Money Market Funds See Massive Inflows As Fed's Bank Bailout Fund Holds At Record High
Money-market funds saw a massive $102BN inflow last week (the largest since the middle of the SVB crisis in March). The fifth straight week of inflows pushed total MM fund assets to a new record high of $5.84 TN...
Source: Bloomberg
In a breakdown for the week to Nov. 29, government funds - which invest primarily in securities like Treasury bills, repurchase agreements and agency debt - saw assets rise to $4.77TN, a $71.5BN increase.
Prime funds, which tend to invest in higher-risk assets such as commercial paper, meanwhile, saw assets climb to $940BN, a $2.19BN increase.
With the vast bulk of that being into institutional funds (+$71BN), but the unbroken trend of flows into retail funds also continued...
Source: Bloomberg
The resurgence in money-market fund inflows is diverging from bank deposits (which are gently rising on a seasonally-adjusted basis)...
Source: Bloomberg
Meanwhile, despite a small uptick into month-end, November saw a massive exodus of funds from The Fed's reverse repo facility, now at its lowest since July 2021...
Source: Bloomberg
Demand for the facility has been fading this year as the Treasury ramped up fresh bill issuance, offering an alternative for short-term investors.
While reserve scarcity is not a serious worry yet, it;s coming if this pace continues.
After stalling last week, The Fed's balance sheet contracted by $14.7BN last week (to its lowest since April 2021)...
Source: Bloomberg
QT also reaccelerated last week, with Securities Held declining by $12.3BN...
Source: Bloomberg
Usage of The Fed's emergency funding facility for the banks remained at a record high of $114BN...
Source: Bloomberg
Which should be no surprise, as we detailed earlier,unrealized losses for banks surged in Q3...
And for now, banks appear to be pulling the cover over investors eyes that everything is going to be awesome (if rates keep falling)...
Source: Bloomberg
Equity market cap continued to soar, having re-coupled with its years-long relationship with bank reserves at The Fed...
Source: Bloomberg
The band-aid over bank losses may be holding for now... but what happens in March when The Fed pulls the plug on the 'temporary' bailout facility?
There was some sense in the air in the spring of 2020 that many things were not quite normal. Here we had most governments in the world locking down their populations with extreme policies, wrecking economies and long-settled traditions of rights and liberties, while fake scientists took over the airwaves and blasted us daily and hourly with crazy messages of compliance.
It was a lonely time to be incredulous. Most of the people I would have thought would cry foul simply stopped talking. Most of what I saw on social media seemed all about conformity with the insanity. When someone would pop up to raise questions here and there, the account was shouted down brutally and socially punished for deviating from the narrative. This further discouraged people from objecting.
So on it went for months, and then got worse with the nutty masking practices and the vaccine. Suddenly every major voice from pop culture and the movies became a voice for the practice of medicine. These are people who would never recommend pharmaceuticals to people they don’t know. They are not professionals and are in no position to do so. But when the time came, they were all cocksure that getting the shot was the way to go for absolutely everyone.
One possible explanation of the unfolding frenzy was simply that society had gone mad. There is surely truth in that. History is replete with examples of such things, and I had studied them for years. We always believe that in our own times, we are too enlightened and informed for such things but apparently not. The same mad passions that led to the witch burnings, the red scares, and even the bonfire of the vanities are still with us, ready to be unleashed under the right conditions.
And yet we are learning more and more now that it was not only the madness of crowds at work. There was a deliberate construction of a narrative and an orthodoxy, all pushed at the highest levels of government. The proof of this is mounting by the week. To be sure, government is restricted from doing this directly, so over the last five years or so, we’ve seen grand experiments in outsourcing the control of the public mind to third-party organizations with an arm’s length relationship to government. This has included universities, nonprofits, and social media companies.
We’ve read all about this in the Twitter Files, the discovery from the case Missouri v. Biden, and seen evidence from many whistleblowers. But the latest leaks go beyond anything we’ve seen yet.
Michael Schellenberger, Alex Gutentag, and Matt Taibbi came into the possession of a huge trove of documents from the so-called Cyber Threat Intelligence League (CTIL), an organization set up in 2018 to monitor and curate the internet.
CTIL was supposedly a private organization but it later came to work tightly with government agencies. Indeed, from its inception, the League included employees from the Department of Homeland Security (DHS), the Federal Bureau of Investigation (FBI), and the Cybersecurity and Infrastructure Security Agency (CISA). “According to the whistleblower, roughly 12-20 active people involved in CTIL worked at the FBI or CISA,” report the journalists. How many people worked in this supposedly volunteer effort? It could be 500 but also could be as many as 1,700. Because they didn’t work directly for government, they were not bound by strict rules over information classification, so leaks would be inevitable, despite constant injunctions to lock down all material.
They were not just working with social media and mainstream media to craft narratives. They were engaged in so-called offensive work too, creating sock puppets to shout down dissidents and humiliate them, fabricating the appearance of a mainstream consensus. These efforts of CTIL began in earnest in 2018 in order to stop a “repeat of 2016;” that is to say, the election of Donald Trump. The ethos in the group was that Trump and his supporters, and any opinion they held on anything, represented a grave threat to state security and needed to be crushed.
So, yes, CTIL was deeply involved in the entire Russia hoax, the notion that somehow Putin was responsible for putting Trump in office. But that focus turned eventually to COVID. That’s when I first began to notice that something was amiss. These fairly intelligent but anonymous accounts would appear on my timeline with bitter denunciations of my anti-lockdowns posts, and anything that seemed to “minimize” the grave threat of the virus.
The same thing happened with masking. I posted a zippy protest, suggesting that masks were medically useless for this kind of virus but also that they were a symbol of obsequious deference to regime priorities. Pretty much the ceiling fell in as I faced a huge barrage of hate, not just from people who should have known better but also many accounts of people who otherwise had no public profile. Some would claim high credentials but I could never verify them. They were clearly sock puppets. Now I see that it was likely CTIL at work crafting the narrative to control the public mind.
CTIL recruited people out of the intelligence agencies who had retired and also sought volunteers from the tech industry. They pushed their agenda with intense political passion and without regard to any facts at all. Their whole goal was to suppress and counter any opinions that contradicted Deep State priorities at the time. Again, the organization was set up in 2018 so by the time the 2020 lockdowns came along, it was fully practiced and prepared.
The conspiracy was and is out in the open. CTIL has an X (formerly Twitter) account. In April of 2020, the head of CISA (which was also responsible for dividing the workforce between essential and nonessential, while becoming the center of all censorship efforts) actually posted the announcement of a partnership between CTIL and CISA.
“Thank you to @CTIleague volunteers for working to manage risk and identify #vulnerabilities in the nation’s medical sector,” the head of CISA wrote.
“You’ve already accomplished so much in a short period of time and you’re just getting started!”
Yikes!
But sure enough, we are seeing the same thing happen in the economic realm. The White House and its agencies are working with such groups to suppress negative information about economic conditions.
This impulse to control and curate the public mind is spreading to ever more areas. And despite existing court cases, nothing currently seems to stand in their way. It’s almost like the First Amendment is a dead letter. Certainly the Cyber Threat Intelligence League acts like it is.
Mo'vember Marks Best Month For US Bonds In 40 Years; Global Markets Add Over $11 Trillion
Remember, remember, the surge of November...
Global bond and stock markets added over $11 trillion in capitalization in November. That is the second biggest monthly gain in history (Nov 2020 added $12.5 trillion)...
Source: Bloomberg
Who could have seen that coming?
1. Dealer gamma turns deeply positive
2. $5BN in daily buybacks until mid-Dec
3. CTAs buying up to $200BN in global stocks over next month
4. Hedge Funds least net long since 2011
5. Seasonals pic.twitter.com/Rv3U1HLGHx
Global bonds had their best month since Dec 2008 with US bonds soaring to their best month since May 1985...
Source: Bloomberg
...and back into the green for the year...
Source: Bloomberg
For context, that is a 60bps or so collapse in yields for Treasury bonds on the month (with the short-end underperforming)...
Source: Bloomberg
Despite bull-steepening in the last few days, the yield curve (2s30s) is flatter (more inverted) for the second straight month...
Source: Bloomberg
“There’s a little bit of the fear of missing out,” said Ed Al-Hussainy, a rates strategist at Columbia Threadneedle Investment.
“Suddenly 5% yields on the 10-year Treasury have become a distant memory.”
No fear here in stock-land as all the US majors rallied almost non-stop (up around 8-10% on the month) led by Nasdaq...
Source: Bloomberg
Random but interesting... the sales per employee in the Russell 2000 (where people expect job cuts) has never been higher.
The energy sector was the only one to end the month red while Tech and Real Estate were the big winners...
Source: Bloomberg
And VIX plunged to a 12 handle - its biggest absolute monthly decline since Nov 2022...
The rally in bonds and stocks sent financial conditions dramatically looser...
Source: Bloomberg
In fact, October saw the biggest absolute monthly loosening of financial conditions in history (back to 1982)...
Source: Bloomberg
The dollar index tumbled 3% in November - its biggest monthly decline since Nov 2022 (and 2nd biggest since July 2020). Note that today's bounce ripped up to its 200DMA and stalled...
Source: Bloomberg
Bitcoin rallied for the 3rd month in a row, back above $38,000...
Source: Bloomberg
Ethereum soared over 12% in November - its best month since March and its first monthly outperformance of BTC since May - but as is obvious from the chart, it has stalled since the early surge...
Source: Bloomberg
Gold rallied for the 2nd straight month, back up to record highs...
Source: Bloomberg
Silver also soared back above $25...
Source: Bloomberg
Oil prices fell for the second straight month, with WTI finding resistance at the 200DMA for the last week (including a stop-run that failed today)...
Source: Bloomberg
Finally, November was truly a month of "bad news" being "good news" for stocks...
Source: Bloomberg
'Hard' data hits a 14-month low as stocks surge back near record highs.
“We’ve been getting economic data recently that reinforces the idea of the Goldilocks slowdown,” said Rebecca Patterson, former chief investment strategist at Bridgewater Associates.
“Inflation is coming down, and at the same time it hasn’t been unduly impinging growth.”
But be careful what you wish for - if financial conditions loosen much more, The Fed will be forced to jawbone some reality back into market as November saw the biggest increase in rate-cut expectations for 2024 since Nov 2022.
Do investors really think anything but a NOT-soft-landing would spark 5 x 25bps rate-cuts in an election year!
...many have highlighted the ADL's nearly two-decade sponsorship of a program which sends US law enforcement officials to Israel for various training seminars which several organizations have blamed for the 'militarization' of US police.
This is also set against the backdrop of the post-9/11 'war on terror' era trend of local police departments gaining access military gear and equipment. Heavy armored vehicles like MRAPs have now become a fixture of even small town police departments.
"A lot of the policing that folks are observing and being talked to about in these trips is policing that happens in a nondemocratic context," Alex Vitale, a sociology professor at Brooklyn College and author of a forthcoming book on global policing, told The Intercept in 2017.
"The kinds of training police are given in Israel is actually part of the problem because it encourages a warrior mindset in police and exposes them to practices that would be unconstitutional in the U.S.," he told the outlet earlier this year.
The FBI has also participated in the program, which was launched by former FBI official Steven Pomerantz.
Did you know the ADL has been sponsoring very expensive police training trips to Israel for top American police departments? pic.twitter.com/UajBNSiSfT
In the summer of 2020 as the George Floyd BLM protests raged across the United States and 'defund the police' became a national refrain which liberal cities across the country actually instituted (with much regret), ADL senior VP of programs, George Selim, and another top ADL official, internally questioned the group's support of the Israeli training program.
"In light of the very real police brutality at the hands of militarized police forces in the US, we must ask ourselves difficult questions, like whether we are contributing to the problem," wrote the officials in a June 9, 2020 memo to CEO Jonathan Greenblatt which suggests ending the program. "That is, we must ask ourselves why it is necessary for American police, enforcing American laws, would need to meet with members of the Israeli military. We must ask ourselves if, upon returning home, those we train are more likely to use force."
When the U.S. Department of Justice published a report opens in a new tab Aug. 10 that documented “widespread constitutional violations, discriminatory enforcement, and culture of retaliation” within the Baltimore Police Department (BPD), there was rightly a general reaction of outrage.
But what hasn’t received as much attention is where Baltimore police received training on crowd control, use of force and surveillance: Israel’s national police, military and intelligence services.
✂️The ADL publicly dismissed that line of critique in the summer of 2020. “Seeking to link Israel as a state to US police misconduct is a bizarre excuse for the centuries-long history of racism and injustice that has been part of American history, really since our founding,”… pic.twitter.com/TKTu4jHuh5
In 2018, five years after former Durham, North Carolina Chief of Police Cerelyn Davis attended a 2013 training session with the Israel National Police, the North Carolina city banned the exchange program. Davis, now the chief of Memphis PD, seemed "to have changed her tune" according to The Intercept.
By the time she became chief in Durham, Davis seems to have changed her tune on such programs. The apparent coolness on the police-Israeli relationships came following pressure from local activists and a national campaign to end U.S.-Israel police exchanges.
In 2018, Durham became the first city in the U.S. to ban police trainings and exchanges involving Israel’s military. At the time, Davis wrote in a memo that she had “no intention to participate or initiate an exchange with Israel,” which prompted two Israeli volunteer police officers to sue her and the Durham police department for discrimination.
Davis's predecessor, Larry Godwin, also trained in Israel as part of a Homeland Security International Conference.
"The ADL is literally the largest non-governmental trainer of the US police..."
[Paraphrasing]
They spend an enormous amount of money for US police to travel to Israel and exchange ideas regarding how to beat and subjugate captive populations and ethnic minorities... https://t.co/EazAWi0WWS
While the ADL has oddly scrubbed the exchange program's main page from their website (now archived here), the organization has defended the program in response to previous questions, writing:
There has been systematic racism in the U.S. for centuries, and it exists within our law enforcement and criminal justice systems. These problems were not imported to the U.S.
Blaming Israel for these grave and serious issues only serves as a distraction from legitimate problems that we as a nation need to confront.
This charge has been propagated by ideological critics of Israel who seek to inject alleged Israeli – and at times American Jewish – complicity into issues of American societal injustice. Those who make this spurious argument have focused more on tarring Israel than promoting real solutions to confronting and transforming systemic American inequities and abuses.
The self-proclaimed 'architect' of the US-Israel police exchange noted above, Steven Pomerantz - who heads the Jewish Institute for National Security of America (JINSA), a Washington DC Think Tank, wrote in a lengthy June 19, 2020 statement (10 days after ADL officials raised the notion of the organization's complicity in police violence) that the training courses don't involve 'field training,' work on "building trust with minority communities," and therefore couldn't possibly translate to reports of increased police brutality in the US.
The letter then pivots to how "Israel’s unfortunately extensive experience in the counterterrorism field" can benefit US police.
"Importantly, both American and Israeli police agencies operate under similar conditions, with judicial and public oversight and an aggressive free press," writes Pomerantz. "There is value in learning how Israel fights terrorism while preserving its democratic institutions and the individual rights of citizens — challenges facing all democratic societies."
Meanwhile, the American Jewish Committeehas criticized the 'deadly exchange' as a 'trope' which 'directly compares U.S. police actions against Black Americans with the Israeli Defense Forces’ (IDF) treatment of Palestinians."
Users of this trope argue Israeli and U.S. law enforcement exchange security practices and ideologies to purposely target people of color. This false equivalence appeared in demonstrations in the summer of 2020 when protesters chanted “Israel, we know you, you murder children, too" -AJC
The AJC says that "Accusing Israel or Zionists of complicity in the murder of Black people is malicious, perpetuates antisemitism, and blames Jews for societal ills."
Bitcoin, the largest cryptocurrency by market value, experienced its first-ever halving 11 years ago today. As the community celebrates the anniversary of the first Bitcoin halving, it’s timely to revisit some of Bitcoin’s historical milestones ahead of the next halving expected in April 2024.
On Nov. 28, 2012 — three years and 10 months after Bitcoin’s first block was mined — the first-ever halving event took place. At the time, BTC traded at around $12, according to data from StatMuse, or 308,200% below Bitcoin’s current price, according to data from CoinGecko.
Though Bitcoin’s halving and the digital currency’s 21 million supply cap are not directly described in Nakamoto’s white paper, the document still hints at certain mechanisms to control the creation of new BTC. The white paper reads:
“To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they’re generated too fast, the difficulty increases.”
Unlike some basic information in the Bitcoin white paper, the halving aspect is mentioned in the Bitcoin source code. The halving is specifically available on the Bitcoin Core GitHub repository on the validation.cpp file and indicates the miner’s block subsidy is “cut in half every 210,000 blocks, which will occur every four years.”
A Bitcoin halving-related snippet from the Bitcoin Core repository. Source: GitHub
The Bitcoin halving mechanism had been programmed into the BTC mining algorithm to counteract inflation by maintaining scarcity.
Before the first halving occurred, miners were compensated with as much as 50 BTC per block. After the first halving event in 2012, the subsidy was slashed to 25 BTC, followed by the second halving in 2016, which reduced the subsidy to 12.5 BTC. The most recent Bitcoin halving occurred in 2020, cutting the block subsidy from 12.5 BTC to 6.25 BTC.
As Bitcoin halvings significantly increase the cryptocurrency’s scarcity, the Bitcoin price cycle has been historically impacted by halvings.
Just a year after its first-ever halving, Bitcoin had risen to nearly $1,000, while the second halving triggered a 350% surge during the year after the event, with BTC subsequently rallying to then all-time highs of nearly $20,000 in December 2017.
The anniversary of the first Bitcoin halving comes as the cryptocurrency community awaits the fourth Bitcoin halving, which is now expected to occur on April 17, 2024.
Many Bitcoin advocates are especially bullish on the Bitcoin price in 2024 amid growing expectations that United States securities regulators could finally approve a spot Bitcoin exchange-traded fund.
The 2024 halving won’t be the last one, though. Bitcoin miner reward is expected to be halved 34 times until it reaches 0 BTC after all 21 million Bitcoin are mined.
In 1944 the truly remarkable movie Gaslight, starring Charles Boyer and Ingrid Bergman, was released to theaters to great success and acclaim. Its plot centers around a woman who is being manipulated by her husband to believe that she is becoming insane, even to the point where he uses her observation of the gas lights dimming in their home as proof of her hallucinations or false memories.
So impactful was this movie that it gave birth to the term gaslighting, which is ”a form of psychological abuse where a person causes someone to question their sanity, memories, or perception of reality. People who experience gaslighting may feel confused, anxious, or unable to trust themselves.” It is one of the principal forms of abuse that a victim experiences at the hands of a malignant narcissist.
Gaslight depicts such abuse vividly, as the wife’s very real memories are used as proof against her that she is insane:
This scene depicting narcissistic abuse came to mind as Google’s no-doubt maliciously programmed algorithm decided that I needed to see the following headline:
The article itself includes a parade of “experts” subtly saying that people are crazy for thinking there is even a problem at all. For example, take this snippet [ZH: emphasis ours]:
Even for people whose incomes have kept pace with prices, research has long found that people hate inflation more intently than its economic impact would suggest. Most people do not expect their pay to keep up with rising prices. Even if it does, the higher pay may come with a time lag.
“They’re obsessing over the fact that the prices they pay for the things that are very salient — gas, food, grocery store prices, rent — those things still seem elevated, even though they’re not increasing as rapidly as they were,” Hershbein said.
Since the abusiveness of the article in question is so very subtle, I thought it better to summarize it in the manner of a scene from Gaslight, as if those in power were speaking to America:
“Oh America, if we could only get inside that brain of yours and understand what makes you do these crazy, twisted things.
Do you not remember how terrified you were after we showed you those images from Bergamo and New York City? How you begged us, your betters, for your safety?
How we lovingly allowed you to stay home and order things to be delivered with the government checks which you cashed?
How we brought you safely back into the world with our gift of muzzles and injections? The fact that you are even alive today is a credit to our brilliance and care for you, and all you can do is complain about the price of food and energy?
How ungrateful!
“What a small price to pay for your survival! Your ingratitude shows itself even more by your demands that prices return to what they were in 2019. Do you not understand how DANGEROUS and HURTFUL deflation is to us, your loving caretakers?
After all we have done for you, you turn against us, your benefactors, and desire to bring us harm?
You are monstrously insane, and we shall have you put away from the levers of power, so that you may bring harm to yourself and us no more!
You are lucky that you even have jobs, and it is to our credit that we even allow that.”
So much of what we have gone through in these recent years is understandable as a form of societal-level narcissistic abuse. We weren’t allowed to leave our homes, see our friends, go to church or work, or even make our own medical decisions. We were constantly told that those in power were to credit every time the scary numbers went down and that we were to blame every time the scary numbers went up.
If I were counseling a victim of narcissistic abuse in my office or the confessional, my immediate suggestion would be to break off contact as completely as possible as the relationship is unrecoverable.
How does a nation respond when the abusers are politicians from both parties and nearly the entirety of the administrative state and legacy media?
Berkshire Hathaway Inc. reported on Tuesday that Charlie Munger has died at the age of 99.
According to the family, he passed peacefully this morning at a California hospital. He would have been 100 on January 1st.
"Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation," said Warren Buffett, CEO of Berkshire Hathaway, in a statement.
Munger, in addition to Berkshire's Vice Chairman, was a member of the Costco board, chairman and publisher of the Daily JournalCorp, a philanthropist and an architect. His fortune was estimated at $2.3 billion earlier this year (while Buffett's is estimated at around $100 billion).
Munger dropped out of college in 1943 to join WWII, serving in the US Army Air Corps. Upon his return to the states, he applied himself - taking graduate courses without an undergraduate degree, after which he was eventually accepted into Harvard Law School. He began his career at Wright & Garrett, making $3,300 per year.
Buffett and Munger met in 1959, after Munger returned to Obama following military service at the age of 35 in order to close his late father's legal practice - after his eight-year marriage ended in divorce which left him in dire financial straits because his wife received the majority of their assets.
Munger had also lost his son at the age of 9 to leukemia.
A year after his divorce, Munger faced a devastating blow when his 8-year-old son Teddy was diagnosed with leukemia. In an era devoid of medical insurance and effective treatments for the disease, Munger shouldered the medical expenses while grappling with the emotional turmoil of his son’s illness. He juggled his responsibilities as a father to his other children and his law practice, even as he watched Teddy’s health decline.
Munger’s friend Rick Guerin recalls the heart-wrenching moments Munger spent at the hospital with Teddy and his solitary walks through Pasadena, California, overwhelmed with grief. Teddy’s death at age 9 left Munger shattered. -Benzinga
And how did Munger later reflect on that period in his life?
"Envy, resentment, revenge and self-pity are disastrous modes of thought," he later said. "Self-pity gets close to paranoia. ... Every mischance in life is an opportunity to behave well and learn. It’s not to be immersed in self-pity but to utilize the blow constructively."
That year he was introduced to the then-29-year-old Buffett by one of Buffett's investment clients, and the two hit it off.
Munger served as chairman and CEO of California-based insurance and investment company Wesco Financial between 1984 and 2011, when Buffett's Berkshire purchased the remaining shares. According to Buffett, Munger convinced him to invest in higher-quality, underpriced companies as opposed to those in distress.
An early example of the shift was illustrated in 1972 by Munger’s ability to persuade Buffett to sign off on Berkshire’s purchase of See’s Candies for $25 million even though the California candy maker had annual pretax earnings of only about $4 million. It has since produced more than $2 billion in sales for Berkshire. -CNBC
"He weaned me away from the idea of buying very so-so companies at very cheap prices, knowing that there was some small profit in it, and looking for some really wonderful businesses that we could buy in fair prices," Buffett told CNBC in May 2016.
At one point Buffett started calling Munger the "abominable no-man" for his wholesale rejection of potential investments.
Charlie Munger’s formula for success is simple and perfect:
- Spend less than you earn
- Invest prudently
- Avoid toxic people and toxic activities
- Defer gratification
- Never stop learning pic.twitter.com/8IiJNngsdg
Waller Whacks The Dollar: Dovish Fed-Hawk Sparks Bid For Bullion, Bonds, & Bitcoin
Another day, another set of weaker data with Case-Shiller home-prices rising at their slowest rate since March, ugly downward revisions in the Conference Board consumer confidence data (and labor market weakness), and Richmond Fed Manufacturing and Dallas Fed Services showing anything but resilience as the temporary highs of Bidenomics' spending spree come crashing back to earth...
Source: Bloomberg
But it was FedSpeak that prompted initial movement today.
Historically one of the more hawkish Fed members, Governor Christopher Waller said he's encouraged by a recent slowing of economic activity, which may indicate the central bank’s policy is tight enough to contain inflation that still remains too high.
“I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%,” Waller said Tuesday in prepared remarks for an event at the American Enterprise Institute in Washington.
“I am encouraged by what we have learned in the past few weeks - something appears to be giving, and it’s the pace of the economy.”
Waller added that the recent slowdown in CPI was positive:
“This is encouraging, but it is not enough evidence to be sure it will continue,” Waller said.
“Just a couple of months ago, inflation and economic activity bounced back up, and the future was looking less certain.”
But Waller's comments essentially endorsing the Taylor Rule were the market mover - implying that when inflation cools, real interest rates should decrease - prompted a major bull curve steepening in TSY yields...
Source: Bloomberg
If inflation continues to cool for several more months, maybe three to five months, and US central bankers feel confident it's headed in the right direction, the Fed could lower the policy rate just because inflation is low, Waller told the audience in a question-and-answer session at the American Enterprise Institute.
Rate-cut expectations surged on the headlines (now pricing in 110bps of cuts in 2024)...
Source: Bloomberg
Of course, CPI's next print will drop on Thursday morning.
“The Fed is providing parameters for the potential of looser policy,” said Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities.
However, Waller did note (somewhat hawkishly) that "the recent loosening of financial conditions is a reminder that many factors can affect these conditions and that policymakers must be careful about relying on such tightening to do our job."
Source: Bloomberg
But, Fed Governor Michelle Bowman (another traditional hawk) is less sure about the progress being sustainable:
"We should keep in mind the historical lessons and risks associated with prematurely declaring victory in the fight against inflation, including the risk that inflation may settle at a level above our 2 percent target without further policy tightening," she said.
The US equity majors chopped around but a late-day short squeeze lifted The Dow, Nasdaq, and S&P into the green while Small Caps ended red...
"Most Shorted" stocks had a double-squeezey day today - first from the initial dip after the down-open and then after the 7Y auction...
Source: Bloomberg
VIX pushed down to a new cycle low around 12.60 before the 7Y auction triggered a massive spike above 14 (and back down)...
...not a fat finger.
Treasuries were aggressively bid from around 8amET with the short-end outperforming (2Y -12bps, 30Y -2bps). Since the close before Thanksgiving, the short-end is down 17bps (and 25bps from Monday's highs)...
Source: Bloomberg
10Y yields are down to almost 4-month lows (was 5.00% the top?)...
Source: Bloomberg
And the 2Y Yield hit 4-month lows...
Source: Bloomberg
The dollar was clubbed like a baby seal back to 4-month lows on the dovish narrative...
Source: Bloomberg
And as the dollar sank, gold jumped back above $2040, back up near record highs...
Source: Bloomberg
Bitcoin surged back above $38,000...
Source: Bloomberg
Oil prices ripped back higher after dropping on OPEC headlines with WTI back up to $77, erasing losses from last week...
Finally, given the decoupling between real-yields (surging higher) and gold prices, it would appear the precious metal is very much in play...
Source: Bloomberg
...and no, Sara Eisen, you don't need a weaker dollar for gold strength...
Source: Bloomberg
...but, of course, in the limit, that's where it ends.
