Covering (In) COT Blue

There are ebbs and flows, nothing ever goes in a straight line. But like the Treasury market in mid-2019, this one’s been limited to an atypically narrow range. Even this year’s August-November BOND ROUT!!!!! barely qualified as a market fluctuation. In the media, inflation’s guaranteed; done deal. I mean, Jay Powell and “digital money printing.”

Then again, we’ve heard this story before and not all that long ago. Inflation Hysteria #1 is near enough in the past to be easily recalled even by the shortest financial attention spans (Economists, including bank CEO’s, and those who uncritically parrot them). And that previous one had categorically more going for it than this. Even the Treasury futures market, the whole market, has at best been neutral this year; never once flipping reflationary like it had a few years back.

More than such reasonable doubt, however, if the shorts are doubting their own shorts, and it does seem that they are now, it might have quite a lot more to do with where things actually stand – and what that really portends for the near and intermediate terms. It was nice even fun to pretend for awhile that 2020’s gaping economic and monetary hole could be so easily covered by government-funded thirteen-digit numbers.

No. The reason the shorts never pushed things very far is that a very different scenario continues to beckon. And this one has not only stuck around while the temporary euphoria over vaccines and stipend-mania fades, it’s gotten stronger as the sense of long-run (deflationary) damage relentlessly pounds the entire global scene.

And it has little or nothing to do with more lockdowns and new variants to COVID.

Inflation Hysteria #2 has somehow been even more hysterical.


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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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