Federal Reserve - 0.25% rate rise today 03-22-22 from the Fed

[Flexacon]

That’s interesting about the US presidency. I can imagine a few factors as to why but I really don’t know what would be say the top 2 key factors. Is it opponent isn’t decided and current regime starts to unveil fiscal packages?

Wasn't sure myself, but you would imagine if POTUS was in control they'd try make sure markets didn't crash in election years. Politically the 3rd year would be a preferred year for a crash

There is a chart doing the rounds again which is the S&P crashes when the Fed pivots. No issue there but the market is expecting rate cuts in July vs Fed in February 2024. Plus in addition equities are thinking cuts in July means QE and are trying to front run everything.

Yes. Posted in another thread

Just gotta remember the markets will probably bottom several months after a FED pivot.

The reason being the FED pivots because something broke, contagion unwinds and then we reach the bottom.

Market participants have been getting destroyed trying to second guess the FED. They'll stick the course until something breaks (banks are fine) The market expecting a rate cut in July is more desperate act in trying to force the FED to change course

Coincidentally this just got posted on twitter



Current #SPX bear market (blue) compared to:

1946-1949 Bear Market, Soft Landing, High Inflation (Light Blue)
1973-1974 Bear Market,  Hard Landing, High Inflation (Pink)
2000-2002 Bear Market - Dotcom crash (Green)

[Mayday]

Yes. Posted in another thread  The reason being the FED pivots because something broke, contagion unwinds and then we reach the bottom.

Market participants have been getting destroyed trying to second guess the FED. They'll stick the course until something breaks (banks are fine) The market expecting a rate cut in July is more desperate act in trying to force the FED to change course

Coincidentally this just got posted on twitter



Current #SPX bear market (blue) compared to:

1946-1949 Bear Market, Soft Landing, High Inflation (Light Blue)
1973-1974 Bear Market,  Hard Landing, High Inflation (Pink)
2000-2002 Bear Market - Dotcom crash (Green)

You are right it will look different, no river is walked through the same twice. but the outcome will be identical as both 40s and 70s achieved the monetisation of debt and a property bailout.

For a soft landing like 1946 we have the central banks backstopping the banks with unlimited liquidity basically. If that wasn’t done we’d be fucked sideways already.

However, for a hard landing we have a rate cycle identical to 1967-1969 which is where my model is.

So it’s a combination of the two from what I can see:
prevent the multiple 58% crashes by backstopping banks with liquidity while preventing the highs with aggressive rate cycles. Ends in sideways equity chop perhaps.

On the liquidity side there was 3T added to the balance sheet for bank liquidity basically immediately when covid hit. Then came the stimmy to the plebs. Same thing fired up now with the aces balance sheet so if this is creating room for the 2nd wave we need to see more than 3T come onto the Fed books.

[Flexacon]

So it’s a combination of the two from what I can see:
prevent the multiple 58% crashes by backstopping banks with liquidity while preventing the highs with aggressive rate cycles. Ends in sideways equity chop perhaps.

On the liquidity side there was 3T added to the balance sheet for bank liquidity basically immediately when covid hit. Then came the stimmy to the plebs. Same thing fired up now with the aces balance sheet so if this is creating room for the 2nd wave we need to see more than 3T come onto the Fed books.

The sideways equity chop is where I'm pretty much at right now and for the foreseeable future. Maybe when something breaks they start stimmy

The recent injection of liquidity should hit prices soon. Maybe next week, or first week in April. Btc and Eth didn't dump this week and there was more than enough bad news to crash them. That kinda strength typically only comes from what's going on in the broader market. The face ripper you mention is close (could still dump before it pumps though)

[Flexacon]

The sideways equity chop is where I'm pretty much at right now and for the foreseeable future. Maybe when something breaks they start stimmy

The recent injection of liquidity should hit prices soon. Maybe next week, or first week in April. Btc and Eth didn't dump this week and there was more than enough bad news to crash them. That kinda strength typically only comes from what's going on in the broader market. The face ripper you mention is close (could still dump before it pumps though)

SPX back above the pre banking crises prices and the markets look like they are getting ready to rally. Expect a mini dip soon, maybe later today or tomorrow, but then it's going up to semi retarded levels. Russell 2000 might be the true retards play.

[Mayday]

SPX back above the pre banking crises prices and the markets look like they are getting ready to rally. Expect a mini dip soon, maybe later today or tomorrow, but then it's going up to semi retarded levels. Russell 2000 might be the true retards play.

Market says no bank crisis. Can’t blame them when central banks backstop the big players.

Market now pricing one last increase in May as the peak.

Market now pricing in first cut in September.

With the runway out to May and September it’s possible the DXY has a leg down which is what my position in silver miners is based on. That position is tapping +10% now which is good enough to take profit but I think we won’t have ‘the’ sell off event for months so I’m looking to leave it open. Top end could be +30%.

[IroNat]

2 year rate climbing again.
Inversion curve widening.

[Flexacon]

Market says no bank crisis. Can’t blame them when central banks backstop the big players.

Market now pricing one last increase in May as the peak.

Market now pricing in first cut in September.

With the runway out to May and September it’s possible the DXY has a leg down which is what my position in silver miners is based on. That position is tapping +10% now which is good enough to take profit but I think we won’t have ‘the’ sell off event for months so I’m looking to leave it open. Top end could be +30%.

Following what the market is expecting rates to come in at is ruining people. I was one of them for the first half of 2022.

I've got the DXY low in April and a SPX top in May.

Tech stock as a percentage of the SPX is almost at Dec 2021 high. It's basically a bubble again.

Also check out the SPX for March, April, May 2008 and and 2001. That's the kinda leg up I think we'll get. After that things get interesting or more accurately scary. Be careful about staying in anything for too long.

Surprised the SPX didn't drop a bit lower yesterday and fill some gaps. I think we could still get that next week, but look at my boy Russell go. Up 200BPS already!

I was gonna post something about link in the btc thread. Kinda lazy though, but bump that thread if you're interested

[Mayday]

Following what the market is expecting rates to come in at is ruining people. I was one of them for the first half of 2022.

I've got the DXY low in April and a SPX top in May.

Tech stock as a percentage of the SPX is almost at Dec 2021 high. It's basically a bubble again.

Also check out the SPX for March, April, May 2008 and and 2001. That's the kinda leg up I think we'll get. After that things get interesting or more accurately scary. Be careful about staying in anything for too long.

Surprised the SPX didn't drop a bit lower yesterday and fill some gaps. I think we could still get that next week, but look at my boy Russell go. Up 200BPS already!

I was gonna post something about link in the btc thread. Kinda lazy though, but bump that thread if you're interested

You might like this one.

US money supply is -3.5% down which is well above the norm of -1%-1.5% post the Great Depression.

This has been a 10mth drawdown when history is a couple of months.

Money supply will uptick before economy bottoms. General upticks are +1.5%. We have a +0.2% which is not something to salivate over. QE was +8% in its first month.

Fed forecast sees GDP to Hades by year end but inflation sticky. Fed has planned No rate cuts before year end at the moment vs market saying -1%.

Last chart is US jobless claims. During the GFC we saw M2 begin a rapid uptick which 1-2 months later the S&P began its final leg down and jobless claims found its peak. This is what I am looking for. The money supply will fire up rapidly before we bottom and when we see that happen I’d say that’s when you will see your leg down happen.

Short recessions are 2 quarters. Rate cuts happen during a recession so the Fed timing of February is either recession in Q4-Q1 or Q1-Q2. It’s likely the US govt budget will be delivered in March 2024.

[Flexacon]

You might like this one.

US money supply is -3.5% down which is well above the norm of -1%-1.5% post the Great Depression.

This has been a 10mth drawdown when history is a couple of months.

Money supply will uptick before economy bottoms. General upticks are +1.5%. We have a +0.2% which is not something to salivate over. QE was +8% in its first month.

Fed forecast sees GDP to Hades by year end but inflation sticky. Fed has planned No rate cuts before year end at the moment vs market saying -1%.

Last chart is US jobless claims. During the GFC we saw M2 begin a rapid uptick which 1-2 months later the S&P began its final leg down and jobless claims found its peak. This is what I am looking for. The money supply will fire up rapidly before we bottom and when we see that happen I’d say that’s when you will see your leg down happen.

Short recessions are 2 quarters. Rate cuts happen during a recession so the Fed timing of February is either recession in Q4-Q1 or Q1-Q2. It’s likely the US govt budget will be delivered in March 2024.

Nice with regards to indicators, not at the prospect of a recession 

The OPEC cuts to oil production is potentially another recession indicator, but naturally the cuts are getting politicized in an attempt to divert attention.

Production was cut a few months before the 1990 and 2001 recessions. Also a few months into the 2008 one. Makes sense to decrease production if they're expecting less consumption because of a looming recession. Obviously happened with Covid recession too.

Eye balling it

1990 Feb cuts, lead to SPX Oct 1990 bottom but we got a higher low in Jan. So 8-12 months approx lag.

2000 Oct cuts lead to SPX Oct 2002 bottom. 24 months approx (OPEC ramped up in May 2001 but cut again a few months later probably 9/11 related)

2008 June cuts lead to SPX March 2009 bottom. 9 months approx.

The more compelling stat is that on those 3 occasions the recession was over around 12 months after OPEC cuts had started which would line up with around the end of March 2024 

[Mayday]

Nice with regards to indicators, not at the prospect of a recession 

The OPEC cuts to oil production is potentially another recession indicator, but naturally the cuts are getting politicized in an attempt to divert attention.

Production was cut a few months before the 1990 and 2001 recessions. Also a few months into the 2008 one. Makes sense to decrease production if they're expecting less consumption because of a looming recession. Obviously happened with Covid recession too.

Eye balling it

1990 Feb cuts, lead to SPX Oct 1990 bottom but we got a higher low in Jan. So 8-12 months approx lag.

2000 Oct cuts lead to SPX Oct 2002 bottom. 24 months approx (OPEC ramped up in May 2001 but cut again a few months later probably 9/11 related)

2008 June cuts lead to SPX March 2009 bottom. 9 months approx.

The more compelling stat is that on those 3 occasions the recession was over around 12 months after OPEC cuts had started which would line up with around the end of March 2024 

FYI I closed my silver mining position +18%. I took your advice and at that level of return on a good chunk of capital there is no need to be risk on with VIX at 19s 👀

It’s always good to get to similar conclusions using independent methods

Looking at recessions and rate movements:

2020 - rates already at lows
2007 - cut 0.25% before 1st Qtr of recession
2000 - cut in 1st Qtr of recession
1989 - 0.25% cut in Qtr before recession

Here is where things get messed up:
1981 - increased in 1st Qtr of recession then cut in 2nd Qtr of recession
1979 - increased 0.25% in 1st Qtr of recession, increased 1% 2nd Qtr of recession,  rose every qtr until cuts in 5th Qtr 👀
1973 - cut in 1st Qtr of recession held, increased 3% in 3rd qtr, increased 1% in 2nd qtr before cutting
1969 - increased in 1st and 2nd qtr of recession. Cuts in 3rd qtr of recession

[Gym Rat]

[ThisisOverload]

FYI I closed my silver mining position +18%. I took your advice and at that level of return on a good chunk of capital there is no need to be risk on with VIX at 19s 👀

It’s always good to get to similar conclusions using independent methods

Looking at recessions and rate movements:

2020 - rates already at lows
2007 - cut 0.25% before 1st Qtr of recession
2000 - cut in 1st Qtr of recession
1989 - 0.25% cut in Qtr before recession

Here is where things get messed up:
1981 - increased in 1st Qtr of recession then cut in 2nd Qtr of recession
1979 - increased 0.25% in 1st Qtr of recession, increased 1% 2nd Qtr of recession,  rose every qtr until cuts in 5th Qtr 👀
1973 - cut in 1st Qtr of recession held, increased 3% in 3rd qtr, increased 1% in 2nd qtr before cutting
1969 - increased in 1st and 2nd qtr of recession. Cuts in 3rd qtr of recession

I enjoy reading you and Flex's posts.

You say similar things to my good friend who is a savant at investing and market tracking.

Interesting times ahead.

[Mayday]

I enjoy reading you and Flex's posts.

You say similar things to my good friend who is a savant at investing and market tracking.

Interesting times ahead.

Flex and Thin Lizzy are very good to listen to. Very smart guys. I’m more an out of control annoying hyper retard but I don’t get myself wrecked. Just note talking ideas is mere talk and doesn’t mean I act on every single thing I say. Only fight when you think you have an advantage.

[ThisisOverload]

Flex and Thin Lizzy are very good to listen to. Very smart guys. I’m more an out of control annoying hyper retard but I don’t get myself wrecked. Just note talking ideas is mere talk and doesn’t mean I act on every single thing I say. Only fight when you think you have an advantage.

I appreciate the comments.

It makes sense to me from a certain perspective.

I enjoy reading multiple platforms of info.

Having an open platform is important.

[Flexacon]

I appreciate the comments.

It makes sense to me from a certain perspective.

I enjoy reading multiple platforms of info.

Having an open platform is important.

Agree. I like hearing a variety of takes on every situation. Dumb money and smart money takes, we can learn from everyone.

There are a fair number of other guys on here who could provide valuable insights, but for whatever reason prefer not to.

[Mayday]

Ape’d in fairly hard today. This is with my large capital base.

10% capital in Sugar 👀 

I wanted to move into junior silver miners but they aren’t available to me. So I instead took 50% of my capital into a large fund that manages metals. Should be a no brainer for them given things are in their favour.

I really want wood futures but it’s not available. Looking at wood producers most here are shit it seems so I have to find something else for 30%.

[honest]

You might like this one.

US money supply is -3.5% down which is well above the norm of -1%-1.5% post the Great Depression.

This has been a 10mth drawdown when history is a couple of months.

Money supply will uptick before economy bottoms. General upticks are +1.5%. We have a +0.2% which is not something to salivate over. QE was +8% in its first month.

Fed forecast sees GDP to Hades by year end but inflation sticky. Fed has planned No rate cuts before year end at the moment vs market saying -1%.

Last chart is US jobless claims. During the GFC we saw M2 begin a rapid uptick which 1-2 months later the S&P began its final leg down and jobless claims found its peak. This is what I am looking for. The money supply will fire up rapidly before we bottom and when we see that happen I’d say that’s when you will see your leg down happen.

Short recessions are 2 quarters. Rate cuts happen during a recession so the Fed timing of February is either recession in Q4-Q1 or Q1-Q2. It’s likely the US govt budget will be delivered in March 2024.

Interesting, unemployment is what is baffling me most at this point compared to historical

[Humble Narcissist]

Interesting, unemployment is what is baffling me most at this point compared to historical

Just refilling jobs lost during the shutdown.

[Mayday]

Interesting, unemployment is what is baffling me most at this point compared to historical

I had to figure all this out in a short span of the pandemic so I get at times you feel like your are doing circles.

Everything has lag in it but it’s super long lag which is why things can often feel off or confusing.

It’s actually very, very easy to run fiscal and monetary policy at a flat 2%. It’s not done though because then there wouldnt be opportunities. It’s why average Joe is always saying how shit central bankers are, don’t realise it’s done on purpose.

Rates are used to help create cycles which create opportunities. Unemployment is at the end of the tightening phase resulting from an overtighten which then allows an over loosening.

There is a lot of overlap in the lag which is what wrecks people. For example today it’s non-stop crash and burn……. Yet the reality is likely what I have posted before about expecting a mad run up in equities towards the end of the year.  It’s just lag.

July 2019 last rate peak before cut. S&P sold off Jan 2020 and into the pandemic.
Mar 2007 unemployment cracked, July 2007 last rate peak before cut. S&P sold off October 2007.
Sept 1998 last rate peak before cut….S&P dipped in July but rallied through to Sep 2000 so what ended up happening was rates ran straight back up and continued higher even even after the S&P started to crash in September 2000 (rates peaked in December). Unemployment cracked December. This was to send the message to not fuck with us (the Fed).

Now, while unemployment cracks close to peak rates, the rate cycle actually begins 1yr+ in advance. Hence its overtightened by not factoring in lag

Today while we are in the last leg for equities we are at the beginning for liquidity which is why I took positions in metals and sugar which I will hold out into 2024 most likely.

[SOMEPARTS]

Interesting, unemployment is what is baffling me most at this point compared to historical

They (BLS) are lying about everything. This is the Wile E. Coyote moment before the drop. The rate increases take a while to show up. Businesses are preparing...they always underestimate the survival instincts of small business people that don't have a fed safety net.


   " last week claims was 246K revised from 198K

    the week before that was 247K revised from 191K

    the week before that was 230K revised from 192K "





https://www.zerohedge.com/personal-finance/jobless-claims-explode-higher-after-bls-revisions-tech-layoffs-2001-pace

[Mayday]

China have just sent it. This is their manufacturing index. China going to suck up every commodity known to man kind.

And the US fucked over Saudi oil and as a result had production cut and no SPR refill lol.

In a nutshell this is the 2nd wave 👋

2024 is going to be a hoot.

[Flexacon]

Today while we are in the last leg for equities we are at the beginning for liquidity which is why I took positions in metals and sugar which I will hold out into 2024 most likely.

What do you mean exactly by the beginning of liquidity?

The chart below shows the March injection of liquidity which was acting in a similar way to QE (risk on). It takes a few weeks for it to show up in the indices, but you can see the liquidity is already dropping off. So we may get a few more weeks of upwards price action in the indices (4200-4300) and then that drop off in liquidity starts hitting the market (Indices go sideways/go back down)

What might happen near the end stages of all this is a sell off of in risk on assets and a move into recession stocks and assets. Is that what you meant by "beginning of liquidity" for metals and sugar? (plus China buying)

Just gonna repeat what I said a few weeks ago. Anyone thinking the bull market is back on and we'll hit a double to thanks to "QE" is gonna be very disappointed

[Mayday]

What do you mean exactly by the beginning of liquidity?

The chart below shows the March injection of liquidity which was acting in a similar way to QE (risk on). It takes a few weeks for it to show up in the indices, but you can see the liquidity is already dropping off. So we may get a few more weeks of upwards price action in the indices (4200-4300) and then that drop off in liquidity starts hitting the market (Indices go sideways/go back down)

What might happen near the end stages of all this is a sell off of in risk on assets and a move into recession stocks and assets. Is that what you meant by "beginning of liquidity" for metals and sugar? (plus China buying)

Just gonna repeat what I said a few weeks ago. Anyone thinking the bull market is back on and we'll hit a double to thanks to "QE" is gonna be very disappointed

It took a year for the Fed to sell off 0.8T and a month to add 0.4T      It didn't 'act like QE', the markets acted as if it was the same as QE and got all giddy.  Hence for many months i have held the stance that the markets will misjudge things and get it horribly wrong but not before they bid it up.

By liquidity i mean what creates bottoms. Had the Fed not stepped in to backstop the banks you would have seen your S&P @ 3,000 right then and there. This also tells us the Fed does not want to crash the markets because that was their opportunity.

Why i posted the tightening phases is because markets rally right up until they can't anymore which is generally when rates are cut. That is the breaking point. Why we haven't seen a sell off is because we are not at breaking point. By my mind, i think November best case otherwise it's Q1 sometime. That's 8 months of rallying....... by then we likely will be higher than 4,800 meaning the sell off might not go lower than the 3,500 people already had.

Why liquidity flows in now is because of the huge lag. So when you look at my timing of Nov-Feb you see why liquidity is flowing in  already which is to catch the economy and form a bottom when it falls off a cliff. Metals will be a first mover. I'm into Sugar because it was really the only raw food offered in my fund. Basically i'm trying to get as close as possible to raw materials because that is what will bounce first.

The Fed has to fire up liquidity in a big way from now out to early next year whether they like it or not. China firing up demand and Europe being their largest trade partner coupled with dealings in EUR, this is the big 'fuck you' from China because they know it forces money out of the US, weakens the USD and forces the Fed to step in to fill gaps.

[Flexacon]

It took a year for the Fed to sell off 0.8T and a month to add 0.4T      It didn't 'act like QE', the markets acted as if it was the same as QE and got all giddy.  Hence for many months i have held the stance that the markets will misjudge things and get it horribly wrong but not before they bid it up.

By liquidity i mean what creates bottoms. Had the Fed not stepped in to backstop the banks you would have seen your S&P @ 3,000 right then and there. This also tells us the Fed does not want to crash the markets because that was their opportunity.

Why i posted the tightening phases is because markets rally right up until they can't anymore which is generally when rates are cut. That is the breaking point. Why we haven't seen a sell off is because we are not at breaking point. By my mind, i think November best case otherwise it's Q1 sometime. That's 8 months of rallying....... by then we likely will be higher than 4,800 meaning the sell off might not go lower than the 3,500 people already had.

Why liquidity flows in now is because of the huge lag. So when you look at my timing of Nov-Feb you see why liquidity is flowing in  already which is to catch the economy and form a bottom when it falls off a cliff. Metals will be a first mover. I'm into Sugar because it was really the only raw food offered in my fund. Basically i'm trying to get as close as possible to raw materials because that is what will bounce first.

The Fed has to fire up liquidity in a big way from now out to early next year whether they like it or not. China firing up demand and Europe being their largest trade partner coupled with dealings in EUR, this is the big 'fuck you' from China because they know it forces money out of the US, weakens the USD and forces the Fed to step in to fill gaps.

There was no Large Scale Asset Purchase, which is QE, but the injection of liquidity (FED to Banks then Depositors make withdrawals, then deposit to new banks, then Direct and indirect purchase of assets) acted in the same way as QE. Net new $ was printed by FED.

Withdrawing FED "printed" money from one bank and depositing it to another, results in the new bank having to purchase securities to back those new deposits, so this "acted like" QE. The market didn't go up just because people got giddy, it went up because people realised the mechanism I've just tried to explain and then got giddy.

Now with the Fed balance sheet and liquidity dropping it will move in the same way as QT. The same people who understood the mechanism explained above are all ready to pull the trigger and sell everything the bought in March. They followed liquidity injection up and are gonna follow it down. They aren't moving the markets, they are just helping to increase the size of the move.

It would make no sense to let the banks crash and then let them take the markets out. Other than a few outliers, most banks were strong. They can let things crash later without risking banks.

Obviously it's just my opinion, but going forward  I'll be ignoring everything that happens from March until end April. Think of it as a blip and normal service will resume. Another 0.25% rate raise in May, more chop chop and then the real move in 2024.

[Mayday]

Sorry I’m not using my words well.

Global liquidity has increased.

DXY is going to fall as the flow goes outside of the US. It will break to the downside regardless of any short term events that might trigger a sell off.

Like an earlier post, I had no faith when Bitcoin was following the S&P. It is now following liquidity and now I have faith.