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Jimbo

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Jimbo last won the day on August 12 2023

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Doctor of Stock Proctology

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  1. WHEN WILL FINANCIAL MARKETS Realize that the primary task of the FED is to save the US Government from the consequences of its fiscal profligacy and the danger of hard default by printing money. Price stability is a secondary task. If the two tasks conflict....as they currently do..... Then task one wins at the expense to task two. And the wealth of lenders gets transferred to the borrowers.
  2. THE GREAT BOND ESCAPE From 2009-2019 the FED had created the perfect gulag system for free debt. It made all the borrowers...........home buyers, private equity, commercial real estate buyers very very rich. Where bond holders worked away for .....nothing in return. The perfect wealth transfer machine. Until the virus print created all that inflation. Until the great bond gulag escape of March 2022. Now the FED is in full "Band Aid" mode. Its desperately keeping the ten year around 4.25%. Still subsidizing the borrowers.
  3. THE BACKGROUND LIQUIDITY OF THE BIG PRINT...2.0 The big print of 20/21 created a lot of liquidty. It has coalesced into super cluster galaxies of over valuation. It will disperse into background liquidity eventually.
  4. A LITTLE PROBLEM WITH NUMBERS The US budget defecit is 6% of GDP. To stop the government debt spiralling futher in real terms requires inflation around this level. I call it the "budget balancing level of inflation".
  5. INTERESTING STOCK OF THE DAY BP Market cap $106 billion. Cash on balance sheet $33 billion. So really the business is valued at $73 billion. Free cash flow in 23 was $17 billion. 4.3 times FCF. Why don't companies like this just can their dividend and do buybacks??? They could buy the company back in 4 years!!!!!! If they use the cash on the balance sheet and four years of FCF!!!!! 25% return on capital.
  6. A BANK OF GREY RHINOS Banks face a small herd of grey rhinos 1/ The treasury and MBS bond losses....currently stabilised by the FED moderated yeild curve. 2/ The CRE losses ....not moderated by anyone and gradually getting worse. 3/ The deposit flight to fund the defecit.....FHLB is currently sort of looking after this.....sort of. What do you call a herd of grey rhino's..... My suggestion is a "bank of grey rhinos".
  7. IN THE GOLDILOCKS ZONE The treasury yeild curve is just where the FED wants it. In the 4-5 zone. Not too hot not too cold.....just right. Any attempted move by the curve below of above this zone will be countered with the application of the appropriate amount of synthetic QT or QE.
  8. IN THE GOLDILOCKS ZONE.......MORE MUSINGS ON THE TEN YEAR My old post from 2023. Ten year currently at 4.31 .....just where the FED wants it. Not too far from 4.2. In the 4 to 5 band is the FED's "goldilocks" zone.
  9. THE PRIVATE EQUITY WEALTH ALGORITHM Here it is..... Nirp/Zirp + inflation + leverage = Enormous Capital Gains (taxed at concessional rates) A very nice little algorithm indeed. But if Nirp/Zirp ends it doesnt work so well any more. Thats why a compliant and complicit FED is so important for the continued operation of the algorithm.
  10. THE JOY OF INTEREST RATES Australians are now happy they can get term deposit rates of 5%. (on which they pay tax at marginal rates) The annual CPI is 5.3% The real rate is still negative!!!! Still nirpville!!!!!! Hmmmmmmmmmmm
  11. THE DEBT AND PRINTING SPIRAL The FED and the US Treasury are dance partners in the debt and printing spiral. Both doing their part, moving as one. The only reason the FED is doing some QT now is because there is enough background liquidity left from the big print to plug..temporarily...the treasury supply demand gap. It's 2 trillion a year that has to be plugged...add infinitum. When the remaining liquidity from the big print is all used up....it's back to tapering QT then more QE, to keep bond rates below 5%. And eventually more inflation will be the result. The Fed has zero independence. It's just the "in house" funding arm of the US Treasury.
  12. THE BOND HALF WAY HOUSE The bond holders managed to escape the FED's bond gulag in 2022. With the loss of up to half of their capital (SEE TLT CHART). But they have been herded into the FED's specially prepared half way house for bond gulag survivors. They get one square meal a day and sleep on a straw matress. After the bond gulag they think this is paradise. But they should be sleeping in a nice three star hotel!!!! The ten year should be trading above 6%.
  13. THE FED's GAME PLAN Yes it has a game plan. A rather sad one....but it is a plan. Here it is: 1/ Use as much of the back ground liquidity still remaining from the big print to plug the treasuries gap. RRP, whatever. 2/ Prop up the banks by replacing the deposits as they flow out to feed the defecit beast. Alphabet soup programs etc. 3/ Layer on the synthetic QE when needed. When the ten year rate gets too high say over 5% trundle out Printer Jay or one of the minions to say something nice and positive about QE. Give the impression the real stuff is not too far away. 4/ When the above stops working start tapering the QT. 5/ When tapering the QT stops working roll out as much real QE as required.
  14. THE BIG SHORT AMBUSH ...2.0 Yes the last half of 23 was just one big short ambush. Thanks to the RRP. Thanks to Jay Printer laying on the synthetic QE and the synthetic pivot, The FED laid a cunning trap for the shorts. However 2024 I feel will be a different year.
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