Notes From Underground: Are You Ready When Delta Is?

I’ve been away minding my two Floridian grandsons (exhausting yet delightful). I did, however, have time to catch up on some reading, particularly W.E.B. Du Bois’s “Suppression of the African Slave Trade,” as recommended by Chris Whalen. Du Bois looks at how the large state-domiciled banks helped finance the importation of African black slaves. This is high quality prose written in 1896, a well documented and enlightening read about the politics of America at its early beginnings. We could all stand to learn from a genuine scholar rather than shouting at each other.

Also, I followed up the Du Bois with a reading about China from many different perspectives. The markets seem to be, once again, caught up with fears of a rapid rise in covid’s delta variant. There is definitely some position unwinds, as well as some market participants hedging against positions for a potential redo of March 2020.

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But seen in the context of the massive deleveraging that occurred in the spring of 2020, the current market action does not even register on our RICHTER scale. The SPOOS remain 90% above its lows of March 23, 2020 and almost 27% above the all-time highs that it had made in the previous February. The BONDS have recently rallied in anticipation of some rising uncertainty but the 30-year bond is resting just above the levels of February 23, 2020.

While traders are certainly cautious there is NO PANIC. The primary difference from 16 months ago is of course the FED having moved to the ZERO BOUND so yields are just too low at this juncture to attract those in search of a haven at any price. The critical question remains: IF THE ONSET OF THE DELTA VARIANT INCREASES GEOMETRICALLY, WHAT WILL BE THE RESPONSE OF THE MONETARY AND FISCAL AUTHORITIES? WHAT TOOLS REMAIN IN THE BOX? THESE ARE THE CRITICAL ISSUES CONFRONTING ALL INVESTORS WITH U.S. RATES AT ZERO.

Last Wednesday, I had the great pleasure of discussing these issues with Peter Boockvar and Richard Bonugli of the FINANCIAL REPRESSION AUTHORITY. It is certainly apropos to listen to the FRA podcasts for we are in the throes of a global scheme of FINANCIAL REPRESSION. This is the active policy to crush savers to keep the financial system buoyant in the short- to medium-term. Read the work of Professor Carmen Reinhart on Financial Repression to get some historical context as to where we are at, or where in the financial world is Carmen Reinhart? Enjoy the PODCAST.

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