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Battle OF The Fibos & The Negative Yield Wall
Battle OF The Fibos & The Negative Yield Wall
Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur. They are based on Fibonacci numbers. Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a Fibonacci ratio, 50% is also used. – Investopedia
Traders and ‘bots are clearly in control of this market.
We are fairly convicted the 50% Fibo won’t hold, which sets up a quick move to 50-day moving average at 2721-ish.
Source: Carl Quintinalla
Be careful out there, folks, the shorts have been destroyed in the big bounce off the March 23rd bottom and there is very little holding up this market now x/ hope, delusion, and the specter of more financial asset shortages, in our opinion.
Bonds
Moreover, there is little room in yields for bonds to now be used as a stock market hedge or short proxy.
Though it’s possible the trading momo boyz & ‘bots may believe Jerome Powell will take them out of their longs at -2.0 percent, we have our doubts as it will create a real problem for the Fed and Treasury.
It’s [negative interest rates] an unsettled area. I know that there are fans of the policy, but for now, it’s not something we’re considering. We think we have a good toolkit, and that’s the one we’ll be using.” – Chairman Powell, May 13th
Though the Chairman was likely referring to only policy interest rates, it is not clear that if traders pushed U.S. notes and bond yields into negative territory the Fed would be there to buy as part of their QE program. If they do, imagine the shit show this would cause with the monthly Treasury auctions.
…click on the above link to read the rest of the article…
Fourth Turning Economics
Fourth Turning Economics
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning – Strauss & Howe
The quote above captures the current Fourth Turning perfectly, even though it was written more than a decade before the 2008 financial tsunami struck. With global debt now exceeding $250 trillion, up 60% since the Crisis began, and $13 trillion of sovereign debt with negative yields, it is clear to all rational thinking individuals the next financial crisis will make 2008 look like a walk in the park. We are approaching the eleventh anniversary of this crisis period, with possibly a decade to go before a resolution.
As I was thinking about what confluence of economic factors might ignite the next bloody phase of this Fourth Turning, I realized economic factors have been the underlying cause of all four Crisis periods in American history.
The specific details of each crisis change, but economic catalysts have initiated all previous Fourth Turnings and led ultimately to bloody conflict. There is nothing in the current dynamic of this Fourth Turning which argues against a similar outcome. The immense debt, stock and real estate bubbles, created by feckless central bankers, corrupt politicians, and spineless government apparatchiks, have set the stage for the greatest financial calamity in world history.
…click on the above link to read the rest of the article…
Negative Yields and the End of Deposit Insurance
Negative Yields and the End of Deposit Insurance
The Madness of Negative Bond Yields
As we have frequently discussed in these pages, time preference must always be positive on a society-wide basis – it is a praxeological law that future goods and/or satisfactions are valued at a discount to identicalpresent goods. We emphasize “identical” here because sometimes people are asserting that there are exceptions, such as in the famous example that men would prefer having ice in the summer over having it in the winter (thus, in wintertime, ice available in the future would be valued more highly). However, “summer ice” is not identical to “winter ice”, even though it has the same physical properties. The reason is that the satisfaction if provides is not the same.
As an aside, this also explains why the assertion that the prices of goods will tend to equalize across the entire market economy (excl. transportation and other extraneous costs) is not disproved by the fact that a cup of coffee in Hicksville can be bought at a lower price than e.g. an identical cup of coffee offered by the Sacher coffee house next to the opera house of Vienna. In spite of the physical properties of the two cups of coffee being the same, they are not the same good. In the latter case one pays a premium for the view of the opera house and the general atmosphere of the location.
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