SPX vs Fed Rate in a rising rate environmentIt took 18 years for the SPX to gain 30% when the fed was raising interest rates during a high inflation period.
FEDFUNDS trade ideas
Trend of BTC & GOLD.Did you guys found that BTC and GOLD have a similar trend while interest rate change since 2018?
Return of BTC is just 10 times leverage of GOLD!
2 year treasury yield against Federal funds rateThe Federal funds rate typically follows the treasury yield. With the treasury yield's lower high (LH) forming a down trend & is now approaching this resistance level again, there is a possibility for the Fed. to reverse on the current tightening of monetary policy.
how to profit from higher yieldsthis chart shows, how the moneyallocation rises while the fed highers yields.
The setup in RSI and the actual chartpattern has high similarities to the copper chart 2006, when Copper broke through a resistance and made exponential returns.
Now copper is again at a resistance, if it breaks through, we might see some crazy gains again.
Federal Fund Rate's too low The tangent line to the Federal Fund Rate of the past two debt cycles has only one tangent point to the curve identifiable in geometrical terms to 1974 12.90% Federal Fund rate.
To be clear what anyone can draw in geometrical terms as a tangent line to a curve, in math terms can be defined as the first derivative of the curve in that specific point.
The fact that the last two decades Federal Fund rate curve have the same tangent line, i.e. the same derivative, as the 1974 Federal Fund rate, that only in visual terms can explain how misplaced are money markets interest rates
and how dangerously far out the curve the Federal Fund rate has been squashed and compressed down.
Taking into consideration the high Inflationary CPI and PPI data consistent for more than one year, and the considerable disruptions and shortages in all sorts of commodities and supply chains, the Stagflationary economic environment of 1974 could be easily replicated and repeated, with the only caveat that the Federal Reserve has increased of 25 basis points the Federal Fund Rate to 0.25%, thereby a lot more CPI and PPI Inflation are going to characterize the economy in the near term or years.
Federal rates won't go as high as we are expectedThe yellow line is where i expect the fed rates to pull back
Major Crashes and the Federal Funds RateThe last three major crashes and recessions have been preceded by a period of interest rate hikes by the Fed.
Each hike since the 1970s has gotten less and less far before the economy rolled over, calling for an emergency rate cut.
There are many reasons for this, including the deflationary impact of demographics and globalisation, as well as the ever increasing debt burden around the world.
This has caused us to want lower and lower rates, and to implement Quantitative Easing (QE) when the rates bottom out and cannot be reduced further.
Each time the rates are hiked. Each time the Fed eventually realises the economy cannot cope and performs an emergency rate cut.
Each time in the last three cycles, this came too late, and a crash ensued.
A trendline can be drawn to estimate where the rate hikes could go this time before history begins to rhyme. Incidentally, this is also what the bond market is pricing in right now.
With spiralling inflation, the Russia crisis and the energy prices, the pressure to hike rates is extreme. However, the economy is slowing, the earnings are stalling, and the stimulus is spent.
China's economy has already stalled to the point where its government has cut rates, even in the face of inflation.
When will the US be next?
Unless the Russia/Ukraine situation stabilises soon, this chart is probably conservative.
Can technical analysis infer the result of Fed Tightening?This chart uses a simple downtrend in order to predict the terminal fed funds rate, which I believe will be 150-175 basis points by March 2023. As we can see, the previous fed funds rate hikes under the current downtrend have resulted in periods of lower GDP growth as well as yield-curve inversions and very regularly precede lows in total US jobless claims (the two criteria for a slowdown to be considered a recession are two consecutive quarters of lower GDP growth as well as a trough in unemployment). Historically, sharp increases in oil prices have been consistent indicators of economic slowdowns and very rarely move to the upside with a significant degree of magnitude without preceding a recession or at least a period of stock-market volatility.
Federal Fund Rates Slim MarginsSimple late night doodles with some input of previous crashes from: fred.stlouisfed.org/series/FEDFUNDS and some simple trend following to suggest the increasing fragility of the effect that marginally increased rates may have on the economy.
FRED:FEDFUNDS
Fed Funds Rate history implies the FED can hike only 6 timesIncreases in the US Fed Funds rate during the FED's hiking cycles have always preceded a recession.
A simple analysis of the most recent recessions, the amount of rate hikes preceding them and the downward trending channel in which FED Fund Rates have moved suggest the FED only has room for 150bp worth of hikes (or a total of 6 hikes).
Fed Fund Rate Vs US 10Y Vs GoldHere is an interesting comparison of the 3 charts. If the history of these charts has taught us anything, there is going to be a rise in rates on a real rate basis more so than actual rates. What is more interesting is how this real rate rise will influence gold prices. Now gold isn't bitcoin, they are the exact opposite things. One is front-loaded with energy and the other requires perpetual energy in addition to one having mass vs one having no mass. The risk-off appetite will be a big player here. I can see rebalancing to add gold to your account of 5-10% and reducing bonds to offset this is smarter now. Adding the 1-2% bitcoin position will make sense as the risk-off bottoming occurs.
Gold miners will be smart soon, but not yet. Pick your miners now, Barrick, Newmont, Agnico Eagle, Wheaton Precious, FrancoNevada, Sandstorm, etc, and hit the bid when they tank along with equities. (This is a time to add additional bitcoin as well)
US Federal Funds Rate (FF) vs the SPXIncreases in the US Fed Funds rate during the FED's hiking cycles have always preceded a recession.
A simple analysis of the most recent recessions, the amount of rate hikes preceding them and the downward trending channel in which FED Fund Rates have moved suggest the FED only has room for 150bp worth of hikes (or a total of 6 hikes).
OANDA:SPX500USD FRED:FEDFUNDS
Volatile real rates lead to higher gold prices.During periods of deep negative real rates gold tends to do very well.
The 1970's was a decade which saw big moves in real rates due as the Fed trying to combat the high inflation.
The more volatile the moves are in real rates, and the deeper into negative territory real rates go, the better gold performs.
We may be entering a similar period where the Fed is having to increase real rates with tightening policies, only to reverse course when it becomes clear the economy can take no more.
Gold is forward looking and so will predict the above outcome before any other asset does. Therefore I would expect gold to rally, once the Fed begins raising rates in March in anticipation they will likely reverse course soon after.
Will Rising Interest Rates Crash The Market?Despite previous data showing the contrary, many believe that rising fed interest rates will be a catalyst for a down turn.
In the chart above, I compare the federal fund rates (blue) to SPY (orange).
As you can see in the past, a rising interest rate was NOT a catalyst for a crash. Of course this time could be different, but there is no evidence currently showing that it should be different.
If anything, a falling rate appears to be catalyst and usually coincides with a down turn in the economy.
I'm not saying that the market will continue to go up from here, all I'm saying is that if it continues to go down, it will be hard to blame the rates as the reason.
The Credit Cycle - QTM The Business Cycle has not been the Cumulative Driver of Economic Expansion.
And why the Quantitative Theory of Money is at best incomplete.
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We are in an Extension of the Credit Cycle - an Experiment gone horrifically wrong.
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Typically the Equity Complex adjusts to what is perceived as too much tightening.
The Federal Reserve knows it must pace itself and they will. The wording on January, 26th
will be Key - as If the Raven comes off too aggressive, Participants will look forward initially
and perceive a Shock.
The assumption within the Model is one of declining Prices once the FED begins to tighten.
Not going to happen, Prices will continue to Rise in REAL TERMS and Purchasing Power Parity
will continue to be reduced by ever more insidious amounts.
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Perception Management is the FEDs Agenda for managing their Domain.
Cui Bono?
Up to you to provide our own answer(s).
M2 never declines.
Velocity can increase when price increases cause a reactionary chase to hoard what will
be perceived to be higher in price in the Future, then and only then will we see M2 Velocity
Increase.
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Productivity of Capital - The average credit cycle is longer than the business cycle in duration
as TIME requires a weakening of corporate fundamentals and property values, the 2 indicators
most closely followed with respect to ASSET Valuations.
Extreme extensions of credit in terms of amount and period in conjunction with Fiscal Policies
can further Distort and Distend the Malignant System.
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Presently, the ONLY thing keeping this dysfunctional system together is the Federal Reserve.
The rest of it is for Historians to sort out, as it has all been dumped on its collective head.
Functioning, or properly functioning Markets that are efficient and open to information flow.
We do not nor have not seen in a very long time.
Playing Poker with a Blindfold is not "Investing" it is speculating everyone else is wearing
one as well.
They are not.
An illusion Compare the Feds rate and the market...
Absolutely sustained by feds by devaluation...
It will collapse like never
I am not saying that I am shorting - I am a scalper LOL
Road map for 3600$ gold in 2025 and 6800$ in 2026.Using inflation rate and fed fund rate. See what happened in the past!
Pop or Drop time. The 10 year bond compared to interest rates. (Sorry my chart is ugly) Any good trader knows what a descending triangle looks like and we all know what happens when it is compressed to a fine point- BOOOM. Unfortunately we are at the end of the road when the government will have to keep printing money at a ridiculous rate or they will have to raise interest rates and crumble the economy into bankruptcy. Based on this chart we have about 4 years left. I hope everyone is prepared because either way it's not going to end pretty. As a precious metal guy I'm going that way but others like real estate or crypto. I would only imagine these safer spots to store your money will start going up in value VERY soon.
DXY - When the Wind Blows, the unwashed Laundry wafts INNational Currencies in the European Union?
Hmmm... Good Luck in the Short Run, the disarray will
be compelling viewing.
European officialdom is now reeling from THE outbreak of apostasy
within its own ranks.
Adios Angela and a subtle reminder of 2010:
" It is an existential test and it must be overcome ... if the euro fails,
then Europe fails,” she said
11 Years later and she has one foot out the door.
Failure, it appears was THE option.
The disintegration of the EU due to financial panic on international markets
will spread contagion to the United States.
America’s $30 trillion debt load from Obama to Biden, the burden has become
rather large.
The Largess is not to be easily contained. American banks will see trillions
of dollars in losses due to credit exposure within Europe's Financial Edifice.
Deutsche Bank AG readily comes to mind - the Zombie Bank eating the brains
of it's Depositors is overdue.
The very solvency of the entire American financial system will be tested without
remorse, regret nor remediation in a timely fashion.
What of Uncle Buck?
It is safe to assume, yes safe - Inflows into the Dollar and US Assets would flow from
Europe, Asia and about any piece Sovereign on our little blue ball in space and time.
Will it, it will it result in the (and I hold immense disdain for this term) GREAT RESET.
Stay Tuned intelligent observers, we maintain everyone loses a Hand.
Fed Fund Rate and Silvers 1955-2003If we are starting an new important inflation cycle, increasing rates indicated incoming inflation.
Transition will be accompanied by wall of worries and volatility.
Look to higher time frames for a noise reduced guidance.
