Pumping Jerome

The A/D, or Always Money, or Fed money, and Warren Buffett “walking around” money, is surging powerfully here. Too bad it is the only money flow outperforming in this reflexive rally. MFI is setting up a cycle similar to 2018, a rough year for all but the nimble. The whales are buying the dip and we know for all the jawboning the Fed isn’t really doing anything to restrain liquidity, other than reducing their bond buying, (but they are still rolling over bonds on the their balance sheet) Now they are threatening to sell those bonds, QT, and if the market continues higher, they will.

At this moment the reflex rally and this dance of death between markets and the Fed, if we keep buying the Fed takes away the punch bowl, if we sell the party keeps going, we just have to keep the noise down. So there is nothing wrong with the money flows, the problem is an overhang of sellers, sellers who perceive the signals of a recession, and the blathering of a moar hawkish Fed, and a crazed world leader with nuclear weapons. Sellers want to sell Google and buy utility stocks. This is great cover for the Fed to look like it is imposing some discipline, but the A/D implies this is just another episode of Pumping Jerome…

In my mind the best way to play this ragged ass market is with volatility, and precious metals. Bitcoin showed its feet of clay when it dropped along with the market. Gold is not far behind. My personal gut check meter says gold and gold miners will pullback with the market when this reflex rally ends. Now we are entering (perhaps) what Bob Prechter calls the “Impulse” wave, and he quantifies that, I am just going to assign the emotional context here. And how far we go and how the money flows respond will determine the length and breadth of the pullback.

It could be as I have been saying for a long while, that Russia is near collapse. How will the global economies handle that? I mean good thing we sanctioned them so there are no supply chains to cut, no financial deals to unwind, all the ties have been broken or are being ended, all in advance of this event. The war and sanctions were all purposely constructed to set the stage for the final implosion. What comes next??

Well on the surface it stacks up to be a breath of fresh air in some old totalitarian regimes and some cold water in the face of some powerful new gulags. And perhaps even a hint of expanding democratic rights in the US, whose lagging in democratic policies, voter rights especially, puts a cap on the long list of oppressive policies since 2000, like Patriot Act.

In gold I trust, but I want to be able to tap the brakes on my one true love. The volatility in the VIX also presents some opportunity.

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