Market Notes

The fall of currencies under the spell of stocks worries strategists is yet another article which points out that risk on/risk off now dominates all securities markets. Fed expansion pushes investors into risk on markets, and even in FX, traditionally a much bigger and liquid market than equities, the risk-on/risk-off narrative dominates price discovery.

Today is a quadruple-witching day, with expiries of futures and options and two other mystery derivatives. Usually, this is an exciting time. Time to adopt the brace position.

Another note on why US markets are irrationally exuberant. Of course I agree, but I’ve been reading articles saying more or less the same thing for a couple of decades, or at least it seems that way.

J Powell eases off the throttle

Fed Ends QE, Total Assets Drop. Liquidity Injection Ends published yesterday by Wolf Richer explains that for all the hoopla the Fed actually shrank it’s balance sheet last week, and that in future funds will start to flow into programmes to support consumption. We might get a pick up in consumer price inflation, and a drop in stocks, but it’s certainly too early to take action on this.

This is on top of the fact that as the UST starts to issue its trillions of dollars worth of bonds to finance fiscal activism, it will drain liquidity out of the system that would otherwise be used to buy stocks.

Unemployment in the US running at 20%, maybe

Estimate from Wolf Richer.

Politics

Bolton reveals closely guarded secret that Trump is a narcissistic idiot who thinks of nothing but getting re-elected and succeeds in having the book banned to improve sales.

Ex-Facebook VP Chamath Palihapitiya thinks governments will go after Big Tech and break them up within a decade. This is why the FAANGs spend billions on lobbying. They are very powerful, and have bought up politicians in bulk, so if Palihapitiya is right it will be the result of an unprecedentedly dedication from politicians to put the public good ahead of their own narrow self-interest.

(Added on the 20th): SPX tipped down at EOD because Apple said it was re-closing some stores. AAPL itself seemed largely unaffected.