Thursday, August 4, 2016

High Plateau Drifter: "The Dudley"

High Plateau Drifter writes us,

This past Sunday, the Dudley, head of the Federal Reserve Bank of New York and the second most powerful member of the Federal Reserve gave a speech. Now usually the Dudley doesn't come out of the closet often (double entendre intended!) excepting only at turning points in policy and markets. He announced that the Fed open market operations - which he controls - would prevent the Dollar from rising, thus announcing that the USD will effectively enter the currency war allong with all the other currency warriors, thereby negating any rewards from that confict and joining forces behind the as yet slow paced race to the inflationary bottom along with all the other warring currencies.

Over the last three trading days in response the bond has fallen in price while the Dollar moved sharply lower.

On the daily chart the Dudley has given us a higher low on the bond, so following my rule, I have a small marker position in TBT to see what happens next. My thinking is that the Dudley has changed the environment, and as Goldman notes in the ZH synopsis, we are now using monetary policy to target the dollar. While this policy shift might not seem dramatic, it will prove to be of utmost importance. What with China, Japan, Draghi and all the others trying to destroy their currencies relative to the dollar, and the Dudley promising to keep pace, I no longer feel confident that I will get my hoped for significant correction to re-enter the GDXJ.

Of course this policy shift means more repression for savers and ever more severe wage repression against the Trump voters, as real inflation at about 7% keeps their real incomes and wages falling. Frankly. I am amazed that Trump would even want the job given what the next four years are likely to bring.
Getting the bond market right is the only thing that matters.


CP said...

Jan 2018 $100 put for TLT

When I wrote this post they were 80 cents:

They've fallen in price, now offered at 67 cents.

TLT last got down close to 100 at the end of 2013. At $100 for TLT you're basically talking about 4% yield on the 30 year. For 92 cents, you can now get the $105 puts.

Also see:

High Plateau Drifter said...

Just bought 10 Jan 2018 $100 TLT puts at 63 cents.

Put in a second order for 40 more at that price and the dealer choked! No fill.

High Plateau Drifter said...

Remember that the first year of a new president's term is when the economic garbage is put out on the street. If Trump wins then it is a near certainty that he will go for a cleansing recession in 2017, putting his political enemies out of business, and hoping to get it all done quickly enough so that the economy will be on the upswing for the 2020 election. Thus a put on the bonds is an advantageously mispriced bet on a Trump win. The other possibility is that Trump might go for helicopter money to help his voting constituency. Thus in either case, Trump in 2017 is going to be bad for the bond.

Anonymous said...

Sadly, Trump is going to get crushed. With the economy booming, college educated whites in squishy purple states are going to status signal that they are above economic concerns by voting for the Cunt.

High Plateau Drifter. said...

"Sadly, Trump is going to get crushed."

We shall see!!

The oligarchs know that Trump would veto a bail out of the financial industry that is so vehemently opposing him. That is the real issue in this election - destruction of the bail out put under the on Wall Street animal spirits.

Anonymous said...

Trump properties doing poorly because of women who shouldn't even be voting:

Anonymous said...

when Trump suggested Obama and Hillary created ISIS, the press acted as if he had suggested both had flown to Baghdad for the constitutional convention like Franklin and Jefferson a couple hundred years prior. Therefore, the only story to cover was not whether or not Obama and Hillary’s policies had led to ISIS, but that Trump flat out lied.

Of course Hillary said earlier this year that Donald Trump was ISIS’s number one recruiter. Evidently the way she stated this did not confuse the press into thinking that Trump had flown to Baghdad, interviewed for a sales job and then joined the ranks of ISIS where he later won first prize and the Cadillac El Dorado. No they assumed Hillary was using rhetoric like they assumed those accusing Bush of Katrina and Reagan of AIDs had done.