Sunday, October 16, 2022

Whip Inflation Now!

The following chart shows the natural log of the 30-year Treasury yield. When using natural logs, constant exponential growth (or decay) is seen as a straight line. I have added long-term trend lines in red and a short-term trend arrow in green.




Will the long-term trend ultimately prevail? Trapped in a world of nearly permanent ZIRP?

Will the short-term trend break everything? Housing! Stocks! Bonds! Employment!

Will it be a combination of both? Or neither?

Stay tuned for the next exciting and terrifying episode of...

Global Devolution!
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16 comments:

  1. Stagflationary MarkOctober 16, 2022 at 10:52 PM

    https://en.wikipedia.org/wiki/Whip_inflation_now

    ReplyDelete
  2. Who Struck JohnOctober 16, 2022 at 10:55 PM

    Having broken the channel on the downside, the Fed now has to correct by breaking the channel to the upside. It won't last, but it'll sure leave a mark.

    ReplyDelete
  3. Stagflationary MarkOctober 16, 2022 at 11:31 PM

    Yeah, it’s certainly leaving a mark on Stagflationary Mark’s April TLT purchase.

    This is not how I intended to ride the bull. My bottom’s sore, lol. ;)

    That said, I continue to believe that we haven’t put ZIRP permanently behind us.

    https://twitter.com/MacroAlf/status/1581724155019374598?s=20&t=8BOqw6ebuHn7Tzd2ehrWew

    Contrary to popular belief, higher levels of government and private debt lead to lower (real) yields over time - not higher.

    It's all about equilibrium: a world swimming in (unproductive) debt needs lower and lower real yields to remain functional.

    Believer. The real yield on the 20-year TIPS is now a whopping 1.89%. I can’t believe that it’s sustainable, given all the headwinds we face.

    https://www.bloomberg.com/markets/rates-bonds/government-bonds/us

    ReplyDelete
  4. Stagflationary MarkOctober 16, 2022 at 11:37 PM

    Speaking of unsustainable, it was 74 degrees at 4:00am last night where I live (just outside of Seattle). And 88 today! Joked to my neighbor that I was thinking of building a snowman.

    I cannot believe that I’m watering my lawn right now, in mid-October. Crazy.

    ReplyDelete
  5. AnonymousOctober 18, 2022 at 11:19 AM

    "(or decay)"

    I'm glad you made that point.

    One of our local financial advisor office's has been offering 4+% 1 yr. CD's. Only this week they upped the ante to 100K minimum. I need to stop in soon and thank them for the help.

    ReplyDelete
  6. Stagflationary MarkOctober 18, 2022 at 5:41 PM

    Anonymous,

    My neighbors are moving. Will be giving up a low rate mortgage for a high rate mortgage. I told them that had to hurt but maybe they’ll get a chance to refinance in a few years at a better rate. They said they’s what they are hoping for.

    I told them that I am sharing their pain in TLT. We’re both positioned the same way. Betting on more decay, at least over the long-term. Not a sure thing, by any stretch of the imagination. Lots of uncertainty. Perilous times.

    ReplyDelete
  7. AnonymousOctober 20, 2022 at 12:02 PM

    I waded bought some more ZROZ this morning. There’s got to be a bottom somewhere, I hope.

    ReplyDelete
  8. Stagflationary MarkOctober 20, 2022 at 3:52 PM

    Great Unknown,

    It’s definitely been painful. I keep expecting our economic Jenga Tower to experience a “soft landing” each time the Fed removes an interest rate block, but there it still stands, seemingly as resilient as ever. Even with all the cracks and termite damage. Amazing.

    I worry that we will not get what we hope for, but I also worry that we do. The Jenga Tower is especially high right now. The landing might crush us all. *cringe*

    ReplyDelete
  9. Stagflationary MarkOctober 20, 2022 at 4:00 PM

    Hey, maybe the next generation has workable solutions to our many problems.

    https://twitter.com/WallStreetSilv/status/1582731244541947904?s=20&t=tn8JTYPe9iIDOSGVvQy9Iw

    Or maybe not. *cringe*

    ReplyDelete
  10. AnonymousOctober 20, 2022 at 5:12 PM

    I feel your pain. I am trying to view my TLT and similar ETF positions as an insurance policy in case we”re right.

    ReplyDelete
  11. Stagflationary MarkOctober 20, 2022 at 6:16 PM

    https://schrts.co/uneQvpqM

    As seen in LTPZ, Inflation protected bonds have done worse than TLT since I bought TLT.

    Market has not predicting perpetual 1970s.

    However, LTPZ has been outperforming TLT lately. I think it’s just short-term but it’s worth watching. It’s concerning.

    ReplyDelete
  12. AnonymousOctober 21, 2022 at 5:38 AM

    The big risk is the Sovereign debt crisis theory that those such as Luke Gromen have been advocating. It is very possible that we are there. In that case we are truly in for tough times.

    ReplyDelete
  13. Stagflationary MarkOctober 21, 2022 at 8:34 AM

    Yeah, that’s truly a nightmare scenario.

    I own a home knowing that something is virtually guaranteed to destroy it someday (earthquake, volcano, asteroid, war, ….).

    I own US Treasury bonds knowing that something is virtually guaranteed to destroy them someday. Might even be the same thing that destroys my home.

    It’s all in the timing. Will it happen in my lifetime? I don’t think so, but thinking about it doesn’t help my insomnia. I do have this Illusion of Prosperity blog. A Sovereign debt crisis would certainly pop the illusion. Big time.

    ReplyDelete
  14. Stagflationary MarkOctober 21, 2022 at 10:36 AM

    Twitter thread by MacroAlf that’s worth reading:

    https://twitter.com/MacroAlf/status/1583491735820603392?s=20&t=0mFiTFvIYTIkEtHZVhedyQ

    ReplyDelete
  15. AnonymousOctober 27, 2022 at 6:18 AM

    FYI - your "Seattle: CD Rates" link is no longer working.

    ReplyDelete
  16. Stagflationary MarkOctober 27, 2022 at 6:55 AM

    Thanks!

    Replaced it with CD Rates in Washington. :)

    ReplyDelete