Copper up 8%
Gold up 3%
Oil breaking trend to the upside
What does it tell you when US yields go up (USTs go down), $ goes down and gold goes up? It could be a one-day fluke but if this becomes a trend, it would imply someone selling USTs and selling $'s to buy... That someone is someone pretty big.
Oil was bearish trade and trend until very recently... and suddenly today it broke both, and is above trade and trend... turning bullish = inflation up.
Obviously Miners went ballistic - and the large caps, in particular: Anglo American was up 11% at one point. Rio + BHP% 8%
Why? - well rumour has it China is ditching its 'never ending story lockdown' policy... ( which may account for coppers move).
But why the gold move? Well, I think the market is has made a judgment on the FED... THe long dated bond rates (30, 20 and 10year) increased whilst the short 1,2,3and 5 year yields decreased today... The inversion between the 2s and the 30s is massive - over 50 basis points
Bloomberg this AM suggested that: recent volatility in the U.K. economy, such as the bond and currency market panic that greeted former Prime Minister Liz Truss’ fiscal policy announcements in late September, had distorted market expectations for the Bank’s future interest rate hiking trajectory.
“We don’t think interest rates would need to rise as high as the market has been pricing, precisely because that would induce a slowdown in the economy that is bigger than is required to get these inflationary dynamics under control,” Pill added.
The Bank expects an economic recession that began in the second half of 2022 to now last until mid-2024, which would be the longest period of GDP contraction since records began."
So BOE now pushing back against the FED's narrative of higher for longer interest rates. That is cowbell... So do we infer this is because 1) the BOE are panicking (about UK housing) or 2) the FED are essentially lying about terminal rate rises? Or 3 the UK is just sounding cowbell and now on different paths breaking away from each other?
Paddy shared with me this Absolutely fascinating thread https://twitter.com/maxjanderson/status ... 1973257221 which demonstrates that the FED can do F**k all about inflation... And I mean F**k ALL... THIS IS WHY:
In 2019, pre-pandemic, US fiscal debt service accounted for 13% of US federal budget .. but given their $31 trilion national debt thats changed recently.
2019 Budget: Debt Burden was #4 biggest line item:
Healthcare: $1,240bn
Pensions: $1,100bn
Defense: $940bn
Debt Service: $580bn 
Welfare: $370bn
Education: $150bn
NASA: $22bnAt 4% interest, US debt service cost grows to 22% of the planned federal budget
#3 biggest line item
2023 Budget (@ 4%):
Healthcare: $1,640bn Pensions: $1,370bn Debt Service: $1,250bn Defense: $1,170bn Welfare: $510bn Education: $240bn NASA: $26bnOil is about to rocket, especially if china opens up (rumour is the've now dismissed all covid lockdowns ) So china demand should surge -copper and gold up this am - on reopen .. and Biden has already shot his load (with releasing the Strategic Petroleum reserves empty b January/feb) so.... Energy inflation increases not decreases... into 2023 And for Powel to kill inflation with CPI at 8% he needs to put interest rates higher than 8%... Volker doubled rates v the CPI - so CPI at 8% means rates to 16%. That's simply impossible : It would mean US taxes have to increase 6 fold to break even and the US national debt payments would leapfrom $1.2trillion at 4% rates to >$5trillion at 16%
At 16% interest, debt service would become 86% of the planned federal budget
2023 Budget ( 16% Treasury yields):
Debt Service: $5,000bn 
Healthcare: $1,640bn Pensions: $1,370bn Defense: $1,170bn Welfare: $510bn Education: $240bn NASA: $26bnConclusion:
Market Change is happening - rotation into assets with harder value underway.
Evidence from the bond market suggests the Fed is losing credability.
Long end suggesting inflation will be here for longer... and inflation will run its course.
Nasdaq 34% down... and US dollar falling, While gold copper commodities rising rapidly.
I think market is finally starting to realise Powell simply can't raise rates high enough to control inflation.
Cowbell has already sounded at the BOE and BO Australia; The market is on the hunt for assets that have real value - commodities erupt...
High inflation of 5-8% CPI will be here for longer. Positive real interest rates are a much longer way off than thought.
Rates cannot get above ~5% and 6% would almost certainly break credit markets... this is the 'financial stability' caveat Powel keeps mentioning.
So Powel cannot do a Volker ... to Service the US national debt at 16% would require a 6 fold increase in US tax burden.
That's just not going to happen.... Inflation will run its course (and conveniently inflate massive government debts away).
There is much pain ahead ( for any Joe Public not positioned to capture this). Feel for those exposed to panic stricken long only Hedge Funds invested in Apple + Amazon (where is the bottom?) Google and Meta.... They have a log way to fall.
As Luke Groman puts it " I do not recall ever before seeing GLD outperform TLT by nearly 500 bps in a single trading day."
Boom!!
