Wrap
(This is written at about 5:30 pm GMT, so US markets are still open.) This seems like another boring day. Currencies, bonds, equity indexes seem pretty flat. Even $BTC moved only around 3%, which is about as stable as you’re going to get it.
Something is happening with $TSLA that has dragged up the other Ponzi stocks, like $RIDE, $NKLA, $GOTU and $LOOP.
$TRCH, another Ponzi stock slumped 26%. See here for an explanation why. Note that when this article was written, $TRCH was trading at about $1.5. It is still above $5. This is the problem of identifying a fraud.
Oil ground higher. Most energy stocks were up, and copper and other miners. Range Resources ($RRC) was up 9%. This is a natural gas company, involved in fracking. This might be a better nat. gas play than the commodity itself, via futures. Not investment advice.
Fed and MBS
Our Problem in a Nutshell: Why Is the Fed Still Buying $40 Billion a Month of Mortgages?
The $120 billion-a-month QE program that the Federal Reserve has been running since last Spring includes $40 billion-a-month of Mortgage Backed Securities (MBS).
In other words, the Fed is buying $480 billion of MBS a year, a pace equivalent to roughly $74,000 per home sold in the US this year or about 25% of the value of current home sales. If you buy a home this year, there is a decent chance that the Federal Reserve will end up holding your mortgage.
Not too surprisingly, home prices are screaming higher at the fastest pace since 2006. That was right before the last housing bubble burst in spectacular fashion.
This is the Sounding Line, sounding off again about the problem with the Fed. With Blackrock buying up a lot of single family houses, this seems just wrong. I sort of understand why QE is needed (although I doubt if it creates inflation), but buying commercial, long-dated paper seems wrong.
Why did gold sell off?
This article says that it is unfathomable. Well, I agree, but in the short run I’d prefer to say out of gold.
Basically, it doesn’t make sense for other real assets to be rallying against gold. Real rates are strongly negative, which a positive for the metal: TIPS are yielding something like -2.5%.
It’s just a herd reaction, I guess. Some inflation hawks have moved money into crypto, but I am not sure how much longer that is going on. In the short run, all markets are voting machines. And people don’t like gold right now, and because they don’t they convince themselves that we’re heading for deflation. Or the other way around.
This is a great thread that makes the point that money now is not the same as money at some point in the future, as they are not subsitutes, but that they can be traded and the price of the trade is the discount factor, i.e. the interest rate. I haven’t done justice to this great explanation, so you should follow the link. It’s explains why monetary policy cannot create inflation on its own.
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