June DDD

What’s coming next week:

Some history:

No one worried about a recession:

Small Cap debt:

I’m not so sanguine about the market:

The USD is building strength. USD up everything except Gold down.

Sure Yellen wants the USD down and has been actively trying to push the USD lower. To an extent she has been successful. Successful in delaying the seemingly inevitable.

So: https://www.bloomberg.com/news/arti…er-path-for-rates-boosts-need-to-lift-revenue

The chart from the article:

For this chart to remain flat, as above, then GDP growth must consistently be ABOVE INTEREST RATES.

Why is this an issue?

Because with US debt at 121% of GDP interest payments MUST continue to rise as a % of GDP.

So, to keep the above chart flat, nominal interest rates must be lower than nominal GDP growth. With interest costs growing at a compounded rate, how exactly do you keep nominal GDP moving higher at the necessary rate? Well you can’t. Which means essentially some form of YCC.

Which is of course incredibly inflationary. And if you are stupid enough to hold bonds means that in real terms you lose money going forward.

Higher inflation = weaker USD. Which is of course where we came in. That is longer term. Currently the USD is looking rather too bullish for my liking vis -a- vis stocks, which could well take a tumble.

jog on
duc