the current immigration levels - illegal or not - are not enough. it is not oil the world is in competition over, it is people. US must have 1.5 million plus per year immigration year on year out. the great competition will not be over goods but people/populace the influx of people required given capitalism of the US means the influx will occur. the current tussle is over who controls those people for the corrupted results of that control. Al Sharpton or Ted Cruz?

all discussions on QRA and the budget and size of the 2 year issuance or size of TBills issuance or long bonds - all of this was well known for well over a year now - even 2 years now after the increase in federal spend plateaued. this is why it is important to understand that risk free is based on seigniorage allows this what seems simple but isnt realization that there is only one risk free rate that is "cast" forward by well known mathematical functions.

the current rebound makes sense from any macro economic view. and more and more folks becoming aware that it is only macro economics now. and today seems Trump will win. that doesnt mean Harris macro is not also supportive of much higher levels in equity.
but. I am not convinced Trump is a shoe in (and this isnt my passion on what a disaster it would be for the US and the world if Trump is elected - i understand the merits of Thiel, Lighthizer, Vance understanding of macro - it is generally excellent)

the US economy and markets must have price discovery. it must have US Treasury 10 year approximate to US risk free 10 year rate. it must have an accurate US Treas curve that reflects the economy. it must have a active powerful monetary agency Fed that operates here and now right now there is none of the above. a 28 tril to be 29 tril (heck might be there now) with a 30 tril or more debt level is just crashing around without any monetary governance. and Congress has lost any control - on a whim now Congress can double debt or slam it down to 60%

it is really worth your time to read or even scan the following as this is the Fed monetary policy (ie no policy as a deliberate policy choice)
columbia.edu/~mw2230/JHole2…
levyinstitute.org/publications/g…
johnhcochrane.blogspot.com/2012/09/woodfo…
chicagofed.org/-/media/public…


or let me put it this way. if you have not studied Woodford prescription on how to execute Neo Wicksell monetary policy but charge money for folks to listen to you when you do discuss the current Federal Reserve monetary policy you are just shades away from being a fraud.