Morning

Mildly risk-on. Dollar weaker. Lots of articles talking about negative interest rates (US), precious metals breaking higher (especially silver). Global equities generally higher, but Far East looks precarious. I understand the arguments that the Fed cannot let the long end of the curve get out of control, but I can’t help thinking that with all the funding needed by the Treasury that the US curve will steepen. I think the same goes for the UK curve, but it’s harder to trade this: the short sterling contract seems moribund, and my rule of thumb estimate of the duration of 3-month sterling futures suggests that you need an awful lot of them to hedge out the base level interest rate risk. Gold grinds higher, although silver is taking a breather after its recent sprint. I suspect it’s a good time to buy miners that produce gold, silver and copper, but I don’t know enough about the individual stocks to risk it.

More blah blah about Treasury General Account

The US Treasury funds all government spending. It has a bank account, at the Fed, with the money it’s going to spend. It is issuing (Treasury) securities like a madman, and the balance in the General Account is going through the roof: $1.8 Trn. Currently, this is locked up in the bank, but real soon now it’ll be in the bank account of a banker near you. Will this light the flame of inflation? Or maybe just another leg up for the NDX? Who can tell?

Bubble Economy

$AAPL, $AMZN, $MSFT are now trading at beyond-stratospheric valuations, which are totally nothing to do with money creation, as exemplified by this chart.

It’s clear where the money is coming from to invest in stonks. The bit that is unclear is why it ends up inflating the price of a very small number of “high tech” stocks, such as the the FAANG++ and not other assets, like real estate, wine, oil stocks, transports. Yes, I know that value is not sexy, but

Whacky Wednesday

Wall Street On Parade is probably considered a fringe publication. But it’s one of the better ones. This post picks out some whackiness that really couldn’t be made up. The Koch network is blamed. I tend to blame the alienation of most normal people from the political process, which allows actors like the Koch brothers to have a wildly disportionate influence on events.

Wrap

Major UK equity indexes down today (apart from IWM which was flat). UST yields up (inconsistently) but only slightly. Commodities mixed, though gold still up, silver down. Natural gas looks as though it may be headed up (5.7%), but it’s so volatile (well, it’s it has a molecular of sixteen, so what do you expect?) it’s probably better to steer clear of. WTI is down 1.5%. There is a theory that NG and CL prices move against one another, but I’ll leave that for another time.