This is NOT investment advice.
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Let's check in on various markets impacting this grand game of Chess unfolding before our eyes. First, a bonus chart. Remember - it doesn't matter what I think or what you think. It's what the market thinks and does. I'll type out below my initial and gut reaction to the below chart doing my best to look at it very quickly and from inside a vacuum:
- do not long (aside from rapid fire scalps)
- money flow oozing out
- sell the rips if long
- look for confirmations of failed support at key levels to go short
Instincts tell me that isn't too far off from a description of the current Risk Off versus Risk On dilemma. But, could be very wrong as is the case more than just infrequently.
Still eyeballing BTC 74K-77K and yes there will be a sharp counter-trend move in the QQQ at some point. Question will be how long it can last and at what level it gets rejected.
Japan
Here is a recap of the Yen Carry Trade - my interpretation only and just one man's opinion.
Yields on the 10YR in Japan are up 33% . . . . . . . . since the end of January.
- the higher these go, the more strain on the economy and most especially the balance sheets of the banks and other entities that hold them (BOJ may have already put itself in Checkmate)
- if these yields don't move higher, Japan could encounter serious political and social issues IF inflation is truly ingrained and in motion
- the higher these yields go, in a vacuum, the less likely it is the Yen Carry provides juice to risk assets globally
- if BOJ decided to intervene long or short, most likely course of action involves selling UST
UK
How confident are you that the UK has a credible plan with the existing people in power to get the economy on track?
Germany
Germany is experiencing high tensions politically while also sending signals about firing monetary bazookas. Tariffs, great for headlines, very well could initially harm the German economy, and the Central Bank chief is speaking up about it. Tariffs lead to stagnant economy leads to the politicians finally embracing pro-growth fiscal policy (ECB already in easing mode). Maybe that's the point all along (and an ultimate huge tailwind for BTC on a long time horizon).
US
I'm starting to think more and more that part of Bessent's mission is to avoid Checkmate. For the record - I'm not claiming to have created or invented the concept of Checkmate here. I'm very certain many, many other people are and have been looking through a very similar lens. So far since the election, looks to me like Bessent has his debt mountain more under control than his peers do (or does he, stick around).
- use tariffs to show the EU/UK no more vultures picking at the carcass and they need to carry their own weight more so, sends them into a need for fiscal stimulus and big spend on growth (thus helping America indirectly with global growth and not piling on even more debt to serve other masters)
- all the anxiety and fear generally serves the purpose short term of lower DXY and higher UST (prices)
- strong arm (speculation by me) partners via tariffs, etc. into buying more UST and being tied to buying more ongoing???
I would say America in some ways has strengthened its position considerably since the election in this financial war.
But . . . . . . . . .
That magic wand bond gonna need to be real, real magical. It still evades me as to how some unusual and unorthodox move could both satisfy the intermediate term challenge of the refi wall and the long term debt challenges without using Gold or Bitcoin.
Maybe the biggest buyer of all emerges, or at least signals at some point it is no longer a seller?
Near Term Forward Spread - the market's opinion about what it is saying now about where it thinks the 3-Month T Bill rate will be in 18 months relative to today's 3-Month T Bill rate.
Red - if anything, encourages Powell to hike
Blue - straddling the fence, not clear
Green - suggestive of the potential to ease policy, lower rates
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