I made 5% in my money market fund over the last 1 year. That is unprecedented and is due to the Fed's actions in the repo market. My guess is the Fed's QE has reached the event horizon, where it becomes self-fulfilling. What I mean by this is the Fed has lost control. Now, they have no choice but to continually expand their balance sheet to sop up collateral from the Repo, Treasury, and eventually the Corporate bond markets. Liquidity will continue to vanish into the black hole of US and Basel regulatory insanity, as well into the repudiation of US debt by Russia, China, and other countries, as well as into the repudiation of the use of the USD to settle trade agreements. We may actually never see hyperinflation in the statistics, because they've bastardized the statistics into meaninglessness, ignoring all the actual services and goods that real humans buy in their annual basket of purchases, like health care, education, and energy. Those expenses evidently are not worth tracking in core inflation to the Fed's way of thinking, which means, they don't understand why the 99% are crying "Uncle" on the inflation front. So they see no inflation and they want to ignore any sign of it, so they can continue to have plausible deniability as they massively expand their balance sheet, because they know if they don't, the whole financial system will seize and markets will crash like in 1929 and 2000 and 2009. Why they won't let that happen is because they have become a Communist politburo that believes central planning is better than capitalism, which is like ignoring the laws of mathematics. The problem with the Fed's actions is that they are tackling an exponential function with a linear response. It's getting away from them and there's nothing they can do.
Real estate and stocks tell the story most clearly. They are levitating while fundamentals crumble. The disconnect is jarring, but everyone ignores it as they play the greater fool theory to its limits. Will Powell have the guts to be a another Volcker? Not likely, at least not until after Nov 2020. Then after that, he may pull back and break the buck. By then the stock markets could be another 10-20% higher. We're in the final melt up. Enjoy it while it lasts. I'm still on the sidelines, earning my paultry 5% from cash and 2-3 year duration bonds and marveling at those crazy returns in a relatively safe space. At some point, cash will have a negative return, at which point gold and silver will be the place to be. I estimate the buy time for that will be shortly after the next election, when stocks have reached their zenith and gold/silver have been squashed like a bug. Then the melt up will implode and bonds and money markets will likely provide no safety either as the Fed's QE tools and interest rate decreases fail to work anymore. The only safe place then will be gold and silver and probably oil.
Good luck over the next year. Play your cards tight with stops to preserve your monumental gains! |
