Bonds are a good hedge for stock investors only if core inflation is predictably below 3%.

Otherwise they suck at diversifying portfolios.

History tells us it’s about to get ugly

More inversion days = deeper drawdown

We’re already at +511 days

This only occurred 3 times:

- 1929
- 2008
- 1974

It’s my thesis that the Fed is trying to not repeat its policy errors of the 1960’s and 1970’s, and to lean against the fiscal dominance. That means higher for longer, until either a recession happens, or inflation progresses further towards the 2-3% range. Neither seems likely

For US Treasuries, the lack of a positive term premium in an era of fiscal dominance doesn’t make much sense. If inflation is to remain sticky in this deglobalized world, amid deficits and a Fed that isn’t willing to subsidize the Treasury’s endless supply of debt, the term

First Treasury buyback operation will take place tomorrow.

Very small amounts - just making sure the system works. A regular buyback program will then be rolled out later in the year.

This cannot be real.

The Philly Fed publishes coincident indexes for all 50 states.

The January update showed that 34% of states now hold a 6-month growth rate below 1%, the highest percentage of this Business Cycle.

The new supply might come from
$BIG.v $NCX.v $INTR.v $TBK.v
🤔

Analysts are now trying to avoid the mistake they made in 2008

Back then, leading economic indicators were contracting sharply, like today

But analysts were revising their earnings estimates upwards

We all know how that played out…

With 489/500 companies reporting, 76% of companies beat estimates by an avg. of 7.31%. Notably, the estimated year-over-year growth rate improved from +1% to +8%. While valuations are getting stretched, the improving margin story seems to be making up for it.

The Costco Price Index is the real CPI.
$COST

🇺🇸 US Leading Economic Index -7% YoY.

GDP growth QoQ +3.3% annualized.

Unprecedented divergence!

Excess fiscal stimulus deficits of 6.3% of GDP in 2023 probably working against monetary tightening, keeping the economy out of #recession .

Chart: Randy Woodward

Huge statement from Apollo this morning:

'The current AI bubble is bigger than the 1990s tech bubble.'

Apollo basically just said that the Dot-com bubble was just a preview of what we are in right now.

They note that the Forward P/E ratio for the top 10 tech stocks right now

'A Fed pivot is bullish for stocks'

'An inverted yield curve doesn't mean a recession is coming'

Based on history, when the Fed pivots with an inverted yield curve, stocks crash.

Smart money has been selling like NEVER before

The insider transaction ratio spiked to levels unseen since 2023

When this ratio hits is at 20 or above, it's bearish as insiders sell

And below 12, it's bullish as they buy

Currently, the ratio is at a staggering 150, indicating

Meanwhile:
 
The US monetary base has been rising significantly recently.
 
In the last 12 months alone, there has been a rise of $420 billion, primarily fueled by bank reserves.
 
While the Fed should not classify this as QE due to mechanical differences, it unmistakably echoes

Even if the broader market catches up to the mega caps, that doesn’t tell us whether they will outperform. We are living in one of the narrowest markets in history, with only 26% of stocks outperforming the index. The last time this happened (1998-2000) it all ended in tears

'We estimate that current market conditions now 'cluster' among the worst 0.1% instances in history, typically followed by abrupt market losses of 10%-30% over the next 6-10 weeks.' hussmanfunds.com/comment/mc2402… by John P. Hussman, Ph.D.

In 30 years, US Federal spending is expected to hit ~28% of GDP.

Meanwhile, US Federal revenue will be just ~19% of GDP.

In 2023, the US posted its 3rd largest deficit on record, spending $1.7 TRILLION more than it brought in.

This was a $300 billion increase in deficit