Bonds Crying for Help

The bond market is getting destroyed.  The US Treasury market is screaming a cry for help.  But politicians, Treasury, and the Fed are ignoring its cries.  The bond market is begging for Yellen to come out to say they will be doing Treasury buybacks or will issue more T-bills and less duration.  Or Powell to come out and say that QT would likely be stopped when the Fed cuts.  Or for Congress and the White House agree to spending cuts to lower the budget deficit.  Those are unlikely to happen.  So the bond market is on its own.  The US government brought this upon itself.  You only get a selloff of this length and magnitude in the biggest, most liquid bond market in the world when there is a huge fundamental change.  That change has come gradually and then suddenly, just like how people go bankrupt.  

First the gradually part.  It didn't start with the 2008 recession.  Contrary to what many believe, Obama was not a big spender while he was in office.  In the first 2 years when he had both Houses of Congress under Democrat control, he didn't do a Biden style big fiscal stimulus, even though the economy was in a deep recession.  He did small, piecemeal fiscal packages that hardly moved the needle.  The big budget deficits from 2008 to 2010 were mainly due to tax revenues tanking because of huge losses in jobs and capital, not lots of spending or tax cuts.  For the rest of Obama's tenure from 2011 to 2016, the Republicans controlled the House, and they pushed for spending freezes while the economy was in a low growth, low inflation environment.  That was a huge boon for the bond market, as the Fed was stuck at zero because fiscal stimulus was not coming, and the organic growth rate was just too low.  

Then Trump gets elected, and you get huge tax cuts as well as spending increases, increasing the budget deficit up to trillion dollar territory during expansionary times.  That was the first sign of trouble for the bond market, and you did get the Fed to actually start raising rates again because inflation was creeping higher, and the economy was slowly heating up.  This was the beginning of the end for the bond bull market, as the wave of populist fiscal policies gained traction in Washington D.C., and politicians realized that voters like tax cuts, they liked stimmies, and they didn't really care about the national debt or the budget deficit.  You had MMTers urging on more fiscal spending, with inflation just a mere afterthought.  

All of this created a huge tinderbox that was just waiting to ignite with a flick of a lighter.  That was Covid in 2020.  You don't get the huge fiscal response if you have politicians worried about the budget deficit and spending too much money.  And politicians like to follow what is popular, and they realized that handing out cash for nothing was extremely popular.  And because of the low inflation decade from 2011 to 2020, they felt like inflation wouldn't flare up even if they spent trillions of dollars!  And even if they thought inflation would go up, it would happen a few years later, so it didn't really matter to them.  So you had the perfect recipe for reckless fiscal policy in 2020.  And because investors had been so used to a long bond bull market, and with rates getting so low, bond investors felt invincible.  Ignoring the negative consequences of such outrageous spending.  

So Trump and Mnunchin in 2020, with the firm approval of Pelosi, went to give out trillions in stimmies to individuals and corporations for doing nothing, or just keeping employees on payroll, for way longer than necessary.  Powell got in on the action and printed gobs of money to monetize the debt so rates would be super low, especially mortgage rates, while all this happened.  It was a huge transfer of money from the public sector to the private sector.  The repercussions of all that stimulus still reverberate today.  

Then Biden just pours gasoline on the bonfire while having great luck by having the House and Senate under Democrat control, by the skin of his teeth.  Enabling him to pass trillions more in pork spending packages in the form of infrastructure, CHIPs, and IRA bills.  Inflation was already starting to rage, this just added to it.  Bidenomics = Inflationomics.   He is the most inflationary president in US history.  You can't totally blame him.  He is a politician.  He does what is popular.  And spending money is popular in America.  Because it reduces unemployment and gives people more cash.  And the inflationary consequences come later.  It embodies the American mindset.  Buy now.  Pay Later. 

These Biden spending bills are the main reason that the US economy is outperforming the European and Asian economies in 2023.  American exceptionalism is massive, shameless pork spending and huge budget deficits, fully utilizing its reserve currency status to prime the pump.  It is not sustainable in the long term.  Reserve currency status is hard to obtain, but once obtained, it is easy to hold on to.  People are stubborn and hold on to long held beliefs until the evidence becomes overwhelming to make them change their mind.  The US government is doing everything in its power to abuse its reserve currency status by running multi trillion dollar budget deficits in expansionary times, having a huge Fed balance sheet that is excruciatingly slow to be reduced by a peashooter QT policy.  Take a look at the fiscal deficits as % of GDP.  It never was so low in an expansion as you are seeing in 2021-2023.  Budget deficit of 8% of GDP with unemployment at 4% is ridiculously expansionary policy.  That is why inflation isn't coming down faster and why the recession isn't coming. 

 

The US Treasury market is now starting to convulse from all the mistakes that politicians made for the last several years.  You can't blame Powell for this mess, although he was huge enabler in 2020 and 2021 with all that QE.  Its Argentine fiscal policy that is causing the huge rout in the most important bond market in the world.  There are only two ways this gets resolved:  1) Treasuries keep going lower until they find fair value for the current fiscal environment of reckless spending and tax cuts with no regard for budget deficits.  2) The US government starts to control its spending and causes a recession, which brings a bid back to USTs. 

It is out of the Fed's hands now.  They are not the bus driver, as many think.  They are bus riders.  The bus drivers are the President and Congress.  They control the future of interest rates, not Powell.  The long term future for US Treasuries and the US dollar look bleak.  Yes, even the almighty dollar.  The last time the US ran such big budget deficits during an expansion was in the early to mid 1980s under Reagan.  The US dollar kept going up until it didn't.  Here is what happened to the US dollar in the 1980s. 

I expect a similar situation this time around, with the dollar remaining strong until the trend reverses violently in the other direction as a massive US budget deficit causes the supply of US dollars to overwhelm demand.  Also, the US dollar is fundamentally overvalued based on PPP to Europe and Japan, the 2 biggest weightings in the US dollar index. 

The SPX is following the seasonal patterns to near perfection.  You got the initial weakness in August, followed by strength at the end of that month.  And then September follows through with its reputation of being the weakest month of the year, with the weakness back end loaded into the second half of the month.  This is not voodoo.  Seasonal patterns happen for a reason.  Post quarterly options expirations are notorious for being weak in March, June, and especially September.  A lot of options open interest is concentrated in those quarterly expirations, and the rolling over of options positions/being less hedged make the SPX more vulnerable to selloffs.  Puts dominate the index options space, so when put open interest goes down, that means less put protection which means more fund managers are more likely to sell when markets are going lower, rather than staying still.  That's happening since Sep 15 quarterly options expiration.  Add into the bond market weakness and you have what you see on the screens.  

Don't believe those who are members of the Church of What's Happening Now about the bond market and its affect on stocks.  The stock-bond relationship is overstated in times like this.  Yes, all things equal, lower bond yields are better for stocks than higher bond yields.  But stocks focus much more on future earnings, and with most SPX companies having locked in long term rates at much lower levels, their future profits are not so negatively affected by higher bond yields as they would be in the past.  Also, one of main reasons the bond yields are higher is because the US economy is stronger than most expected, which means earnings expectations have gone up.  And with so much fixed rate debt (mortgages, corporate) in the US locked in at low rates, higher bond yields have a smaller effect on the economy than people think.  Probably the only thing I would worry about is the lack of bank credit that would result from these higher long term yields, as they pressure bank balance sheets and reduce the demand for credit.  But that would be something I would be more worried about at a 10 year yield above 5%, not here.  

On the intraday V bottom pattern:  they are not reliable.  In fact, they often lead to gap downs the following day and breaking of the intraday low in the following days.  We did see a lot of put volume on Wednesday which is necessary for the bottoming process.  GS Prime broker data has shown that hedge funds have sharply increased their short selling over the past week.  So the foundations for a tradable bottom are coming into place.  We also got much closer to the much talked about SPX 4200 support level, which is rock solid.  Based on the price action and the relatively low volatility (VIX is still under 20), its likely the SPX bottoms above 4200, probably somewhere between 4220-4240.  

You had a huge rally in June and July from 4200 to 4600, coming off a long term base that was between SPX 3800-4200.  August and September are consolidating those gains.  The fundamentals for the US economy has not changed much over the past 2 months.  Its still stronger than most expected at the beginning of the year, and you still have a lot of skeptics who think a recession is right around the corner.  Yes, yields are higher, but as I mentioned above, currently the US economy is not that interest rate sensitive.  

Its regrettable that I didn't put on a short position earlier in the month, even though I felt like ingredients for another selloff were there, including price action, seasonality, and the bond market weakness.  That would have been immensely profitable, even if I covered early around SPX 4300-4350. The clue to get short was the inability to V bottom towards previous highs around 4600 in September.  Held on to my previous view and didn't adjust as the market was showing weakness when it should have been stronger.  That opportunity is behind us, so on to the next one, which is to buy the dip.

The technicals are oversold, the fundamentals haven't changed much, and we are entering a period where the market usually bottoms.  I put on a starter long position in SPX/NDX on Tuesday, and am waiting to add more around SPX 4230-4250 in the coming trading days. 

Fear and Loathing in the Bond Market

99% of investors have never seen such a long bear market in bonds.  The selling seems relentless, coming in waves, with only brief and shallow bounces.  It has been a wholesale repricing of future interest rate expectations, with more people getting skeptical about the Fed's ability to get down to their 2% inflation target.  Most investors now believe that any recession, if it happens, will be brief and mild, with the Fed not going down to 0% like the last 2 times there was a recession.  Those outcomes are certainly possible, and probably the higher probability outcome vs. a long, deep deflationary recession.  But at a certain point (may need another 30-40 bps selloff), the market will underprice a low inflation outcome, and overprice a high inflation one, making bonds too cheap, especially short term bonds.  

In the short term, I am less bearish on the US economy than the economists that I hear on CNBC and Bloomberg.  The tailwind from the big fiscal deficit is still carrying the economy in a high interest rate environment.  Another tailwind that is rarely mentioned is the surge in immigration in 2022:  

The number of people born somewhere else climbed by nearly a million last year, reaching a record high of just over 46 million, according to new estimates from the U.S. Census Bureau.   "The foreign-born population zoomed up," said William Frey, a demographer at the Brookings Institution in Washington, D.C. "The gain in 2022 was as big as the previous four years put together."

More immigrants not only means more labor but it means more demand for goods and services.  So the supply of labor has gone up along with the demand for goods and services.  You combine the big budget deficits with a big influx of immigrants, and everyone focused on tight monetary policy, and that is a recipe for a stronger than expected economy.  In recent months, you are finally seeing some people recognize the absurb levels of fiscal spending and deficit/GDP, and are connecting 2 plus 2 to figure out that its difficult to get a recession under those circumstances with such a tight labor market.  

This realization of a resilient economy that is less rate sensitive has re-priced the yield curve, with a bear steepening move that has put 10 year yields back towards the panic highs of October 2022.  The bond market is now in a 3 1/2 year downtrend, coming off of a 40 year secular bull market.  Gradually, fixed income managers are realizing that the previous bond market isn't coming back, and that supply and demand fundamentals are now much worse than they were in the previous 40 years.  The main reason is the US government.  When the government is addicted to deficit spending / tax cuts, without caring about debt or deficit levels, you have an unfavorable environment for bonds.  The enormous deficit spending and lack of tax revenue has brought huge amounts of Treasury supply into the market, which can only be digested at lower prices/higher yields.  Not only that, all of that Treasury issuance has goosed the economy by adding trillions of dollars into the economy that would otherwise not be circulating so freely, even with QT.  That keeps the Fed from cutting, which then puts pressure on the rest of the yield curve as the negative carry from borrowing short to buy lower yielding long term bonds reduces demand for long bonds, causing a bear steepening.  

Remember, the Fed did so much QE in 2020 and 2021, there is still a huge amount of money in the reverse repo facility which can be sucked out by QT without affecting the ample reserves in the system.  So QT is not tightening financial conditions.  Plus, once you get the reverse repo funds drained (will take about 18 more months at this rate), you still have a lot of excess reserves held by the banks that can be reduced without affecting interbank transactions or repo rates.  QT is not doing anything to the stock market because there is still so much excess liquidity in the system that is out there just parked at the Fed collecting 5+%.  

Of course, the origins of this comes from the outrageous fiscal and monetary policy in 2020, which laid the groundwork for this bond bear market.  For the bond market, it was short term gain, long term pain.   Despite the huge interest expenses racked up by all the national debt, politicians could care less.  They are all populists now.  On both the left and right, they pay scant lip service to the debt and deficits, and focus on ways to placate their core constituents by spending on clean energy, border control, defense, or just outright handouts like child tax credits or payroll tax holidays or pure tax cuts.  That's in addition to the natural increase in the deficits coming from the baby boomers entering retirement and collecting Social Security and Medicare.  Its just an explosion of deficit spending that will keep the long term trend of inflation higher and nominal GDP growth higher than in the past.  Real GDP growth down, inflation up.   

I remember when people actually cared about the size of the national debt, which kept politicians from going overboard on spending/tax cuts.  There was the famous national debt clock which gets no air time these days, but was a source of concern by many back in the 1980s and 1990s.  No one cares anymore.  

Eventually, you will get to a point where the economy slows down and can't handle the higher interest rates and the Fed will have to cut.  But probably longer than most people expect because a lot of businesses were bearish on 2023 and held back spending and investment until things improved.  So there is definitely some pent up demand that will be slowly unleashed in the next 6 months.  My best guess for when the economy slows enough to get the Fed to cut will be sometime in the summer/fall of 2024.   Next year, you have less spending at the state and local level, and the spending in the IRA and infrastructure bills will flatten out.  Capital gains tax receipts will be much higher in 2024 as stocks have gone up quite a bit since the start of the year. 

 Overall, the fiscal deficit as % of GDP should drop 2-3%.  That should be enough to slow down the economy and increase unemployment, which will put pressure on the Fed to start cutting ahead of 2024 elections.  Powell got re-nominated by Biden, and has no shot at getting re-nominated by Trump if he wins.  Don't forget that Trump hates Powell because he wasn't as dovish as advertised, and didn't yield to pressure from Trump to keep rates even lower.  So Powell will be incentivized to get political and help Biden win by cutting rates even before inflation goes down to 2% if he sees unemployment rising.  That should help the bond market in 2024, but that's a few months away so until then, there could be some more pain ahead as I don't expect the economy to get weak enough to support the bond market with all that supply coming down the pipe.  The 2-10s yield curve inversion is too steep for there to be much of a drop in longer term yields if the Fed stays steady.  The only reprieve will come with actual economic damage, and nothing else. 

So if bonds are weak for the rest of 2023, does that mean the stock market won't go up anymore?  No, not necessarily.  Stocks have rallied huge even as the 10 year yields have risen over 100 bps from the lows in April at 3.25%.  Bond yields are secondary to the stock market.  Earnings are the primary driver.  If a stronger economy keeps earnings expectations higher in the future, that helps stocks, regardless of higher bond yields.  So I could definitely picture a scenario where bond yields grind even higher and stocks going higher alongside it.  That's what happened for the past 5 months.  It has happened numerous times in the past.  Notably 2013.  2017.  2021.  And this year.  

The SPX is trapped in the middle of a range here, and volatility is dying.  VIX at 14 and realized vol even less.  The FOMC meeting on Wednesday has low expectations, and knowing Powell, he's not going to be giving away much here, being as mealy mouth and data dependent as possible, especially as he'll be on hold.  As we approach quarter end, you could see some rebalancing out of equities into bonds, so that could put some pressure on stocks in the next several days.  Had a big inflow into equity funds according to BofA in the week ending Sept 6, so investors are a bit sanguine here.  Also, JP Morgan fund hedge flows from the short call and long put spread being rolled over into December should require several billion of SPX selling by dealers to accommodate the rollover.  Don't like playing in the middle of the range, so not shorting this.  Overall, the flows look bearish for stocks here. 

Calm Waters, Europe vs US

It has been a calm, sleepy market in SPX for the past 2 weeks.  The VIX is getting pummeled, as the realized vol is just too low to allow the VIX to stay above 15.  There is a bit of a sticker shock effect for market participants when they see the VIX in the 13s even though the SPX is not in a bull trend, but options traders aren't stupid.  They will not keep paying a fat premium for IV when realized vol is so low. The much hyped September seasonal weakness has occurred, but not in the way that many expected.  Its been a very controlled drip lower, since the start of the month.  Its mostly sideways, yet from watching CNBC and Bloomberg, I sense that the fast money crowd is looking for a down move in the coming weeks.  We got an oddly high put/call ratio yesterday even though the market didn't go anywhere.  Perhaps they are loading up on puts before the big Sep. opex on Friday.  They are definitely not bullish here. 

One thing that has been noticeable is European weakness. European indices have  been underperforming the US indices for awhile now.  There is a very simple reason that separates the US and Europe.  Its not demographics or the economic system.  They aren't that different.  Its fiscal policy.  Europe is governed under rules and stipulations determined by the EU in Brussels.  They have a big say in what kind of fiscal policy that the member states can run.  In particular, there is a limit to the budget deficits as a percent of GDP that are allowed.  Before 2020, their rules were strictly followed and this kept a lid on fiscal policy for most of Europe.  After 2020, the rules were relaxed because of extraordinary circumstances but that wasn't meant to be a permanent relaxation of rules, just a temporary one.  In particular, Italy took full advantage and ran up huge fiscal budget deficits to stimulate its economy, making it much stronger than most of the other member states.   And Italy has horrible demographics and a huge debt to GDP ratio, making them spend way more than other EU countries on interest expense rather than actual government spending.  That shows you the power of fiscal.  But rules are rules. EU budget rules hang like a dark cloud over the European economy, and has kept the member states from going full bore on fiscal stimulus. 

In the financial markets, fiscal policy is very underrated, and monetary policy is very overrated.  That is a result of decades of fiscal policy which didn't stray too far from normal, with low single digit budget deficits as a percent of GDP.  Fiscal policy used to be a near constant, with only small stimulus packages during a recession, and with no  bold spending plans over the past few decades.  That's changed since 2020.  With more populism, and politicians as well as most voters no longer caring about deficits and the national debt, sovereign governments are much more willing to spend without taxing more.  In fact, they are spending more and taxing less.  More spending + tax cuts/subsidies = bigger deficits = stronger economies.  But there is no free lunch when the government spends more money.  

The more money that the government spends, even when its not financed with the money printer (QE), the more demand that is pumped into the economy that would otherwise not be there.  Sure, that money now has to come from investors instead of from the central banks, but those investors can use those government bonds that they purchased as repo collateral to invest in stocks and other bonds like its cash.  So net net, the government spends more money and economy gets stronger, and investors can continue to buy riskier financial assets, even though they have to buy more government debt as its issued.  

There is a reason why the bond market is so weak.  The current fiscal policy, in the US anyway, is being run as if the economy was in a deep recession, with budget deficits of 8% of GDP with near full employment and fairly strong GDP growth.  Its hard to have a recession under those conditions, even after 525 bps of rate hikes.  US fiscal policy is ridiculously inflationary.  The bond market hates it.  The stock market likes it, because it boosts corporate profits, even with much higher borrowing costs.  

When big corporations and homeowners are already well financed with long term debt, their net interest expense will remain low even with yields exploding higher, because they locked in low rates in 2020 and 2021.  It makes them less sensitive to bond yields, and Fed policy.  It seems like the macro pundits are more worried about higher rates than the borrowers who actually are involved.  

So the country (US) that has the most long term fixed interest rate debt and is the least sensitive to monetary policy is running the most expansive fiscal policy.  While the ECB is trying to follow the Fed because of short term inflation pressures which are much more likely to subside than in the US because their governments aren't going hog wild with spending, and because their homeowners are on more variable interest rate debt, which is much more tied to current monetary policy.  

While the CPI in the US is much lower than in Europe, that's not going to last.  The CPI in the US is already bottoming, and going back up, while in Europe, they will continue to go lower as the EU inflation leading indicators are all pointing down.  Add on top of that the trend of European industrial production moving offshore, and you are looking at a big divergence between European and US inflation in 2024.  The Eurostoxx is sniffing out the weakness in Europe, as Europe, which was leading for the first quarter of 2023, is badly lagging the US in Q2 and Q3.  It doesn't help the case that the ECB remains stubbornly hawkish, thinking they can copycat Fed policy, and get the same economic results.  Lagarde has outsourced EU monetary policy to Powell, who has much more room to be hawkish than Lagarde, but it seems like Lagarde is trying to outhawk him.  It should lead to a very weak European economy in 2024, which will seep a bit into the US, but not much.  The US government always figures out a way to prime the pump with more stimmies out of the blue, so the US should remain resilient for the next several months.  Bottom line, for the next 6 months, US stocks > European stocks, and European bonds > US bonds.  

There hasn't been much to do.  There is no reason to press any positions here.  If I had to choose a trade right now, it would be to buy bonds, just from a purely tactical view.  It would be for a short term trade, not a long term holding.  My preferred trade is to wait for a dip to buy SPX and NDX.  Perhaps after you get past September triple witching opex, you can start to see a bit of a downdraft to buy into.  There is a potential government shutdown at the end of September, and the restart of student loan payments on October 1 which could act as bear catalysts.  Take a look at the underperformance of the Eurostoxx and Russell 2000 vs. SPX over the past month.  The divergences are building for another move lower in the coming weeks, although I am not playing it. 

SPX vs Russell 2000

SPX vs Eurostoxx 50

Its not a time to force trades, wait for the market to come to your levels.  Less is more here.

Fiscal >> Monetary

Biden is running things as hot as he can.  Powell is trying to cool things down without going overboard.  Its not a fair fight.  Expansive fiscal policy (lots of spending and tax cuts) is popular.  And potent.  Politicians don't even pretend to care about the deficit anymore.  They know that the masses don't care.  People just want to keep their jobs and receive government handouts from time to time.  The US is a socialist country now.  The government has a huge influence on the economy, much more than it has versus anytime since World War 2.  The massive budget deficits prove it.  Powell can't win a fight against Biden because he has to pay more and more interest on an ever growing pile of debt with each rate hike, interest that is stimulative to the economy!  So his main tool of raising rates to slow down the economy just doesn't work like it used to. 

Most of the macro "experts" are still looking for that long awaited recession.  That is the general consensus from all the macro pundits that treat their opinions as if they are fact.  Still.  You would think that after wrongly forecasting a recession for 2023, they would rethink their views and see where they went wrong, but most are just blaming the long and variable lags of monetary policy for their missed macro calls.  Its like the investor that buys a stock that continues to sink after he buys, saying that he was just early, not wrong. 

After thinking about my missed call for a sharp weakening of the economy in 2023, it really comes down to focusing too much on monetary policy and not enough on fiscal policy.  And not thinking about the lack of monetary policy transmission with the low fixed rate mortgages that most homeowners locked in with refis in 2020 and 2021.  Same goes for corporations that issued tons of low interest rate, long duration debt in 2020 and 2021.  That immunizes a big swath of borrowers from higher rates.  That is not the case in Europe, which is why Europe is already experiencing a noticeable economic slowdown, while the US is cruising along with minimal economic damage despite 525 bps of rate hikes.  

In fact, it can even be argued that the rate hikes have been marginally stimulative, considering that a huge chunk of the higher interest payments that people are receiving are coming straight from the US government and its massive debt load.  There is a huge difference between governments paying interest and private individuals and corporations paying interest.  When governments pay interest, they are just issuing more debt to pay the interest, which effectively makes it like a stimulus payment more than a debt payment.  While those paying variable short term rates on loans are feeling some pain, they are counterbalanced by a bigger group of borrowers that are paying low fixed interest rates on loans that were made when rates were much lower.  And its the fat interest on cash and short term bonds that are tipping the scales in favor of the interest rates actually not having much of a restrictive effect on the economy.  

Most of what I hear out there is about the lags of monetary policy, how the higher rates will slow down housing and hurt credit formation, and eventually lead to a much slower economy and a recession.  That is the base case for most macro pundits.  The calls for recession haven't been canceled, they've just been pushed back to 2024.  Long and variable lags of monetary policy is sounding like a cliche that used to be true in the past when variable rate borrowings and shorter term debt was the norm.  Now corporations are issuing more long term debt than they have in the past, and most mortgages are now fixed rate, with most refinanced at historically low rates.  Monetary policy just doesn't have the bite that it used to because the US economy is less sensitive to interest rates than in the past.  

And I haven't even mentioned fiscal policy.  Take a look at federal spending as a percentage of GDP (excluding interest payments on the debt):  

 It is above 25%, which is higher than after 2008, when the US was in a deep recession and tax receipts were way down + high unemployment leading to more welfare/jobless payments.  The amount of pork flowing through the system, even without the jumbo sized interest payments on the debt cannot be ignored.  It is the elephant in the room that people are not talking enough about.  It is the single biggest reason that the recession didn't come, despite the warnings from most economists. Looking forward, fiscal spending will continue to run at high levels due to entitlement spending (Medicare and Social Security) that will naturally increase due to the retirement of the baby boomers, as well as the reckless attitude towards spending in Washington, as deficits don't matter anymore.  The masses love stimulus and prefer an economy that is running hot vs one that is running cold.  Bidenomics = run everything on overdrive and hope the engine doesn't blowup/inflation doesn't get out of control before 2024.  

There have been some moves over the past 3 months that I've completely missed out on, and/or have been on the wrong side of.  The move higher in stocks in June and July.  The move higher in crude oil in August.  The move higher in yields in August.  The one move that I did get right was the move lower in stocks for August, and it wasn't quite the magnitude of a move that I was looking for.  Predicting macro is hard.  I should probably give up on it, but its so enticing to try to be a macro guru and sound smart, when it doesn't really add any value for my trades and investments.  Really the only edge that I have in trading the big markets is looking at positioning and what people are saying/expecting in the coming weeks/months.  Anticipating the anticipators.  

Been wrong again this week.  Thankfully it was low conviction so I had no money on the thought.  Was looking for a continued grind higher and instead we've got a meaningful pullback.  Still think there will be some buying going into triple witch opex next Friday, perhaps to SPX 4520-4530.  But not a high conviction idea so I've yet to put money behind it.  I may put on a small long position today just for fun as I think its better than 50-50 odds that it bounces up next week.  Also getting more constructive on bonds at these levels, but wouldn't go big here.  Playing small ball until I see better opportunities.  Limiting risk until I have more conviction.