The babbling bovine scattalogy from Jay Powell yesterday may have triggered another everyday garden variety 700 point Dow intraday reversal, but the bigger news is what the smart money is doing.
There is a growing recognition that QT (Quantitative Tightening) in whatever form it takes will result in the Federal Reserve dumping short term US Treasury purchases along with a massive fire sale of mortgage backed securities and other short term paper.
The result of this inept policy approach fails to take into account the disaster at the US Treasury, Janet Yellen, who thinks that the Fed should just buy any instrument she prints so they can proceed with their Great Reset into a globalized financial system. Her policies at the Fed set the table for this disaster our economy is about to experience and the smart money is sending warning signals about her policies making things worse as she stumbles through the fiscal nightmare in Washington, D.C.
This morning the 2 year yield breached the 1.20% level and that is not going to end well:
Needless to say it looks like an inversion of the yield curve at the 2’s to 10’s is becoming a distinct possibility:
By the time that occurs, inflation will be wildly out of control and worse, the Fed still has to buy the 10 year Treasury to prevent the US from entering into a debt death spiral as overseas buyers will flee short term notes knowing the buyer of last resort has left the building. With the hard left in full control of fiscal policy in Washington, nothing good will happen as this tumultuous winter turns into an even wilder out of control spring where financial assets will finally have to start marking their risk levels to a disbelieving market.
Good times baby, good times.