The Only Debate That Matters.
"Nascent".
It feels as though each time the market conversation turns to bear steepening in the curve and any attendant pro-cyclical rotation in equities, the adjective "nascent" is always present. "Burgeoning" is another word that often shows up in those same conversations.
There's a reason for that. "Burgeoning" and "nascent" imply that any bear steepener and concurrent shift away from equities expressions tethered to the duration trade in rates, is in its infancy at best, and will likely pr
In just a few words, it’s a question of getting it just right when it comes to relief/stimulus, while understanding that the variable (the trajectory of COVID-19) which will determine whether the amount of fiscal and monetary accommodation delivered is too little, too much or just enough, is beyond our ability to predict.
Maybe two or three sentences for the above would help the reader?
Warmer weather and more people spending more time outside will cause us to become complacent. Congress and the Fed will hold their fire. But, barring the development of a vaccine that can be delivered to hundreds of millions by Halloween/Thanksgiving — highly unlikely — this thing is coming back with a vengeance, and the Fed and Congress will be forced to double down on their already unprecedented QE actions. Other countries will be forced to do same — and curtail if not prohibit travel from hot spots. Global trade flows will continue to decline, and — I never thought I’d say this — inflation, but more likely stagflation (given the lack of aggregate demand) will become a real concern. The timing of all this might (or might not) have a major impact on the 2020 election.
Inflation, stagflation, recession or depression, our known unknowns. Kinda rooting for recession Timely Information is critical. I do not understand some particulars of the article but do garner much.
Wow ,still very scary.
Thanks for the article. Can anyone recommend a macro book that discusses bond yield curves and term structure as in the article above. Cheers
I have asked similar questions on how to understand the basics to the lingo does not fly over my head and gotten nothing but silence. I still pick up lots however and am understanding more as time goes on. However the acronyms, abbreviations and lingo are still many times something I struggle with. However I do find this the best resource I have seen to understand the real story developing behind the markets.
Hear here, hear here.
I would recommend Investments by Bodie-Kane-Marcus
Frank J Fabozzi
Well Mitch, by your handling of the Senate impeachment debacle you kept this asshole in office. Do the tens of thousands of Covid victims keep you up at night? They should. You share the responsibility for their deaths equally with Trump.
If I am understanding correctly, the essence of this debate leads me to this question–
Am I more afraid of missing out on upside or am I more afraid of losing capital?
Greed or fear. Same as it ever was.
I’m way over my boots in this environment like most amateur investors.
Fascinating times and a fascinating debate indeed. The result will be very much a referendum on the effectiveness of combining monetary policy that affect the long end of the curve (QE) with fiscal action, is this combination in its current form enough of an inflationary supernova to neutralize the deflationary supernova you have detailed in your prior writings? It might be a herculean task to achieve reflation even when not taking into account the headwinds of further trade tensions and spikes in dollar funding stress. How does the Fed overcome the circular dead spiral of monetary easing by every central bank described by Kocic? I know some very bright folks I respect a lot believe the current combo of fiscal and monetary stimulus will lead to a bear steepener, but nascent trade or not I remain pessimistic, I think Kocic describes our immediate future perfectly when he speculates the result could be we find ourselves in a disinflationary world with low growth and no policy tools to combat it.
I’ve been stuck on the bear steepening trade for a while. When the long bond yield broke 2% late summer last year I mentally pegged that bottom entering 2020 – – only to have the Covid rug pull bring the entire curve below 1%. So I can see the near term anchor at zero and I can see the Fed tamping it down out to the ten, but at what point does the long end say enough is enough – here’s a glimmer of hope – and the string shows signs of being lifted from that far right end?? Seems like a no brainer – especially now – but given the second wave risk it just gets pushed out…again…….more time to mull it over I suppose.