As noted by "The LIttle Chief."  Ms. Market was breadthless.

Wally chimes in:

A little more of this sort of divergence (against strong gains in the averages) and I might make my short freak flags fly.

Thanks for reading my Diary and I hope it was useful.

Enjoy the evening.

Be safe.

Only six trading days until the launch of Seabreeze Capital Partners LP!

* Lacking substance - silly and pointless

The testimony and the questions asked Chairman Powell were a total waste of time this afternoon.

What we did learn is what drives Washington politics and not what drives interest rates, inflation and the economy and Fed policy.

From "The Little Chief":

* So, avoid The Trading Jones

Sometimes there is simply little to do from both a trading and investing standpoint. 

Sometimes sitting on your hands - and not pressing action - is the preferable act. 

Sometimes there are few good, reward/ratio setups. 

Sometimes markets are relatively trendless, prices move randomly and there is no memory from day to day (witness Friday and Monday/Tuesday). 

Sometimes these conditions do not engender confidence and we just don't know what to do. 

We might be in these sort of times now. 

Avoid The Trading Jones: 

* Are you spinning your wheels and trading too much?
* Non-stop trading is a mug's game
* So, don't catch the "Stock Trading Jones"
* Stop dribbling and read and think more!

With stock commission down to or close to zero I have noticed a lot more trading activity on the part of our subscribers and, anecdotally, friends of mine.

Here is a repost from a column written eight years ago on the subject of too active trading:

This morning I want to explain why I was so active (in a trading sense) - what were the conditions that moved me towards this strategy - and why it should not be a permanent condition.

I have long tried to take what Mr. Market gives me - whether its during a clearly defined trend or if we are in a trading range.

I buy stocks I like with a funnel approach (and short them the same way) - as prices go lower and become discounted to "intrinsic value" I buy more, not less as the opportunity set is improved. I care little if I am catching a falling knife (rather, I embrace the opportunity) or if the price momentum is weak.

And, I increase my trading activity when the opportunity set expands - when stocks and markets enter a volatile period (much like we have seen in the last couple of weeks).

My Basic Trading Tenets

Let's say in normal times the daily range of the S&P Index, in percentage terms, is about one half of one percent or approximately 13 handles (I am guessing on this as I can't find reliable data). As a rule of thumb I do not trade actively in "normal times" like these.

I become more active when volatility picks up. The greater the prospects for volatility the more active I become.

And, with ETFs risk parity and other products and strategies becoming more dominant influences -- and with everyone on the same side of the boat -- I suspect we will see many more periods of heightened volatility and ever more opportunities for unemotional trading.

As we know, 1%-2% daily price changes became commonplace in the last few weeks - but the intraday swings were much greater. As in one case, two days ago, it approached a 4% swing.

I expected this, embraced the rising volatility and I became far more active in the last week.

But... Beware the Stock Market Trading Jones

During the last two weeks, in particular, I have chronicled much of my frenetic trading activity.

Though the volume of trading decisions were likely confusing to many I purposely wanted to illustrate how active I get when volatility rises - and, at the same time, I have tried to demonstrate the rationale of my individual trading decisions, so you can better understand the trading process.

Nevertheless:

(1) This sort of active trading is not for everyone - in fact, it is for the few.

(2) I want to remind everyone that the more trading decisions one makes, the more likely trading boners will surface.

(3) Longer term investing will still be the principal fountain of returns for most investors.

My 2012 article "The Stock Market Trading Jones" details my views on the risks associated with too active trading:

"Yes, I am the victim of a basketball jones
Ever since I was a little baby, I always be dribblin'
In fac', I was de baddest dribbler in the whole neighborhood
Then one day, my mama bought me a basketball
And I loved that basketball
I took that basketball with me everywhere I went
That basketball was like a basketball to me

I even put that basketball underneath my pillow
Maybe that's why I can't sleep at night
I need help, ladies and gentlemens
I need someone to stand beside me
I need, I need someone to set a pick for me"

- Cheech and Chong, "Basketball Jones"

Growing up on the South Shore of Long Island, my friends and I had one passion that we shared -- watching and playing basketball.

We played basketball at least five times a week at the Rockville Centre Recreation Center, at Hickey Field on Sunrise Highway, at St. Agnes High School or at nights at my friend Mark Merson's court, which was connected to his garage (because his court was the only one in the neighborhood with a floodlight). We even traveled to Midwood High School's outdoor courts in Flatbush, Brooklyn, for the really good competition.

When we weren't playing basketball we were watching basketball. Mostly, we would go to the old Madison Square Garden and watch the New York Knicks. In those days, the best of the New York City high schools played games before the NBA Game. I saw Lew Alcindor from Power Memorial and many of the other high school greats there.

We had what was called in those days the basketball jones, an obsession with basketball.

Today I see many traders and investors with a similar affliction, which I call it the stock market trading jones. Market participants feel compelled to overtrade. It comes in the form of a near-obsession in overtrading both on news-based dislocations (to the upside and downside) and on non-dislocations in the normal course of business, typically through chart gazing. The need to play too many earnings reports and the desire to trade macroeconomic events reside among numerous other catalysts.

There are several obvious influences that contribute to the addiction of too-frequent trading:

• Brokers. Brokerage companies have made trading at home easy and inexpensive. Sophisticated internet-based trading platforms allow individual investors to trade actively at markedly reduced commission rates relative to any other time in history.

• Societal pressures that favor short term over long term. As a society, we have grown increasingly impatient. The media, and for that matter our society, increasingly emphasizes short term over long term and instant gratification over building value through intermediate/long-term value. Today, we even communicate more briefly than ever in staccato-like form via tweets of under 140 characters on Twitter and the acronym soup of instant messaging. How-to-profit books, teaching us how to gain money and fame quickly, outsell more thoughtful investing books such as Benjamin Graham's The Intelligent Investor. All of these pressures, in the pursuit of instant riches, contribute to excessive trading by individuals.

• Quick solutions and foolish acceptance of a special sauce to investment success. We too often seek quick solutions to complex problems/issues. Increasingly, traders seek a special sauce, an algorithm or stock chart that evokes the promise of immediate success, often shunning the heavy lifting and time-consuming analysis. In its simplicity, this also leads to excessive trading, as if the appearance of a chart is an almost mystical and certain way to produce the Benjamins. Technical analysis has a broad definition and when utilized intelligently can be a very helpful adjunct in making (and timing) trades and investments. But too often the decision to make so many of these trades is seen purely through the narrow interpretation of a stock chart, a view that historical price action will provide us with a guide into the future. I see this often on Real Money Pro - particularly in front of an earnings release. Does anyone really think that prior to, say, Nike (NKE) , or any other company) reporting its most recent earnings, a trader can outsmart the legions of other traders by virtue of looking at a chart? Does that really make sense to any of you?

• Shortening cycles. In our fast-moving world, economic, corporate and investment cycles are ever more truncated. Performance definitions grow ever briefer, whether it is the duration of a CEO's or baseball manager's career, measuring a company's profit performance, investors' patience with their investments -- manifested in heavy turnover and reduced holding periods compared to any time in history -- or with defining investment performance.

All of the above factors contribute to the impatience and heavy trading manifested in the stock market trading jones.

I have believed that by developing a variant view through hard-hitting and investigative research (e.g., contacting company managements, their competition, suppliers or through other means), you will have a much better chance of succeeding with an occasional trade. But, even that fundamental approach, which is time-consuming and doesn't fit in with some who believe that trading gains can be as easy as gazing at a chart, represents a difficult journey toward trading success, especially when it, too, is done with too much frequency.

Regardless of the rationale for action, however, a large portion of traders simply seem to have a trading jones - a need to play, a need for action. Just look at the lion's share of the remarks in our Comments section every day -- they are dominated by intraday or multiday trading plays.

In my investment experience, I have seen many more professional traders armed with every trading system that money can buy (who have been inflicted by the jones of constant trading) blow up rather than succeed over time. Then, why should you, as an individual investor, be more successful?

The answer is that, in all likelihood, you will not be.

Nonstop Trading Is a Mug's Game

So, let me be direct and straightforward on this subject - nonstop, excessive trading is a mug's game.

Any market mathematician will tell you that the more trades you make the less successful you will be.

I have written for years that waiting for the right pitch in trading and investing is the way to succeed over the long run in this game.

I believe this now as strongly as ever.

Constant Trading Has Always Been the Media's Selling Point

Constant craving
Has always been
-- k.d. lang, "Constant Craving"

The business media are well-intentioned and inhabited by a lot of my friends. I am respectful of their contributions, but they too often encourage the stock market jones.

By and large, the media have an agenda that is different from yours. It doesn't make them bad guys - their objectives of a growing audience and higher ratings are inherently dissimilar to your objective of making money.

Moreover, as I have recently chronicled, the media's reaction to events of the day (e.g., the sovereign debt crisis, the Presidential election, the fiscal cliff, etc.) is often hyperbolic and simply wrong-footed from an investment standpoint.

Always remember that they are in the press box, and you are on the playing field.

Not surprisingly and understandably - it's in their basic interest - the media too often advance the idea of constant craving of trading and even, at times, by inference, the dream of instant investor gratification. For every long-term investor queried, it seems as if there are at least 10 traders, maybe more, questioned in the business media.

Maybe it wouldn't sell as well, but I wish there were more forums and time spent on long-term investing in the media.

Unfortunately, many investors watching and listening can't help from being influenced by the media's barrage and sometimes short-term emphasis of time frame. By contrast, long-term price targets, defined in years, are deemphasized, as these are not subject matter seen as capturing ratings and audiences, and typically take a backseat in discussions.

We are often inundated with ways to make fast money. By inference, the pundits and talking heads tell us that this is best accomplished by trading almost every market or individual stock wiggle, often based on technical levels and/or in the knowledge of how to react to certain triggers or events.

In the ultimate level of the absurd, the media conduct contests to guess where the S&P 500 and DJIA will close at month's end, what will be the exact jobs number and so on, as if these guesses will provide some sort of magic market elixir to delivering outsized trading gains. The thrust of many of the conversations on CNBC and Bloomberg are too often based on mindless guessing of short-term forecasts of which few really have any edge whatsoever.

How often does a business show start with the moderator saying something like this: "The S&P is up by half a percent today, so where is it going to end the day?"

Or the dialogue goes something like this:

• "What is the next move in Apple (AAPL) ?"
• "How do we play IBM's (IBM) earnings report tonight?"
• "Whither Research In Motion (BB) ?"
• "If Friday's jobs report is 150,000 or more, how will the market react?"
• "How will the fiscal cliff debate impact the market today?"
• "Sovereign debt yields are lower today - how will our markets react?"

You get my point by now - continually going one on one against the trading world by guessing on near-term market and individual stock moves is a difficult if not impossible pathway to investment success.

Trade in Moderation

Importantly, I want to emphasize that there is a place for trading, as I believe intelligent trading can be a profitable adjunct to investing.

I am very much an advocate of opportunistic trading, especially when one concludes that the market is range-bound without a clear bias in either direction or, for example, when one can get in front of an earnings report with an informed and variant view or by responding quickly to an earnings quality in an earnings report (among other means).

Done effectively, trading can result in a cash-register effect, contributing to the aggregate returns in your investment account.

But only in moderation and only when the right pitch (read: enhanced reward vs. risk) is offered up.

In Summary

"Millions of people die every year of something they could cure themselves: lack of wisdom and lack of ability to control their impulses."

- Irving Kahn, Chairman Kahn Brothers Group

The essence of today's opening dispatch is that my definition of a good trading setup is far narrower and more selective than most on Real Money Pro and elsewhere.

My advice is to stop dribbling your way into multiple and numerous trades that one justifies by reacting to the media, based on technical analysis or based on any number of other reasons - unless you are very lucky, it will not pay off in the long run.

More likely, you will trade (and churn) your way into investment oblivion!

Oh, it feels so good, gimme the ball
I'll go one on one against the world, left-handed
I could stuff it from center court with my toes
I could jump on top of the backboard
Take off a quarter, leave fifteen cents change
I could, I could dribble behind my back
I got more moves than Ex-Lax I'm bad

- "Basketball Jones"

frdgrouper1 dougie kass

Do you like coin at this level?

dougie kass frdgrouper1

COIN has done poorly since its direct listing - declining a bit less, in percentage terms, relative to crypto currencies.
in the near term (since May) Coinbase has decinled by only about $20/share - holding up well against the precipitous drop in bitcoin/dogecoin.
i expect/hope that relative performance to continue.
dougie

dougie kass frdgrouper1

coin is a hedge i am wrong about crypto.
dougie

TechNova dougie kass

That is a fair comment. That is why sizing and allocation are so important. Reward needs to be commensurate with Risk.

As of May 2011 BTC was trading at $3.50.
Today, 10 years later (with its multiple retracements, and currently at support) is trading at $31,589.

Nothing I can think of offers this type of reward. Nothing.

Is it worth a percentage allocation given this potential reward? My book says YES.

dougie kass TechNova

the past is not necessarily a prologue
there were no other digital currencies of any consequence (read: Market Cap) a decade ago
now there is a plethora - and it is growing exponentially
we must evaluate the present and not the past - as you know!
if i invested $100,000 in a commercial real estate building thirty years ago and it is now worth $5 million - i dont make a transaction decision based on my cost basis but based on the market value currently.

dougie kass

Color me skeptical.
I have listened to the supporters of Bitcoin this morning - Novogratz, Tom Lee et al.
I heard nothing substantive or new, frankly, in response.
Any asset that falls 50% in two months is not a currency for trade or exchange, imho.
Dougie

TechNova dougie kass

I accept your skepticism Dougie, and I welcome it! You need two sides to make a market. Skepticism is usually the fuel for short squeezes and rallies. I hope that skepticism persists for a while longer. :)

I will simply say that BTC has pulled back 40 -50% before during its epic run higher, only to then continue its run higher. This is a nascent asset class, and is, and will continue to be subject to volatility for a while. Not for everyone, that is for sure.

dougie kass TechNova

I for one do not have a risk profile that is accepting of a halving in an asset class' price.
So it is a non starter for me and probably a lot of other no YOLO traders and investors.
Dougie

J Leafly dougie kass

Agree 100%, and it's exactly what I've been telling my clients for the past couple of years.

I've written on the comments sections in the past that crypto is no store of value. If you want to speculate, that's fine. But call a spade a spade.

dougie kass J Leafly

It is still gambling.
I like to speculate.
Dougie

Record margin debt:

dougie kass

Color me skeptical.
I have listened to the supporters of Bitcoin this morning - Novogratz, my pal Tom Lee, Et al.
I heard nothing substantive or new, frankly, in response.
Any asset that falls 50% in two months is not a currency for trade or exchange.

Stated simply.
Dougie

* Affordability, as I have harped on for months, is the culprit

Existing home sales in May, likely reflecting many contracts signed during the January thru April time frame, totaled 5.8 million annualized, a touch above the estimate of 5.73 million. That though compares with 5.85 million in April, 6.01 million in March, 6.24 million in February, and 6.66 million in January. The slowing rate is in response to low inventory and aggressive price increases. With a lift in the number of homes for sale as is always the case come spring, months' supply rose to 2.5 from 2.4, and which compares with the long term average of six months. 

The median home price is now rising by a +24% pace, with an average rate of +17%, as we're seeing big jumps in home sales priced above $500k. Taking out the influence of mix likely has home price gains between 13%-15% which is out of control. Those aggressive price gains is why first time buyers make up just 31% of purchases, the same level for the third month in the past four. There was a time, now long ago, that it was around 40%. The NAR said, "Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first time buyers out of the market."

Just when one thought that the Fed learned the housing lessons of the mid 2000's, they've obviously learned nothing other than getting rid of no doc loans and boosting bank balance sheets. Not much else as housing is now becoming ever more unaffordable for those the Fed claims they are most trying to help. And now natural buyers are competing even further against the yield grabbing private equity industry as evidenced by the Blackstone (BX)  purchase of Home Partners of America for $6 billion that owns single family rental homes. 

HOPEFULLY, someone in Congress today challenges Powell on the state of the housing market and the Fed's influence. What the Fed doesn't understand that at this point their so called 'powerful accommodation' is now responsible for slowing down the most interest rate sensitive part of the U.S. economy.

Headline: US markets to welcome 17 IPOs this week - two of them $1 billion-plus deals.

Fed Williams followed up his comments yesterday with a Bloomberg interview today. He didn't sound any different. He did mention specifically that rate hikes are a ways off, which is consistent with the dot plot. The hawks will point out that the inflation forecasts from the Fed are VERY low and labor force participation will not increase as much as the Fed is hoping. So the Fed will likely increase rates much faster than they are currently forecasting.

If the hawks are correct...it will be a matter of the investing public believing that the Fed will keep policy relatively easy in the context of very strong data (so rate hike expectations increase, but not enough to send us back into a post GFC like backdrop). If that backdrop comes to fruition, UST yields and Cyclicals work higher over time.

If we are stuck with relative high inflation and weakish longer term economic growth (fiscal cliff has a large impact along with supply constraints on growth) BUT the fed has to respond to inflation...yield curve flattens and Defensive's work. Post GFC backdrop type investing leads.

That is the debate going forward.

In other news...a housing data point finally beat expectations (an important one) and the Richmond fed was better than expected. Neither suggest a cliff.

A new record high:

The prices of bank stocks have, not surprisingly, declined over the last few weeks. 

Accordingly, I am now shifting from negative to neutral on the sector. 

The next move will be to reestablish longs. 

Stay tuned.

* The magnitude and swiftness of the decline in digital currencies has been eye opening and has accelerated over the last few days despite the strong protestations from its supporters

* Bitcoin again dropped overnight (-25% in the last week) and the decline has continued this morning (-8% or -$2.700 to $29,850) - the price has now more than halved from its peak

* Conspicuously, the price of dogecoin has declined from a peak of $0.68 to $0.17 this morning (-14%) and not a word or tweet from Elon Musk

* Some very smart and extremely confident market participants - Saylor, Dorsey, Novogratz, Musk - have regaled in the value of digital currencies

* A month ago Michael Novogratz, with the price at $44k, suggested $40k would hold - it has not

* In this opener I explain why, though my knowledge is admittedly incomplete - I continue to deliver my (negative) view on digital currencies and why a further decline could be market impactful

"Dogecoin will take over the world."

- Elon Musk 

"Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy... There's a $500 trillion monetary planet and the outer layer is currency, then you've got stocks, bonds, real estate. There's $10 trillion worth of gold in there, $1 trillion of bitcoin in there. Bitcoin is going to flip gold, and it's going to subsume the entire gold market cap."

- Michael Saylor, MicroStrategy (Chairman)

"Bitcoin changes absolutely everything... I don't think there is anything more important in my lifetime to work on." ... If (Bitcoin) needed more help than Square or Twitter, I would leave them for Bitcoin."

- Jack Dorsey 

"$500,000 is a good target for Bitcoin by 2024."

- Michael Novogratz

sbickley

The more the "Boomers" keep showing their ignorance and lack of knowledge around BTC the more confident I am that BTC is accomplishing its intended purpose. Cramer and Dougie are both smart as hell and rich as shit. Hell, even Cramer jumped on the crypto bandwagon for a minute, but he is full of shit. Said he was on it as an alternative the USD. Really? Then why do you care what China is doing? As TN pointed out and anybody with a Google machine can figure out, the algorithm adjusts, remaining miners make more money and life goes on in BTC-land. Oh, wait, now Cramer is concerned about the US gov. response...really? Like you didn't know this was controversial? He actually said "I don't think this was the first ransomware payment made in BTC", referring to Colonial - no shit sherlock - its been known and happening for years...it also comprises a miniscule percentage of commerce on the blockchain.

Yes, it is not a traditional investment, nor is it intended to be. The vast majority of us messing around in this space should view it as an asymmetric risk/reward vehicle, that if it succeeds will be massive in fiat terms. If not, its a zero. Can we all agree on that? If so, can we just stop with all the BTC noise? Leave it be.

* We live in a flat and interconnected world - a movement in one asset often impacts other assets, especially when the price action is extreme.

* Crypto is now a multi-trillion dollar asset class. The market cap of all digital currencies now approximates 15% of the market capitalization of gold. Crypto has clearly taken the oxygen out of the gold markets.

* There are numerous collateral crypto plays in the markets - individual securities like speculative gewgaws (MARA) ($58 to $28), (CAN) (39 to $8), (MSTR) ($1315 to $585) come to mind. As I wrote in "Group Stink Has A Foul Odor" we learn important trading and investing lessons from experience, especially of the aforementioned speculative-kind.

* Many disagree with my negative outlook for today's menu of cryptocurrencies. Indeed, the adoption of Bitcoin has continued apace, and is being legitimized, by large financial, commerce and other corporations. As such, we must judge its legitimacy, the cost and whether those operating strategies are optimal in evaluating the outlooks for those entities.

* There is enormous leverage inherent in digital currency investing - raising the possibility of systemic risk if the price of digital currencies continues to fall lower.

My "projections" for the price of Bitcoin have been fairly accurate - and not always bearish. 

In my Surprises for 2019 (written in November, 2018) I wrote: 

Surprise #7: A New (But Old) Shiny Object Appears As A Stock Market Winner in 2019: "Bitcoin trades close to $3,000 in December, 2018 and spends most of 2019 under $5,000 (as numerous trading irregularities, thefts and more frauds are exposed)."

In my Surprises for 2021 I turned more positive - suggesting that the price of Bitcoin could double to about $40,000: 

Surprise #7 A Decline in the U.S. Dollar Spurs an Advance in Gold (to $3,000/oz) and a Ramp of +50% in Bitcoin (to $40,000) - But Silver Is the Big Winner as It Doubles to Over $50/oz - Over easy policy, excessive liquidity, higher inflation and a rapid rollout in the Covid-19 vaccine powers the prices of cryptocurrencies and precious metals higher. Silver, however, is the league leader as the rapidly rising demand for silver in industrial applications creates a supply crunch late in the year. Another challenge on the supply side for silver is that more than half of mined silver supply is a by-product of zinc, lead and copper mining, making it tough for miners to meet the surging excess proportional demand for silver. Precious metals and crypto currency prices peak in the third quarter.

- Kass Diary, 15 Surprises for 2021

Here is a seven year chart on Bitcoin. 

"New" Crypto Headwinds

2021 has brought up new found concerns regarding the digital currency asset class. 

Among them are concerns whether Bitcoin Et al. are truly anonymous, secure and private. Just look at the recent Colonial Pipeline ransom recapture. 

Moreover, during the last week China has clamped down on crypto mining. 

But another concerns have been amplified - and I find it difficult not to expect tax authorities and regulatory bodies to come down on crypto currencies in the year ahead. Not surprisingly, bulls believe regulation is constructive for the price of cryptocurrencies - I disagree. I find it difficult to believe, in the extreme, that the U.S. and other countries will allow for the potential for digital currencies to upend monetary policy. As well, I find it difficult to believe that traditional financial institutions - the large money center banks - will be passive and not attempt to change the competitive crypto landscape in an attempt to not lose market share. 

Finally, I have written this analog about fiat and crypto several times: 

"The problem with fiat currencies, like the U.S. dollar, is that monetary authorities can create an unlimited amount of new dollars or other currencies - making it look, to some, like a Ponzi scheme.

The problem with cryptocurrencies, like Bitcoin and Ethereum, is that anyone can make an unlimited number of new cryptocurrencies- making it, too, look to some like a Ponzi scheme. Ponzi schemes and scams are only visible to those that have no sense of history or want to believe in magic.

I believe cryptocurrency is like Tinkerbell's light - its power source is based solidly on enough children believing in it."

I am still awaiting a thoughtful response and rejection to the concerns in the above quote - which compares endless monetary growth with an endless supply of expanding cryptocurrencies. 

Bottom Line

There are numerous reasons, some mentioned in the body of this morning's column, that explain why I think it is important for me to continue to deliver and monitor our thoughts on cryptocurrencies. 

I am respectful of subscriber SBickley's comments, above, but I nonetheless don'ts see my Bitcoin ramblings as "noise."

As I wrote in "Again and Again 'Group Stink' Has a Foul Odor",  we should stop nodding our head in agreement even when the counterparties are smart and self confident. 

That said, I understand that I certainly do not have the concession on the truth with regard to the intrinsic value of Bitcoin, dogecoin and the other cryptocurrencies. 

So, take my admittedly incomplete knowledge of cryptocurrencies with a grain of salt. 

It is important to develop your own analysis and to seek out advice from other, more informed cryptocurrency observers, analysts and money managers. 

Above all, don't let a trade become an investment. 

P.S. - I tried my best to recreate my opening missive that was lost in AOL mail. I didn't totally succeed, but I tried!

Jay Powell's testimony won't begin until 2pm but we saw the speech last night and it was no different than it was last week. But, with Jim Bullard putting some meat on the bones in terms of what he himself is at least thinking, Powell will likely have to do the same in the Q&A. I'll say again that inflation is now a Main Street story and politicians like to ask questions that they are getting asked from their constituency, so Powell better have his prepared answers to read from when asked as he likes to read prepared answers we've noticed.

Keep in mind here, the Fed is absolutely not getting in front of any curve. They are instead catching up to the new reality of higher inflation that they for sure did not forecast. And, even if inflation falls back to where they think, which I believe it won't anytime soon, it will still be years before we even see zero REAL rates again, let alone a smaller balance sheet.

The only data point of note overseas was the UK CBI industrial orders index which rose 2 pts m/o/m to 19, 3 pts better than expected. That happens to be the best level since 1988. CBI said "Encouragingly, this performance is reflected in the majority of manufacturing sub-sectors and looks set to continue in the coming quarter." But, we know what is coming along with this. "However, supply shortages continue to bite, and firms expect that to push through into prices in the months ahead." Again, the inflationary pressures being felt is a global phenomenon and will just continue further as the rest of the world opens up. This data point is rarely market moving and today is no exception. The pound is lower but most currencies are today vs the dollar. Gilt yields are slightly down but the FTSE 100 is rallying modestly. I remain bullish on UK stocks, particularly the energy ones and some REITs.

To the last point, India vaccinated 8.6mm people in just the last 24 hours, a daily record. Yes, this delta variant is flaring but so is the attempts to vaccinate.

UK CBI INDUSTRIAL ORDERS INDEX

I can't retrieve (and failed to save) my opening missive on bitcoin and cryptocurrencies.

Entitled "Don't Let a Trade Become An Investment" it explained six important reasons why I think it is important to analyze and deliver my views on bitcoin and other digital currencies.

I respond to a number of subscribers who don't want to hear bitcoin "noise" on a continuing basis, etc. I explain why an analysis of such a large asset class (with collateral individual equity plays) is important (touching on systemic risk from the leverage inherent in digital holdings).

I have not always been a bitcoin bear. In my Surprises for 2019 (written in November 2018) I suggested bitcoin could fall from $21k to under $5k (that was very accurate) and in my Surprises for 2021 I wrote that bitcoin could double to over $40k (it did and then overshot).

I also highlight the many high-profile and uber-smart holders (like Musk, Saylor, Dorsey, Novogratz etc.) and why I differ in outlook from them.

And, that, as always, my view should be taken with a grain of salt and everyone should do their own analysis and rely on a number of analysts who follow this large asset class.

Frankly, I am too ticked off from screwing up and I won't be able to nor do I intend to try to duplicate it.

Really ticked off.

I just lost a massive opening missive that I drafted on AOL.

Does anyone know how to retrieve it?

Dogecoin at $0.18 (down from $0.68):

gerryb • 5 hours ago • edited

Revolt in the Sovereign Debt Market

the U.S. government is broke. It plans to soft-default on its debt by pushing inflation up while keeping interest rates down.

The technical term for this is "negative real interest rates." Here's what that means for the debt...

A negative 3% real interest rate reduces the real value of the government debt by 46% over 20 years. At negative 5%, the real value of the government debt gets reduced by 64% over 20 years. (This is thanks to the power of compounding, but I won't bore you here with the details.)

The slang term for this condition is "financial repression." It means the government is sneakily stealing from bond investors, on an inflation-adjusted basis, by about 3% to 5% a year.

Here's the thing...

The Fed and the Treasury cannot admit they're doing this. The announcement would trigger a revolt in the sovereign debt market. So they must pretend to be tough on inflation once in a while, to placate bond investors.

Nothing Has Changed

This is what we saw last week... The Fed pretending to be concerned about inflation to placate its investors and buy some more time.

But long term, nothing has changed. The government has $28.5 trillion in debt and plans to keep spending money it doesn't have - to the tune of more than a trillion per year.

That's why it must soft-default through inflation.

That means it will pay down its debt... but with massively watered-down dollars. It's the only way the government can default on its debt without admitting it's defaulting.

The bond market will eventually figure out what we already know and revolt anyway.

We'll see yield curve control (capping interest rates) and a massive expansion of the Fed's balance sheet... And the paper currency system will be the release valve.

We call this a "synchronized global currency devaluation."

In the meantime, markets will move in waves of sentiment as traders position themselves - and over-position themselves - in one direction or the other.

Higher Gold Prices Ahead

My sense is, after a year of positioning themselves for "more inflation," traders had become overinvested in inflation hedges.

Even though the Fed is only pretending to be concerned about inflation, it was enough to trigger a bigger-than-normal reaction in the markets.

Nothing to worry about, though. With $28.5 trillion in debt and more debt coming, the long-term trend of higher inflation, lower real interest rates, and much higher gold prices is assured... tom dyson