Slowly We Turn

Are Biden, Yellen & Powell The Three Stooges?

My favorites, Moe, Larry and Curly made Niagara Falls one of my all time favorites. In watching the Federal Reerve, something I’ve done for the last almost 50 years, I have seen this movie before. It’s playing out as it should be happening; as I’ve said before, sit on you hands and just let it happen.

Far too many people try to figure out every move, what it means and how you should react. Hey, Powell wore a grey tie yesterday. You know what that means, right? I don’t but I read many articles that jumped on that point. It wasn’t red, it wasn’t blue, it was grey. I read nothing into it except that Powell wore a tie that went well with his outfit. At least that’s what Elissa Leonard, Powell’s wife thought and who’s to argue with her. Give it a break folks, at least it wasn’t stained with Yellen’s mushrooms.

So what’s really going on? Have you been watching the shorter maturities? They have been pretty stagnant. Longer term rates have been rising but with today’s decision it’s a no brainer; rates on the longer term are just about ready to eclipse rates on the short end; especially since the Fed and the Treasury has a lot of refinancing to do.

I’ve got a feeling that Biden, or at least whomever in the administration is making the decisions for him, has sent a message; refinance using intermediate maturities. I agree and that’s what is expected. It makes sense. You see, not everything trends one way or the other; the trends reverse over time. How long that actual trend or amount of time is no one knows. It’s going to happen which is why I’m positioned the way I am.

Is Powell done fighting inflation, no. Is the Treasury done “pumping money” into the economy? No it is not but the trend is slowing and with that, the interest rate curve is going to shift; longer bonds are going to pay more than the shorter end of the curve.

Just like The Stooges, slowly we turned. Just like me, slowly the book is getting done. My long bond and lower Yen expectations are going to come to fruition. Gold, well we will see, same is true for the “widow maker” but to date I’m hanging in there. Why is that? You see, I’ve seen this movie before and like history it repeats itself, slowly but again, the end is the same.

What about orange juice? Why not cocoa? One is much more effected by demand and weather. The other is not. Not the greatest growing and harvest season for cocoa and it seems that people like chocolate. Orange juice just kept on going higher until it did not. Again, not a large position, six contracts total but so far I’m up. Given this sector is impossible to trade I have a trailing stop in there below my average entry point so as to ensure a winner. Let’s hope the “boys” who took it up take it down as well.

Back to Powell, Yellen and whomever is making decisions for the “big guy”. Inflation fighting requires a diminished employment environment. People need to lower their spending. Like anything else that’s not going to happen overnight. The entities that comprise the Russell index need to refinance. Problem they have is that the money is not readily available. That’s why I’m short the index and will continue to add more to the position as the “newbies” think the worst is over. It isn’t but it sure is nice to have a few “new” traders out there who think it is.

As I mentioned earlier, the eBook and it being on Amazon / Kindle is almost a reality. I’ll let you know when that actually happens. Ingram Spark is currently working on the dust covered hardback edition that will include a glossary and an index. That’s the one you’ll get with your Substack subscription. Not too shabby, eh? There’s more and Udemy is happy with the course so far; I am too. Many of you have agreed and I thank you for that. Your patience is appreciated in any ways.

Let me take you back. When I was about five years old Paul Shannon was on WTAE and he highlighted The Three Stooges. Ah yes, the days gone by. Did you know that Topps produced a trading card set featuring The Three Stooges in 1959. I remember and so did my Dad. Whenever he had the chance he bought me those cards and I did what I didn’t do with my Roberto Clemente rookie cards, I saved them and made a fortune. It takes time for good things to happen. For me and my Stooges cards it took 50 years. It is not going to take that long for Powell to win the battle; stay tuned and be patient.