TNX: Ten Year T Note and Super long term trend in interest rates
TEN year T Note: TNX The Super Long-Trem Trend in Rates - Right Side/Wrong Side
Ms Yellen is scarred by her being accused of messing up the markets in mid 2015 and causing a 6 month 21% decline
(nothing to do with her in fact, it was more to do with Nasdaq double topping in mid 2015 at the old 2000 cycle high -
exactly same time from high in 2000 to the high reached in 2007 added on in time to that 2007 high gets you to mid 2015
high (actually it's 10 days out but has nothing to do with Yellen, but the lazy press used it to provide a reason for a
decline... a cycle is just way too vague and esoteric for them to understand, they need a story after all to sell their 'news'
to those who wish to know what happened yesterday). So Yellen is scarred.
She should be raising rates today - if she doesn't she she's a wimp, but although her speech and Q/A will be cheerful and
the markets will like it as it goes on most likely, it has a good chance of ending with a sting in the tail/tale.
Inflation has never been a worry really since 1980 - there have been intermittent scares along the way but the trend has
been relentlessly down since rates hit a high at 15.5% in 1980 - this was caused by wage inflation and led to the demise of
unbridled union power (praise be, something good came of it both in US and UK) And in that long period wage inflation has
subdued and been kept low by immigration trends which are themselves now being addressed in both countries.
Long long story short earnings are now rising at 4.1% and will keep rising...it's this that will trip the Fed into tightening
more than it currrently expects. We are entering a LONG cycle of rising rates and wages caught in a spiral that ends
with much higher rates than anyone ever expected at the outset. After long periods of stability the Fed and BoE tend to
buy into the theme that they are back in control of the 'cycle' and to an extent, they are, as the cycle and therefore the
markets run on the benign side of the curve. But as time passes they begin to lose control (they never really had it
anyway, just the illusion of control which the cycle has given them) - and the cycle slowly turns from benign to malign.
We are at that point now, very early on in the turn. It will likely end with rates at 15 to 16% - but it will take a
generation to get there. In this way each generation repeats the mistakes of the 2 generations that went before it.
It is these 'mistakes' that make markets behave in cyclical ways - if there were no mistakes markets would rise in
straight lines. They don't and never have done. Just look at Bitcoin today.
Ms Yellen is scarred by her being accused of messing up the markets in mid 2015 and causing a 6 month 21% decline
(nothing to do with her in fact, it was more to do with Nasdaq double topping in mid 2015 at the old 2000 cycle high -
exactly same time from high in 2000 to the high reached in 2007 added on in time to that 2007 high gets you to mid 2015
high (actually it's 10 days out but has nothing to do with Yellen, but the lazy press used it to provide a reason for a
decline... a cycle is just way too vague and esoteric for them to understand, they need a story after all to sell their 'news'
to those who wish to know what happened yesterday). So Yellen is scarred.
She should be raising rates today - if she doesn't she she's a wimp, but although her speech and Q/A will be cheerful and
the markets will like it as it goes on most likely, it has a good chance of ending with a sting in the tail/tale.
Inflation has never been a worry really since 1980 - there have been intermittent scares along the way but the trend has
been relentlessly down since rates hit a high at 15.5% in 1980 - this was caused by wage inflation and led to the demise of
unbridled union power (praise be, something good came of it both in US and UK) And in that long period wage inflation has
subdued and been kept low by immigration trends which are themselves now being addressed in both countries.
Long long story short earnings are now rising at 4.1% and will keep rising...it's this that will trip the Fed into tightening
more than it currrently expects. We are entering a LONG cycle of rising rates and wages caught in a spiral that ends
with much higher rates than anyone ever expected at the outset. After long periods of stability the Fed and BoE tend to
buy into the theme that they are back in control of the 'cycle' and to an extent, they are, as the cycle and therefore the
markets run on the benign side of the curve. But as time passes they begin to lose control (they never really had it
anyway, just the illusion of control which the cycle has given them) - and the cycle slowly turns from benign to malign.
We are at that point now, very early on in the turn. It will likely end with rates at 15 to 16% - but it will take a
generation to get there. In this way each generation repeats the mistakes of the 2 generations that went before it.
It is these 'mistakes' that make markets behave in cyclical ways - if there were no mistakes markets would rise in
straight lines. They don't and never have done. Just look at Bitcoin today.
Penafian
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