{"id":57308,"date":"2019-10-19T02:15:59","date_gmt":"2019-10-19T09:15:59","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=57308"},"modified":"2019-10-22T06:20:38","modified_gmt":"2019-10-22T13:20:38","slug":"black-coffee-19-oct-2019","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id57308-black-coffee-19-oct-2019.html","title":{"rendered":"Black Coffee: The Fed’s Latest Cock-and-Bull (Market) Story"},"content":{"rendered":"

\"\"It’s time to sit back, relax and enjoy a little joe<\/em> …<\/p>\n

Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.<\/p>\n

Wow! Another week has come and gone — so without further ado, let’s get this show on the road.<\/p>\n

The first duty of a man is to think for himself.<\/em><\/p><\/blockquote>\n

— Jose Marti<\/strong><\/p>\n

The last duty of a central banker is to tell the public the truth.<\/em><\/p><\/blockquote>\n

— Alan Blinder, former Vice Chairman of the Fed<\/strong><\/p>\n

Credits and Debits<\/strong><\/p>\n

Debit:<\/strong><\/span> It’s worth noting that for the past two weeks, the yield spread between 10- and 2-year US Treasuries has gone from inverting to steepening<\/a>. This is especially significant because the damage from an inverted yield curve doesn’t actually begin with<\/strong><\/em> the inversion, but after<\/strong><\/em> it. In other words, the curve inverts first, acting as a warning — and then<\/strong><\/em> steepens into the recession. So buckle up.<\/p>\n

Debit:<\/strong><\/span> Did you see this? For the first time ever, Greece has issued negative-yielding debt<\/a>. Yes, that<\/strong><\/em> Greece — the same nation that, just seven short years ago, had the largest debt restructuring in history where bondholders saw their capital essentially evaporate into nothing. The world truly has gone mad.<\/p>\n

Credit:<\/strong><\/span> On a related note, MN Gordon notes that, “In a world with $17 trillion in negative yielding debt, and asset prices including US Treasuries bubbled up beyond comprehension, the Fed has fabricated a financial system that’s reliant on extreme central bank intervention<\/a> to remain solvent.” Then again, with worldwide debt at $244 trillion<\/a> — that’s 318% of global GDP– I suppose solvency is in the eye of the beholder.<\/p>\n

Credit:<\/strong><\/span> For his part, after the Fed announced last week that it’s starting yet another<\/strong><\/em> round of quantitative easing (QE), Graham Summers asked this : “If everything is so great, why is the Fed printing<\/a> ($60) billion per month?” Put your pencils down, kids; that<\/strong><\/em> was a rhetorical question. Besides … we always save the more difficult queries for this<\/strong><\/em> guy:<\/p>\n