"The Fed is breaking things. When you have the dollar spike, expect a tsunami." https://www.cnbc.com/2022/10/01/the...t-on-edge-as-risks-rise-around-the-world.html “Strong U.S. dollar strength has historically led to some kind of financial or economic crisis,” Morgan Stanley chief equity strategist Michael Wilson said Monday in a note. Past peaks in the dollar have coincided with the Mexican debt crisis of the early 1990s, the U.S. tech stock bubble of the late 90s, the housing mania that preceded the 2008 financial crisis and the 2012 sovereign debt crisis, according to the investment bank. The rising correlation among assets in recent weeks reminds Dunn, the ex-risk officer, of the period right before the 2008 financial crisis, when currency bets imploded, he said. “When you have the dollar spike, expect a tsunami. Money floods one area and leaves other assets; there’s a knock-on effect there. The Fed and all the central bank actions are creating the backdrop for a pretty sizable carry unwind right now,” Dunn said. There are two broad categories of concern right now: Surging volatility in what are supposed to be the safest fixed income instruments in the world could disrupt the financial system’s plumbing, according to Mark Connors, the former Credit Suisse global head of risk advisory. Since Treasurys are backed by the full faith and credit of the U.S. government and are used as collateral in overnight funding markets, their decline in price and resulting higher yields could gum up the smooth functioning of those markets, he said. Doing so will likely force the Fed to put a halt to its quantitative tightening program ahead of schedule, just as the Bank of England did, according to Connors. While that would confuse the Fed’s messaging that it’s acting tough on inflation, the central bank will have no choice, he said.
No, the Fed will not buckle. Powell wants his Volcker moment, and they are going to express that tomorrow.
They have to push the system right to the brink and purge the speculative excess from risk markets, massacring the generation of traders who've grown up on the Fed put - otherwise their credibility will be totally shot. They're of course praying it won't go that far and that inflation will screech to a halt.
Make drilling and refining great (and easy/cheap) again and this wouldn't be necessary. Of course this administration will never do that.
Fed is 100% culpable for this and the Biden profligacy only hastened the day of reckoning. Many people have been waiting they're entire lives for this shit to finally happen. Waiting for a long ass time. Decades of easy money, ZIRP, and retarded ass housing policy across the entire western world to appease the political donors' greed brought us here. A 'see no evil' monetary policy stance and laughable lending standards across the G7 economies resulted in a form of asset-based welfare for the wealthy and share-holder class. Isn't it great when you can refinance all your assets at lower rates and the bank can (in a regulatory compliant manner) re-appraise the value of your income producing assets higher and higher every fking year... forever. Housing markets pricing in zero rates would be great if it weren't so fking bad for the actual economy. To appease their donors and the investor class, they created the weakest fking consumer imaginable -- surviving on pay-day loans and credit just to pay inflated insurance premiums and absurd rents. Government handouts to the rescue -- SNAP, Section 8, and child tax credits galore kept the bubble going. Covid just 10x the whole fucking thing. Fucking wealth affect is asset based welfare pure and simple. It's time for the shit to burn down and global bond markets to price in reality. When the housing market goes -- if Powell actually has the balls to do it -- then you will see the real capitulation. Look at the Schiller index. Just imagine the thing printing a 350 or 400 handle. All the benefits went to asset holders, bankers, brokers, agents, appraisers, insurers, investors, and wealth managers. This is how the boomers fucked the millennials. Pumping markets to ridiculous levels and then debasing the currency to support absurd pricing.
This is the overnight REPO. It's getting up there, inching ever closer to the 2019 crisis level when the Fed had to step in to put out the fire.
There is no Fed only ZUUL! In 2019 these fuckers could trade stocks willy nilly. They got caught, and now they can no longer get rich on their insider trading. They will now not give a shit, like they have not for the past year. This is the end. Your 401K is screwed man. They are already rich now, after their skulduggery. Why do you think they care about YOU?
Look how the Wall Street vermin are screaming and kicking already. We have not even yet had a real vol bounce and panic selling and the money gang on Wall Street is shaking in the wind. Let's see how they will puke when things accelerate. Can't wait, I am still fully positioned since early this year.