Make it while you can boys....

Thursday Macros

Bonds/Stocks Lower as Fed Readies to Sell All of Their Corporate Credit

Last March 23, 2020 the Fed went "all in" and one of their major announcements was that they were going to buy US corporate credit, including fallen angels.. The market rallied so much for so long that the Fed only ended up buying about 14 billion, while trillions rallied on the announcement... Mission accomplished without having to do the heavy lifting... Now last night the Fed announced that they will start to sell all of their corporate credit holdings, not willing to let them run off...what message are they sending to us now?... Are corporate spreads too tight?.. Yes they are... But we do not think that is the message the Fed is trying to send, nonetheless, with credit spreads as narrow as they are, even with the US economy expanding rapidly and more stimulus on the way, the shot over the bow has been made.. The Fed owns many corporate names and credit related ETF's... Message sent beware.

Equities are lower as more Fed governors are talking about tapering... Employment related numbers, while not non farm itself, are out today..ADP comes out at 8.15, followed by claims 15 minutes later... It is rare to have both numbers on the same day... They will set the tone for the day in both bonds and stocks... And give a good preview of tomorrows non farm number... This is also the first time we can remember where the ADP and the Nonfarm numbers are almost the exact same estimation, 650,000 for the first and 655,000 for the second...eerie

Globally... the Russians are playing out a long game... They see more sanctions coming as more US and global companies get hacked. This is their way of trying to disrupt the US economic system...the Russians are now saying they will eliminate all dollar holdings from their 119 billion Wealth Fund... We see both the Chinese and the Russians making moves towards the demise of the US dollar... We are concerned but do not see the rest of the world moving in that direction... While the Euro is doing better, we do not see it as a replacement for the dollar... But it is worth watching.

Inflation... More and more Fed governors are being concerned... Tim Duy did an analysis of Brainard's last two speeches where he pointed out the subtle changes. The new concern of inflation. She changed her tone from a speech two weeks ago talking about "pandemic risks" to "there are risks on both sides". She dropped her call for "patient" policy in her speech last week... And warned about being prepared to adjust Fed policy as needed... We thought that inflation would catch the Fed off guard from their transitory outlook... And that seems to be happening... Add in today's article from former Vice Chair Dudley, titled " US Inflation is not Scary Yet, But it Could Be"... And you can see the Fed starting to be worried about inflation... And if they are willing to start to sell their corporate bonds, it is logical for them to consider tapering... Heck we would like them to stop buying mortgage bonds and START SELLING MORTGAGE BONDS, but that is a stretch for now.

Expect a choppy mild risk off day... But if you want risk, play the meme stocks... AMC hit 75 this morning...Funny how that purchaser of AMC over the weekend of 8 million + shares looked so smart buying at 27 and change and selling at 31 a day later...only to see it shoot up to 75 this morning... Leaving 44 points on the table... But as Bernard Baruch famously said "Nobody ever lost money taking a profit",,

Have a good day...

Goodbye paper futures, hello live futures.

Working a scalp on /NQ here, went long at 13527