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Carnage In Fixed Income

Daily Rap 03-21-2022

The indices were mixed, although not that far from unchanged through midday. I would imagine most people look at the market action and just shake their heads given the news across a broad spectrum. Stocks rallying and/or trading sideways in the face of overwhelmingly negative fundamentals just demonstrates the power of the passive bid, structured products, and muscle memory. My sense is that there ought to be a very good short-selling opportunity not too far in front of us, but given the market structure, one has to give the upside the benefit of the doubt.

In the afternoon, a small undertow developed that took the Dow/Nasdaq about 0.5% into the red, with the S&P about flat. Away from stocks, bonds got really hammered all across the curve, green...more

Last year's posts for Ask Fleck

Q: It appears that the bond market is forecasting a potential recession. There have been many instances of longer bonds rallying on talk of rising rates. I believe that view is likely correct....that a recession is imminent if the Fed does its rather meager rate rise plan. However, I assume the bond market must also be assuming that the recession will bring down inflation. Do you agree that the bond market might see it this way, and do you believe that a recession would bring down inflation to a level that might be higher than 2% CPI but could be pretty close? I know you believe stagflation is likely, but I do wonder if you think the bond market views things as I described above?

Fleck: We could have a recession if the stock market gets hit hard enough, but the Fed would then shift gears, so I don't see inflation back under 2% for the next couple years. After that is too far out to guess.
(posted: 3/18/2022)

Q: Fleck , would it be at all possible for the fed to just hit the DELETE button on its massive bond holdings and just begin the whole bond buying binge all over again ? Sounds foolish i admit but with the mmt crowd anything may be attempted ! thanks

Fleck: If they don't do QT, then they effectively have hit delete. They never finished QT last time they tried it. They won't this time either.
(posted: 3/18/2022)

Q: Absolutely one of the best posts from Doomberg yet on the crazy AMC/HYMC deal, includes a lot of color on types of reserves and extraction costs. Also casts a negative light on Sprott. He's no fool, but feels like he's playing us for one.

A Fool and His Gold

Fleck: There is plenty of useful information about gold mining here. Everyone who owns miners should read it.
(posted: 3/18/2022)

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