It’s been a little over a week since I uploaded a theory on the US stock market pump and dump cycle of 2022 conforming to the US bond auction dates. It’s either brilliant intuition and pattern recognition or some paranoia and schizoid shit. We'll soon find out if it's wrong - right - or right for the wrong reasons. I'd be fine either of the latter two. The kind of stuff that made the maths guy from the movie Pi apply a drill to his head after failing to solve the stock market with sacred numerology. He was an analyst though, which is already a sort of lobotomy. Like trying to play chess in a game with no rules. Yes - great concentration and memory can allow you to see 20-plus moves, but it won't prepare you for a Nb1 takes Qd8 opening.
Since a little over a week ago the 10Y bond has fallen about -6.5% from its auction on Feb 8. The 30Y about -9% since auction on Feb 9. And the 20Y a little over -3% its auction on Feb 15.
All the focus was on the CPI and PPI prints however. CPI data showed higher than expected inflation and the market was meant to dump - allegedly. But this was a day before the 20Y auction. So the market waited until after the auction and dumped on higher than expected PPI and retail sales data - allegedly. Seems stocks have begun to follow bonds on the downward trend in the brief period since then.
We also got an abrupt narrative change from the Fed after the 20Y auction. In the lead up Powell had given bulls all the buy signals - allegedly. They even booked him in for another informal speaking event as a follow up to his routine FOMC speech. Which the tea leaf readings had down as bullish again.
Then the auctions concluded middle month and all of sudden the idea of a 0.5% hike is back on the menu. And lingering in the background is the debt ceiling deadline sure to seep its way in to the headlines over the coming two months. This provides a great cover story for bond prices to dip as low as they need to trigger all kinds of margin calls on the liquidity that’s been leveraged into stocks over the new year. But most importantly, ensuring those November 2022 bonds with the exceeding high interest rates fall into the right hands so they can be stripped before the first interest payments on them are due. Which is of course on May 15th 2023. The debt ceiling issue can be resolved around then aswell just in time for another restoration of bond prices during the auctions in May.
But how long can things holdout with the yield curve inverted. Which means - how long can things last when short term debt pays better interest rates than long term debt. As it begs the question: who in their right mind is going to purchase long term debt for more risk and less reward??? The answer - a long time. Larry Finks on the job. He cut his teeth securing bagholders for commercial mortgage backed securities in the 1990s/00s. Soon there’ll be synthetic collateralised debt obligation whatever the fucks for 10, 20, 30 year govt bonds slipped into your pension fund like slow poison you’ll never taste. Between the Pandemic and inflation and Putin and Corporations and those dastardly Chinese, you’ll never know who actually dug the knife into your pensions back. And by that time there may be more pressing issues. Like WW3. Didn’t economic depression precede the other two? Smells like a coverup.