{"id":45764,"date":"2019-04-29T19:21:36","date_gmt":"2019-04-30T00:21:36","guid":{"rendered":"https:\/\/olduvai.ca\/?p=45764"},"modified":"2019-04-29T19:21:38","modified_gmt":"2019-04-30T00:21:38","slug":"the-fed-is-the-bubble","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=45764","title":{"rendered":"The Fed Is the Bubble"},"content":{"rendered":"\n

The Fed Is the Bubble<\/a><\/h3>\n\n\n\n
\"\"<\/a><\/figure><\/div>\n\n\n\n

Occam\u2019s Razor: The simplest explanation is often the best explanation. In this case: The Fed panicked in December and by caving to markets reignited the bubble in a major way and now they are losing control as they are trapped and twisted in their own narratives. No rate hikes until 2020 but markets are printing new all time highs less than 4 months following Powell\u2019s famous balance sheet flexibility cave on January 4th, just a couple weeks after President Trump told him \u201cto stop the 50Bs\u201d on twitter.<\/p>\n\n\n\n

And markets have done nothing but gone up since then:<\/p>\n\n\n\n

View image on Twitter<\/a><\/p>\n\n\n\n

\"View<\/a><\/figure>\n\n\n\n
\"\"\/<\/a><\/figure>\n\n\n\n

<\/strong>\u2714<\/strong><\/a><\/a><\/p>\n\n\n\n

2019<\/p>\n\n\n\n

But this appears to be only act one of the drama. Now a mere weeks after a constant drum roll by Kudlow and Trump demanding the Fed to cut rates by 50bp the Fed may actually do just that according to Nomura<\/strong><\/a>.<\/p>\n\n\n\n

Such a move would surely end whatever may be left of the Fed\u2019s \u201cindependence\u201d credibility which one can critically question already following the December cave. Loss of credibility being ironically one of the key risk factors Deutsche sees as a threat to the expansion:<\/p>\n\n\n\n

\"\"\/<\/a><\/figure>\n\n\n\n

<\/strong>\u2714<\/strong><\/a><\/a><\/p>\n\n\n\n

DEUTSCHE: \u201cThere are 5 different ways this expansion could end\u201d

1) A sudden blowup in credit markets

2) The US consumer gets tired

3) The US trade war intensifies, in particular with Europe

4) Fed credibility is severely damaged

5) China gets a current account deficit pic.twitter.com\/059hmNSU60<\/a><\/p>\n\n\n\n

Whether they will cut rates at this meeting or not is speculative, but fact is global growth is slowing still<\/strong> <\/a>and markets are pricing in a rate cut:<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

The Fed has already made itself the market\u2019s play thing and hence can\u2019t ill afford to disappoint markets this year and consequently the Fed faces a perhaps impossible choice this week:<\/p>\n\n\n\n

Cut rates here by 50bp could only exacerbate the bubble and set markets onto their\u00a0combustion<\/strong><\/a>\u00a0path following a total credibility loss.<\/p>\n\n\n\n

 \u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

The Fed Is the Bubble Occam\u2019s Razor: The simplest explanation is often the best explanation. In this case: The Fed panicked in December and by caving to markets reignited the bubble in a major way and now they are losing control as they are trapped and twisted in their own narratives. No rate hikes until […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[303,1849,7542,23808,827],"class_list":["post-45764","post","type-post","status-publish","format-standard","hentry","category-economics","tag-fed","tag-financial-markets","tag-northman-trader","tag-sven-henrich","tag-united-states"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45764","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=45764"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45764\/revisions"}],"predecessor-version":[{"id":45765,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45764\/revisions\/45765"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=45764"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=45764"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=45764"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}