1/7 WHAT BONDS ARE LIKELY TO DO IN THE COMING MONTHS WITH RATE CUTTS

UNPACKING BOTH GUNDLACH AND DALIO

Adding historical data and classical economics rationale to their statements.
GUNDLACH

youtube.com/watch?v=QqJhb-…

It’s pretty clear that the US will hit 3% inflation by year-end, especially with oil adding 0.4% for every 10 USD, he says the view from the Fed is that tariffs push prices higher.

COMMENT:

Sure, tariffs are not monetary inflation, but higher prices are higher prices. If Walmart and Amazon tell you that they will raise price, it’s fair to assume they will. Could the tariffs be a one-time hit? Most likely, but it hits nonetheless.

According to Gundlach, the Fed will have to choose between inflation and unemployment—and will throw away the inflation target.

COMMENT:
That’s short-term expediency. In the long term, they will have neither. The fiscal condition will cripple the US.

2% INFLATION TARGET GONE
In an old post from our previously hacked account, we mentioned that the US would eventually move its inflation target and shift toward inflationary financing:

graphcall.com/execute?task=N… 2/7 Back to Gundlach’s unpacking:
If unemployment rises, they give up on inflation.That’s his view

He also mentions the de-inversion of the 2–10 year spread, which is moving above its moving average. He says that when the spread moves above the moving average it means recession historically.

COMMENT:
That’s an interesting point. But under monetary dominance, de-inversion usually occurs with the entire curve falling, not rising. De-inverting with a rising curve signals fiscal dominance—disanchoring the long end and dragging the whole curve up.

Back to Gundlach:

U3 is at 4.2%,
It is above the 36-month moving average, which is typically a trend of deceleration.
But it's not accelerating.

COMMENT:
Gundlach says he's puzzled by the lack of acceleration. The puzzle might be simpler than it seems. When deceleration happens with little government stimulus (primary deficit = gov stimulus), there’s quick contagion and no artificial booster to stop the decline. That booster is uncovered spending (permanent Keynes now in operation).

BUT even with a large government deficit spending, the economy remains tepid. This was visible in our recent Q1 2025 review of Wells Fargo.
x.com/GraphCall/stat…

It should be a bit alarming—massive Keynesian boosting under both Biden and now Trump, and yet very little to show for it, coupled with reduced output. (Classic fiscal dominance.)

The reason deterioration is slow is due to a crowding-out situation, or “war regime”: lots of means of circulation (T-bills are quasi-money), little output.

The same thing happened between 1913–1919 (see
Kemmerer: High Prices and Deflation), which created abnormally high inflation and interest rates relative to output—if analyzed through a monetary dominance lens.

0/20 After the BLS data on inflation not adding up with inferior goods consumption trends...
Credit bureau data on delinquencies in unsecured debt does not seem to add up either.... let's review the data... 1/20 This is data gathered from different sources, including credit bureaus:
This data seems highly improbable on the side of improving delinquencies in subprime unsecured debt.

1/18 Different data points indicate a Liz-Truss Moment on April 4th.
There was extreme volatility on cash versus futures post- April 4th, with the 30 years going. We have seen the same dislocations and volatility in 2022, during the Liz Truss moment.

Why?bankunderground.co.uk/2024/07/17/fut… 2/18 Because pension funds sold what's liquid first, and it can be the futures.
And that's because people went too heavy on swap spreads, ignoring the fiscal dominance risk...

1/23 External Drains: The Juglar Episode

Why under the old AND new regime ONLY trade can stop Gold outflows (stop rising in a floating ccy)

And why "real rates" alone don't work to stop Gold in the old a new regime.

Are rates responsible for a fall in gold?
Forget what you learnt in FX as reserves, only indirectly via trade when FX as reserves is not obeyed!

A provocative view, yet perfectly logical explanation from Clément Juglar.

It becomes clear why there was a prohibition from Nixon/Volcker on G-7 countries from dumping their USD acquired in trade into precious metals. 2/23 Juglar starts by citing an example that seems to support that the higher rates themselves result in lower prices of Gold. (but wait...)

1/24 You probably remember the claims from Larry Summers and Jamie Dimon questioning the inflation calculation in the US?
I think that we can conclude that they are correct using a simple curve that most people in economics have learnt.
2/24 That is the demand profile for inferior goods versus normal goods.

So here is the chart that shows that inferior goods consumption increases with a decrease in real income.

1/16 “THERE IS TOO MUCH OIL”
Scott Sheffield
Former CEO of the largest independent shale oil driller in the United States (hardly a "green activist") — 1 month ago —
When someone like that says something like that, investors should pay attention.
PLAY 📺
here 👉rebrand.ly/too-much-oil 2/16 Once you connect the dots, it’s fairly simple to understand why he said that. Reporter “13 million barrels a day, can it be increased?” Scott Sheffield “There is a lack of tier-1 inventory. The Permian is running out of tier-1 inventory.

1/6
We have been explaining that for a while, that government figures and people close to the military like Michael Saylor are pumping the #BTC garbage (BIS paper 141)

https://twitter.com/zerohedge/status/1917594997244805503

2/6
Because as the paper 141 from BIS explains pumping #BTC and crypto garbage generates demand for stablecoins which in turn create demand for USD/UST.
In other words buying #BTC helps sustain the USD and UST

1/24 Currency Raiders EPISODE I
Ok, time to republish the Currency Raiders and explain how it ties to the Bonds Raiders series.
I am republishing an episode from my previous account that was hacked, @GraphFinancials.
All the sequences were described in Fall 2023. 2/24 In this media recording, you will be able to judge for yourself how far it was from the target, but here is the written version of what was said:
We have a classic John Law bubble sequence:
It starts with a Commercial credit bubble in 2008,

Play the Recording 📺
Here 👉 link.graphcall.com/Currency-Raide…

1/17
There are wide consequences of establishing the Gold deliveries outside of China. @Kathleen_Tyson_

https://twitter.com/KingKong9888/status/1915509626155786348

2/17
Gold spread means Gold is being shipped from West to East as people do a discharge of debt (USD). This is a very old trade settlement mechanism. H. Thornton 1802, Juglar 1880, Baring (basically everybody knows)

1/ PLANTATION MONEY

FX in foreign CB is a monetary aberration, expanded globally for the first time in 1922 and repeated post WWII (Triffin/Rueff), and has always resulted in a rug pull. There have been 2 rug pulls — 1927 and the 1960s — we are in the third. 2/ FX as reserves in Bretton Woods II is a system of plantation money. The beans and rice (energy – $Oil) are ONLY available if you have plantation money.

1/6 The old/ new Paradigm.
Gold has ALWAYS been THE PRIME source of liquidity.
Explanation by Thomas Tooke WHY.

For FX as reserves to work it requires that Central Bank of the G-7 with Volcker and Nixon be PROHIBITED from dumping their USD acquired into Gold market and use Gold as the liquidity source.

Why? Because it evidently is repeat of the mid-1960s external drain and kills the FX as reserves. 2/6 NUMBER 1 ANNOTATION:
Object is such universal demand

It's liquidity function is because it is the commodity with is the most marketable, very high demand for it worldwide (no #bitcoiners nothing to do with scarcity, scarcity is INEXISTENT concept in economics

1/17 Back to some fundamental concepts.

How Are Natural Rates Computed in the Absence of Government Debt?

Clément Juglar 1886 tells us.
A quick thread🧵 2/17 Some people on Twitter believe that free market rates are simply SOFR plus a spread, and they claim that natural rates without a government benchmark are "impossible." Nothing could be further from the truth.

1/7 TRUMP may have folded to bail out bond funds that don’t understand a key principle: the inverse correlation between credit and Treasuries breaks down under fiscal dominance.
Quick 🧵 2/7 Here’s how it works:
As Joseph Wang explained in an interview with Jack Farley, bond funds often operate with leverage — say, 130% of assets. They’ll buy Treasury futures to get 100% duration exposure and then use the extra 30% for credit.

1/13 THE FUNDAMENTAL ORIGIN OF CREDIT: HUMAN RELATIONSHIP OF TRUST
AND WHAT THE CURRENT ADMINISTRATION HAS DONE TO THE UST "CREDIT" (PART I)

The definition of credit by henry Thornton 1802. The fundamental principle of confidence. @rsrindy 2/13 The notion of confidence and sense of justice among credit partners.
There is nothing “just” in threatening to confiscate land from an economic area of a tiny country (Danemark) which is lending money to you and trusted you.

1/9 Precious Metals:
It stinks more than you think,
Let's stop & think for a minute.
What was happening in markets?
From Feb 21st the Nasdaq was already in trouble while
the Precious Metals Gold and Silver were ramping.
D-I-V-E-R-G-E-N-C-E
@DerivativesDon 2/9 We have notorious velocity problems with an insolvent Fed, and a quasi fiscal deficit. Meaning that the Fed has to pay Banks for not using reserves. IORB..
That's a sterilization short-term but inflationary long term.
A QFD as explained by Rodriguez at the World Bank is a very nasty condition of sterilization costs
documents1.worldbank.org/curated/en/465…

1/6 FINAL THOUGHTS ON TARIFFS 🤔,
Let's start with MV=PQ

MV is not affected in principles by tariffs.
That is the quantity of means of circulation is not increased by tariffs, nor should V, the velocity (albeit inflation expectations)

https://twitter.com/DerivativesDon/status/1907389389837119727

2/6 What is interesting is on the other side.
PQ, or GDP
Alright so here we go;
GDP=C+I+G+(X−M)

While consumption C in units will decline on imported good, the trade deficit (X - M) may shrink due to reduced imports.

1/24 The commonly accepted view is that during a recession, long bond yields fall. If you subscribe to a monetary dominance perspective, this is absolutely true, as verified over the last couple of decades. How about since 1731? 2/24 However, if you have experience trading emerging market bonds, you may have some doubts about the extent of the decline due to fiscal dominance.

1/6 Tracking the China Hongbao (red envelopes)
The hongbao bodes well for retail results in China in Q1 2025 2/6 Reasons for the Increase in M0 Supply

a) Seasonal Cash Demand:
During the Chinese New Year (Lunar New Year), there is a surge in demand for physical cash. People withdraw large amounts of money to give red envelopes (hongbao) as gifts to family, friends, and employees.

b) Business Transactions:
Many businesses distribute year-end bonuses and settle payments before the holiday, leading to a temporary spike in cash circulation.

c) Holiday Spending:
Increased consumer spending on travel, retail, and entertainment during the New Year celebrations leads to higher cash withdrawals.

d) Temporary Liquidity Adjustments:
To accommodate these demands, the PBOC injects liquidity into the banking system by increasing the M0 supply.

1/21 "The Bitcoin Act" is as usual with the name of the bill, completely deceptive, devious.
The Bitcoin Sovereign fund bill is neither
disguised Gold revaluation,
nor USD devaluation.
It’s simply
Theft of Central bank’s Gold by the Gov. (PART I) 2/21 We will explain separately in other posts the process of
a) Gold revaluation with archives (Kemmerer 1920) in a separate post
b) Currency devaluation by buying Gold with (Thornton 1802) in several posts (there are 3 versions of the explanation)

1/12 THE RISK-FREE RATE JOKE
(We need a detour to explain how the Bitcoin bill is, in fact, the Federal Reserve’s gold theft by the Gov, and that this bill has little to do with Bitcoin) 2/12
You often hear from posters on Twitter that government bond yields represent the risk-free rate and that it is natural for all other credit securities to trade with a credit spread or gradient. This is entirely false—propaganda and a legal artificiality.

1/25 What is the impact of Gov spending on corporate profits?
The simple explanation of the reduction of gov spending is this.
And agreed with @EdgeGroup. Let’s avoid charlatanry if possible, and keep it simple.
Now let’s do the “complicated” version.

https://x.com/GraphCall/status/1901760558833009066

2/25 It’s not really complicated , so let’s use the national accounting entries. It’s still not hard science.