Inflation ripping:
Oil up, grains and commodities up, and dollar down, as continued US demand at higher prices for energy transfers more $US to foreigners who don’t want to accumulate them.

Weakness continues:
Stocks down and credit spreads looking wider, and claims lower but have nonetheless worked their way higher since year end and only rising exports keep GDP at ‘muddling through’ levels.

Interest rates down:
As markets continue to believe Fed won’t even begin to act vs inflation, and will do ‘whatever it takes’ to narrow the output gap to zero, in total contrast to mainstream economic theory.

5 Responses

  1. W, R U still shorting the ED betting that at some point the FOMC will revert back to mainstream policy?

  2. yes, short a few Dec 09’s

    it’s also partially a hedge vs my personal loans outstanding that float with 3 mo libor.

  3. Wouldn’t it be a good hedge if you are long commodities/AGG? At the last FOMC meeting, when the FED was hawkish vs futures. Commodities
    shot down(albeit after a short delay) and ED futures went up. I know you’ve written that you expect commodities to rise in the long run irrespective of FOMC policy because of saudi/russian manipulation and speculation.

  4. yes, I was long gasoline for a while, then messed up by moving my position to short ED’s thinking the inflation caused by further increases in crude/food would trigger an interest rate response from the Fed.


    At least so far seems the Fed doesn’t care how high inflation gets. And that’s after the FOMC didn’t cut rates in August because inflation was too high then (Bernanke’s own testimony)

    I would have been better off just staying long crude a month or two forward and rolling it out every month.

    If I’m right about the Saudis setting price it should work until there’s a large enough supply shock to dislodge them.

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