Post by
metalhead666 on May 14, 2022 9:43am
Absolutely stupid and fatal to own any stock.....
San Francisco Fed President Mary Daly: “I expect financial conditions to tighten even more… I would like to see continued tightening of financial conditions.”
For its inflation fight, the Fed seeks tighter financial conditions. Not appreciated is that, once commenced, the Fed will not control this process. Financial conditions are now tightening dramatically at the “periphery,” consistent with the “Periphery to Core” analytical framework.
Recall the abrupt tightening of subprime mortgage Credit that initiated mortgage finance Bubble collapse. There are, however, critical differences between today’s “periphery” and 2007. The subprime eruption sparked a tightening of Credit at the fringe of mortgage finance. The impact was initially felt only by a segment of the housing market, while general financial and housing Bubbles were for a while bolstered by declining market yields. Meanwhile, the global economy was supported by powerful inflationary/expansionary dynamics in China and EM generally.
Today’s “periphery” is a vital source of finance for a much broader segment of the economy, particularly technology. High-yield finance (junk bonds, leveraged loans, venture capital, hedge fund leverage, crypto leverage, etc.) is today a key source of finance for our Bubble Economy’s Achilles heel – thousands of uneconomic, negative cash-flow companies and enterprises. Meanwhile, the global backdrop is one of myriad faltering Bubbles, certainly including historic Chinese financial and economic Bubbles. The global system is today acutely more fragile than back in 2008. Moreover, the current geopolitical is fraught with risk. And finally, global central bankers have no solutions. The old inflationist remedies and schemes have turned lethal.