Fed's Mester On "Face the Nation" About Getting Inflation Back to 2%...Really?

Are we the only ones that think talking about 2% inflation is ridiculous at the this time given that the expectation for CPI tomorrow is 8.4% with 17 survey members even higher... This is similar to Powell trying to make us believe that inflation was transitory last year... We said last last week when Goldman said to expect their year end target at 2.70 for 10 years, that we would probably get there last week, and we did... Based on our analysis we should see the first 3% of the actives this week with the 20 Year hitting it first, with 3/5/7s not far behind... But it is all not lost, as March and April are the two worst months for bonds of the 12 months. Just like September and October are the worst for equities.

Overnight rates went higher in Tokyo to all new recent high yields in 5/7/10/30s... There has been a mild bounce-back in London time, but rates are all higher than Friday... With the 20 year not able to hit 3%, only 2.975... The German Bund curve is the worst performer in Europe today with 2-30 all higher in yield from 7 basis to 9 basis... The full curve is positive.... Clearly vigilantes are in control and with CPI, PPI, Retail Sales, coupled with 3/10/30's auctions, and an early close Thursday, we expect new high yields this week... 3% handles would not surprise us in both 7/20....When Treasury close on Thursday at 2 PM, there may not be a time to trade until NY opens Monday... Not sure about Tokyo Sunday night, but Easter Monday will shut down Europe

Rates... Where is support in this bear market of treasuries ?.. 2 years first support at 2.61... 5 years are at our support of last week of 2.80, we see 2.92 next... 10 years are at 2.75, we see 2.875... Then long bonds mild support at 2.78... Last week we saw the biggest steepening in 5/10 since 2009... The ECB, who is meeting this week, is floating the idea of a back stop in rates, if things get out of control

THE BALANCE SHEET UNWIND OF THE FED IS MISPRICED... We reviewed the majority of street research that said one trillion was worth 50 basis... We thought that was wrong so we doubled that to 100 basis... Only to see David Rosenberg, who is usually too aggressive in his view, to one up us to 170 basis points... THIS IS NOT PRICED IN... We think the Fed rate hikes, 50 for May and another 75 between June and July are more than likely, but we see that as priced in....the balance sheet unwind, and the duration risk it will force back to the street, is still not priced in... So expect 3% handles across the curve before the month of April, one of the worst of the 12 months of the year for bonds. We see even higher yields than where we stand currently.

Equities tried to rally last night, but the weakness in Chinese markets capped any rally and S+P futures hit a low at 4.23 am.. Then rallied, and are now back moving towards the overnight low... Summers was interviewed in WSW, where he said that no recession in 2022, but worries about 2023... BB survey for April showed economists moving from 20 to 27.5% risk of recession...we still do not see it, but slowdowns will occur. He also said that there has never been a situation where inflation has been above 4% and unemployment below 4% that has not lead to a recession... We respect Summers, but we point out that we have never experienced a supply side situation like we are currently in, and do not think looking at demand side history is relevant... Nonetheless the Fed is pursuing a demand side solution for a supply side problem... It won't work, unless supply side, which is transitory, corrects... Which we think it will.

View on equities... We view the world from the eyes of a bond trader, not an equity trader... And we can see how bad the next few months for equities look... But if this was as bad as the Mike Wilson's of MS think, there are a few holes in the argument... Corporate spreads would normally BLOW OUT, in either a recession or slowdown... Corporate spreads are wider, but not by much... If you compare the treasury ETF versus the IG ETF or Govt versus LQD, you see the treasury ETF is down 7.3% as of Friday, while the LQD is down 11.2%... But adjusting for the longer duration of lqd versus govt, 7.7 versus 6.9, explains the balance... So until we see spread widening, we remain constructive on the economy . The last point is HEDGE FUND LEVERAGE IN EQUITIES...HF GROSS LEVERAGE IS IN The 4 % PERCENTILE... NET IN THE 2% PERCENTILE... Meaning HF buying power is at maximum and exposure the smallest we have ever seen... This will lead to a rally, just not sure when.

austinAG90 said:

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Fed's Mester On "Face the Nation" About Getting Inflation Back to 2%...Really?

The last point is HEDGE FUND LEVERAGE IN EQUITIES...HF GROSS LEVERAGE IS IN The 4 % PERCENTILE... NET IN THE 2% PERCENTILE... Meaning HF buying power is at maximum and exposure the smallest we have ever seen... This will lead to a rally, just not sure when.

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Ag13 said:

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Musk no longer joining Twitter board. Hostile takeover coming?

Elon has decided not to join our board. I sent a brief note to the company, sharing with you all here. pic.twitter.com/lfrXACavvk

— Parag Agrawal (@paraga) April 11, 2022

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Sounds like he weighed his options and decided rather than accepting the board seat and limiting his ownership to 15%, he's going to forego the board seat for now and just buy the whole fkn thing!

Buying 100 shares of GDXJ (junior gold miners) in the 50K account.

I am going to wait to sell covered calls on anything. I think there will be better opportunities than right now.

Let's not be greedy. Trim and move stop to 2.1.

Anyone else excited to hear Mr Johnsongrass update on T today? The price adjustment for the WBD deal happened this morning.

Sorry. Late. Working another social media site. Position is up as of 9:59am. A nice green $72,459.41 between T and WBD.

$WWR adding Tesla the miner? Possibly, according to Elon Musk it's not just lithium - prices for #Graphite have also surged. https://t.co/TCpbKyBlEo $TSLA

— Beach Trades (@beach_trades) April 11, 2022