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| DJI Cash Index - Monthly Close - Since 1932 |
The second question is this ...
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| Public Debt - US - $24 Trillion |
The first question is about "equity", and the second question is about "debt". They are both ways to raise money to finance a business or a purchase. That's all.
This is the second post this weekend. If you have not seen the first one, yet, you may wish to review it.
Have a good rest of the weekend.
TraderJoe
Answers to both questions will depend on whether one subscribes to a predicate of any current meaningful correlation between them both.
ReplyDeletenice jiberish
ReplyDeleteI believe the correct spelling is g-i-b-b-e-r-i-s-h.
DeleteI encourage you to view the video on the next day's post.
DeleteVery good questions. I think we arrived at the 1932-2020 super-cycle peak in February. I don't think the T-bond market will be willing to finance an open-ended $10T bailout. Beyond the U S, how does the Fed bail out the rest of the world? Who does the U S export to if the rest of the world is broken? Interesting times!
ReplyDeleteExactly! Joe has posed the only question that truly matters, namely whether it is possible for CBs to monetize global debt. That imho remains to be seen, but it looks like plan is to write off (bankrupt central banks).
DeleteThey will try to monetize it, of course. As usual, they have no plans in place should it run into obstacles, or unintended consequences. The reason they let it inflate as they did is because it grew off 'borrowed into existence' currency units and they take fees along the way. But those loans are also ecured by collateral that regs insist must meet capital safety requirements. (Regs that over in ECB land also insist that sovereign debt must be treated as AAA, but that's another topic). The decline is NOT acceptable, as it erodes the collateral values against those loans and raises issues of lender capital impairment and ultimately bank/lender solvency.
DeleteFrom the low to now is just over half the duration of the decline top to bottom - it is one degree lower. Put an A or W at the high, then look for a B or X in coming weeks to maybe .618 retrace near 2450 with much flexibility. The next big leg down is not imminent.
ReplyDeleteYou are quite right about capital ratio but they have another problem. Prices remained elevated in the face of steadily declining top and bottom line revenues. That will certainly not improve after Covid 19. The FED has anticipated the problem and that is why they are now buying junk corporate debt as neither can survive a rising rate environment. Interest rates will determine their fate.
ReplyDeleteanswer to the first question: because in arithmetitic scale it is a much larger drop than your log scale chart shows. log scale is deceptive but necessary for use in charting.
ReplyDeleteI encourage you to view the video on the next day's post.
DeleteThere is a new post started for the next day.
ReplyDelete
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