Big balled rally today, built upon the bones of those about to be buried.
Briefly, markets are rallying because the economy is in COLLAPSE MODE, as evidenced by today’s major ISM miss.
ISM contracted for the first time since 2020, coming in at 49.6 vs an estimate of 55. Immediately following this news, markets took off and haven’t look back since.
The US 10yr is down nearly 14bps because the market believes the Fed will need to PIVOT in order to stave off a Great Depression. In short, the pavlov effect is happening and traders are salivating from their mouths in the belief that the FOMC will save them.
The only problem with this theory is that it isn’t true. No one is coming to save you and the Fed cannot cut rates.
I will repeat.
THE FED CANNOT CUT RATES, so what are you getting all excited about?
Bottom line: My feeeeelings are that markets should crash and burn forever. However, I see the response to retarded news and realize not everyone is as smart and sophisticated as me. Ergo, I have a fully long book, which is hedged to my own detriment at the moment. I am merely +26bps thanks to a series of bad hedges. NEVERTHELESS, I remain steadfast in my belief in collapse and will pray to the Gods all afternoon in order to demand a crashing of the close to validate my beliefs, rooted in my own insecurities — likely because I grew up in the sewers and like to feeeeel right about things from time to time.
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“I see the response to retarded news and realize not everyone is as smart and sophisticated as me.”
Truth
Given who we are dealing with at the Fed, markets will probably know what the Fed will do before the Fed knows. This effect would be even more acute if they stopped playing good cop bad cop with one another in their comments and speeches, which only serves to disrupt the thought process like an unruly talkative drunk at the pub.