Cracks Emerge in Treasury Bond Market as Fed Starts to Back Away (Stimulypto Bubble Trouble: China, Shiller CAPE, Buffett Ratio)

Confounded Interest ^ | 12/06/2021 | Anthony B. Sanders

[Browns Ultra Fan]

As The Federal Reserve tries to drain-off the extraordinary growth in its balance sheet since COVID without raising its target rate (good luck with that!), it is time to appraise where we are sitting. First, liquidity.

Let’s look at the ongoing saga of Chinese conglomerate Evergrande (mainly known as a large real estate developer). Their 8.25% bond has plunged to $23.481 on speculation of a catastrophic default on their bond payments. Then we have Invesco’s Golden Dragon China ETF (measuring a diversified market cap of US-listed companies headquartered or incorporated in China & derive a majority of their revenues from the People’s Republic of China). This ETF has crashed and burned back to pre-COVID (and Stimulytpo) levels.

Now, the Dow is up 600 points today, primarily on the news that the Omicron Variant is about as harmful as the common cold. BUT, there is this interesting news from Steve Leisman at CNBC:

There is no consensus yet on when to begin hikes, but it’s clear that the faster taper is designed to give the Fed flexibility to raise rates as soon as the spring. The markets do not appear to expect the first rate hike until the summer of 2022.

Uh-huh. Let’s see what happens when and if The Fed starts to taper. Is economic growth so strong that it can continue without Federal Stiumulypto? THAT is the right question.

Look at the above charts and tell me if The Fed will actually raise their target rate more than twice. Despite the Taylor Rule suggest a target rate of 15.50% to cool inflation.

Here are Fed Chair Jerome Powell and the Fed Open Market Committee.

[Browns Ultra Fan]

Can the markets survive WITHOUT massive stimulus from the Federal government? We are officially a Socialist state if we can't get by without massive gov't stimulus.

[Paperpusher]

The Fed raised the rate several times when Trump was in office, and did not give it a second thought, trying to slow the economic outlook. Now they are unsure, seems almost like they are more careful and political about it when a Dim is in office. Naaaah!

[wbarmy]

There is a huge amount of capitol moving in from overseas, especially China. As these different entities wonder what the economic outlook is going to be, the U.S.A. is the overwhelming safe looking place for warehousing your money.

We in the US might not think so, but everybody everywhere else wants greenbacks.

[jdsteel]

Correct.

[ComputerGuy]

Finance is definitely not my thing, what with words like
Stimulytpo and Stiumulypto

[Vermont Lt]

They probably think escaping China money will come home.

But, that money won’t be coming back.