Comment of the Day
16th August 2023
EOIN TREACY
AUG 17
Video commentary for August 16th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: real yields hit new recovery highs, gold and silver break lower, dollar firm, 10-year yields exceeed 4.25%, stock markets under pressure, oil unwinding short-term overbought.
Fed Saw Significant Inflation Risk That May Merit More Hikes
This article may be of interest to subscribers. Here is a section:
The minutes also conveyed optimism about the outlook for the US economy as the Fed’s influential staff economists “no longer judged that the economy would enter a mild recession toward the end of the year.”
Still, they expected economic growth over the next two years “would run below their estimate of potential output growth, leading to a small increase in the unemployment rate relative to its current level.”
Eoin Treacy's view
This long-term chart of the core services less housing index helps to highlight why the Fed is so focused on getting inflation back down to trend now rather than later. The rate bottomed near 2% in 1963 and trended higher until 1970.
The closing of the gold window in 1971 temporarily got the inflation issue under control but the demise of the Dollar was one of the primary causes of the oil embargo. Inflation came roaring back, and it was a decade before the rate dropped back below 6%.
This section continues in the Subscriber's Area.
Whatever Happened To The Liquidity Hole?
This podcast from Bridgewater discusses the way in which the US Treasury has been issuing debt.
Eoin Treacy's view
The main argument is the Treasury is now increasing the quantity of debt issued so it more closely approximates the deficit.
Until now, the difference between spending and revenue raising, via debt, has been met with cash pulled from other areas of the government. That is now reaching its conclusion, so debt issuance has to increase to bridge the gap in funding. That siphons money out of the banking system and further tightens liquidity.
This section continues in the Subscriber's Area.
Eoin's personal portfolio: commodity trading and investment positions closed
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
This section continues in the Subscriber's Area.