TIPS are pricing the lowest inflation ever

Suddenly the world seems a happy place again, doesn't it?  It looks like W #2 is now the base-case formation, and while 2000 provides an obvious level to pause for a rest the precedent of the first W suggests that this may represent only a brief break before another march higher.


While stocks were trading strongly early doors thanks to some beginning-of-the-month flows, the really notable development yesterday was the release of more better-than expected data.  To be sure, the absolute level of the ISM was not exactly robust, but it was stronger than expected and importantly improved for the second consecutive month.   Meanwhile, construction spending registered its strongest monthly gain since last June.  Somehow, these stronger-than-expected pieces of data conspired to drive down the GDPNow forecast, but never you mind...the Bloomberg US economic surprise index is at its highest level in more than a year.   If it were an asset price, you'd be buying it.


Admittedly, it is still negative and well below the levels of 2014, so it's premature to say that Goldilocks is back.  Then again, as Macro Man writes this Australia has just released a stonking Q4 GDP figure (0.6% q/q, 3.0% y/y, with upward revisions to Q3) so it does seem that the world isn't ending quite yet.

Macro Man does have to laugh at some of the commentary surrounding big equity moves like yesterday's.  He wonders if people ever bothered taking statistics, or have merely forgotten what they learned years ago.   Lest we forget, a 20 vol financial asset with zero annual appreciation will still register daily gains in excess of 2% a little more than 5% of the time.   That works out to roughly 14 rallies of 2% or more per year...just tick one off after yesterday.

Elsewhere, Macro Man was intrigued to see the news that China will lay off 5-6 million workers over the next few years to mitigate some of the production over-capacity issues faced by the country (and by extension, the world.)  Your author hasn't the time to comment in too much depth, other than to observe that this represents at least a tiny step in the right direction towards countering the supply issues that have contributed to global disinflation.

This in turn is a nice segue to the main gist of today's post.  Economically-inclined readers may have noticed an interesting article on the St. Louis Fed website last week in which staff economists attempt to back out what the market is pricing for oil from the breakeven market.  You should read the short post to get a complete picture of their methodology, but essentially they assumed a non-energy inflation rate around historical norms, calculated an elasticity of the energy CPI to oil price changes, and then backed out what TIPS are saying about the path of oil prices given current breakeven levels.  The conclusion is that TIPS are pricing oil going to zero in mid-2019 and remaining negative thereafter.

This is a startling and seemingly absurd conclusion which illustrates the extremes at which TIPS are priced.   Amusingly, the St. Louis Fed's own President Bullard came out shortly thereafter expressing grave concerns about the level of breakevens!

It occurred to Macro Man, however, that the St. Louis staffers may have had their causality backwards.   They take as a given the level of non-energy CPI, which currently comprises 93% of the total CPI basket, and solve for the oil price, a commodity with a robust and transparent futures market.  He thought it would be interesting and useful to perform a similar calculation in the other direction...take oil futures pricing and the implicit inflation contribution from it as a given, and back out the non-energy component from the level of breakevens.

His first port of call was to perform his own calculation of the energy CPI elasticity to crude.   Using a shorter sample window of 2005-15, his study suggested an elasticity of 0.333, i.e. a 3% move in crude equates to a 1% move in the energy CPI.  Filtering crude moves with this coefficient yields the scatter plot of y/y changes looking pretty linear with a trendline that passes close to the origin:


Macro Man acquired weekly data for 1,2,3,4,and 5-year generic inflation breakevens, along with crude contracts for every 12 months over the next 5 years.  He also calculated monthly weights for energy and non-energy CPIs using the non seasonally adjusted data.

It was then a relatively simple matter of calculating

  1. The annualized inflation breakeven;
  2. The future annualized energy CPI, based on annualized changes in oil priced into the crude futures market;
  3. The annualized non-energy CPI based on the monthly weights (applied with a lag) and the figures generated in points 1. and 2.
Macro Man should note at this juncture that the availability of crude data 5 years into the future is pretty spotty before the early years of the current decade and nonexistent before 2007 or so.  As such, his calculations don't go back as far as he would like.  Still, the results are telling, as the chart of the weekly indicator below demonstrates.

As you can see, based on the crude oil futures curve the TIPS market is pricing non-energy inflation at just 1.1% per annum over the next 5 years.   To put that into context, the average of the past 5 years (a generally disinflationary period, most would agree!) is 1.9%, and the current y/y reading is 2% and rising.

It's true that non-energy CPI did briefly dip below 1% in the aftermath of the crisis.   Then again, the TIPS market was pricing non-energy CPI over the next year of less than zero just a few weeks ago.

To put all of this into context, current pricing of non-energy CPI over the next five years is lower than the lowest-ever 5 year average for that measure dating back to 1957.  Yup, TIPS are pricing the lowest inflation ever...and there's not even a financial crisis going on (insert snarky comment about China here.)  Moreover, the lowest print for y/y non-energy CPI over the last 60 years is 0.73%...or more than TIPS were pricing for the next year just two weeks ago.

To be sure, the price of all high quality nominal fixed income securities are being driven a bit by disinflation, but largely by the negative interest rate regime in Europe (and elsewhere now) and the concomitant impact on Eurozone government bonds.  In such a case, it is useful to make a sense check of things like breakevens to see if we can make a judgement on how seriously to take pricing.   The St. Louis study arrived at an absurd result, which is usually indicative that something is seriously wrong.   Macro Man's results were not absurd, but they were still extreme, again indicating that  TIPS pricing very likely does not reflect a true market forecast for inflation.

Recent comments from Dudley as well as Bullard suggest that the Fed might be preparing to hang their hat on breakevens and inflation expectations as a rationale not to raise interest rates, even as the spot measures reflecting their mandate suggest that a data-dependent central bank should.  But looking into what the market is actually pricing for inflation, it seems clear that breakevens are a chimera, more reflective of liquidity premia and a broken market micro-structure than a legitimate worry about future trends in underlying inflation.

There's an old saying that if something seems too good to be true, then it probably is.  In financial markets one rarely hears the negative analogue, namely that if something seems too bad to be true, it probably is.  There's a reason for that- just see 2008 or Greek banks.  In this case, however, the rarely-heard negative version appears to hold water.   As they deliberate this month and beyond, the Fed would do well to remember that.
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Anonymous
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March 2, 2016 at 7:16 AM ×

excellent post. is there a more efficient/levered way to get exposure to tips for a retail guy like myself than the tip etf? or does one just go through the fx channel and get long usd?

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Marton
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March 2, 2016 at 8:26 AM ×

The recent inefficiency of the short end of the TIPS market is a widely known fact in fixed income markets. Reason is that the natural crossover buyers of short dated TIPS - at negative yields however you slice it - are short-dated treasury and IG bond funds. These funds absolutely cannot bear the mark-to-market vol in TIPS that comes from oil price volatility, but they are not allowed to trade the oil/gasoline futures to hedge out the oil price.

On the other hand, there are hedge funds and prop desks that *can* do the TIPS vs oil arbitrage, but on the short end they don't find it worthwhile - even if they do it well and eke out excess returns of 70bp over treasuries year-in-year-out, that is still a grand total of 1% return on capital on the short end. (The return profile used to better on 10yr+, hence it was closer to fair expectations of inflation - but that has changed, too.)

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Anonymous
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March 2, 2016 at 10:42 AM ×

There are numerous issues with this sort of analysis, which need to be acknowledged. Apart from the fundamental questions of expectations vs risk premia and the inefficiencies of the TIPS mkt (look at the inflation swap mkt instead, as the Cleveland Fed does), there's the bugbear of multicollinearity. The St Louis Fed paper acknowledges it in the following passage: "The recent movements in breakeven inflation expectations may have been caused by something other than the decline in oil prices. It is even possible that a third variable is driving the decline in both." Ben Bernanke in his curiously related recent post on the relationship between oil and stock prices also talks about it. In general, I don't see anything particularly outlandish in the mkt prices of US inflation. Certainly nothing particularly dramatic relative to Europe and Japan. Just my Z$2c...

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Macro Man
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March 2, 2016 at 11:40 AM ×

To be clear, I am amply aware of the issues distorting TIPS pricing and its failure to adequately reflect "true" market expectations of inflation. But given that the Fed seems to be gravitating towards taking the results more at face value, I thought it would be interesting to see what was actually embedded in the price. TIPS pricing may indeed not be outlandish when compared to linkers in Europe and Japan....but it is pretty absurd as an input to monetary policy decisions, which is the point.

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Booger
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March 2, 2016 at 11:45 AM ×

TIPS, bond yields in general, affected by QE and NIRP. Basically, bonds are inflated, irrationally driven perhaps by the C.B incentives and pressure.

Not a good day for commodity currency bears such as myself today. First Canada releases better than expected GDP. So the BOC in March is even more likely to be no cut. They were going to wait for the budget anyway. Then there was the Australian GDP print which was a blowout last quarter and the one before that was revised up.

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Polemic
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March 2, 2016 at 12:07 PM ×

Goodhart's law may come into play with TIPS https://en.wikipedia.org/wiki/Goodhart%27s_law

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Anonymous
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March 2, 2016 at 12:07 PM ×

@Macro Man 11:40AM: Sure, and, to be fair to them, the Fed's generally been stressing that they're aware of the issues with mkt-based measures of inflation expectations. Dudley specifically talked about this in his speech and, obviously, the St Louis Fed paper must have been published w/Bullard's knowledge. Then there's the Cleveland Fed inflation expectations measure, which should be a little better by construction. So I don't think they're blindly taking TIPS as an input to monpol decisions. The bigger issue appears that the divergence between market and survey measures is not correcting in the right direction, so to speak (at least according to NY Fed, Michigan and the SPF). Obviously, surveys have their own well-known problems, but the Fed has to be self-consistent. They have repeatedly emphasized survey measures over mkts in the past, so it's perfectly sensible that they're finding the former much harder to dismiss, IMHO.

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Polemic
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March 2, 2016 at 12:11 PM ×

I'm keenly watching commodity prices. Copper has just broken up through a revese head and shoulders on the charts ( at last. Nickle on the same line. Oil too. Iron has been leading for a while. Commodity price increases are the fastest track to raising general inflation indices. Adnn las with the Spanish inquisition . .'NO one expects commodity priices to shoot higher'. do they?


Yours, 'long copper long aud/jpy, short bunds and looking at peru' Pol

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washedup
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March 2, 2016 at 12:29 PM ×

@MacroMan thx for addressing a topic near and dear to my heart these days as you well know. No major disagreements with your conclusions - I have a more vexing question to pose though - is there a reasonable way to measure the correct risk premium (rather, discount) that should awarded to govvies to come up with a price target for these things in the post GFC/QE world? I will explain with an example - If one thinks nominal US GDP will be say 4% over the next 10 years, it used to be reasonable to think the 10 Yr should be more or less thereabouts - however, clearly due to bank balance sheet and collateral issues, not to mention the occasional bout of risk diarrhea, there is demand for these papers beyond their return on and of value. What is it? 50 bps? 100 bps? 150 bps for bunds? Tough to trade this without having some anchor. Could this risk preference turn to neutrality and/or aversion at some point?

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Macro Man
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March 2, 2016 at 12:45 PM ×

@ Anon 12.07 I suppose that it's Bullard's comments that really prompted this. ""I regard it as unwise to continue a normalization strategy in an environment of declining market-based inflation expectations" which "represents an erosion of central bank credibility with respect to the inflation target". Err....no.

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Anonymous
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March 2, 2016 at 12:49 PM ×

@washedup: One way of doing this is to use some sort of a term structure model. Ideally, you need one that corrects for the non-linearities that arise near the zero lower bound (ZLB) and invalidate the assumptions made by typical affine TSMs. The residual should give you a sense of "abnormal" risk premia, with all the usual caveats.

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Bruce in Tennessee
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March 2, 2016 at 12:54 PM ×

Can't help but notice the 10 year has added about 23 basis points in yield since our little hiccup and it appeared we'd breach 1.60 and continue...it appears, to me at least, that the Chinese must be selling more bonds than I believed...

http://www.bloomberg.com/news/articles/2016-03-02/china-credit-outlook-cut-to-negative-from-stable-by-moody-s

“The government’s ability to absorb shocks has diminished and we want to signal this in the negative outlook,” Marie Diron, a senior vice president at Moody’s, said in an interview on Bloomberg Television. Authorities “have stepped backward in their reform steps and so that is creating some uncertainty.”

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Macro Man
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March 2, 2016 at 12:56 PM ×

@ Washed, historically a 1% change in the budget balance was worth something like 35 bps on 10y yields. You can make some assumptions that suggest that QE acts as a de facto improvement in the budget balance by eliminating the fresh supply of government paper, though it should not fully eliminate the impact of budgets given perceptions of future liabilities etc. Anyhow, it's a relatively simple matter I should think of running a study to calculate the appropriate impact of QE and adjust accordingly....lots of people have already done this.

In any event, as Europe has shown us the issue is not yields in isolation, but yields relative to the risk-free short rate.

BTW, I have a friend who thinks that instead of raising rates this month the Fed should announce an end to securities reinvestment. Now that would be interesting...

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Polemic
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March 2, 2016 at 12:57 PM ×

So .. slow down in China means deflation but as they sell reserves and overseas bonds it pushes their yields higher implying higher inflation expectations? We can get in all sorts of a twist guessing which end of the inflation/deflation donkey is the tail and which the head.

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Anonymous
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March 2, 2016 at 1:00 PM ×

@ Macro Man 12:45 Yeah, I see your point. To be fair, Bullard has an interesting, and relatively extreme view, on the validity of mkt measures of inflation expectations. He seems to be the only one who consciously dismisses all the usual criticisms and disagrees with a lot of accepted notions. While he may well be wrong, at least it doesn't feel like he has arrived at his view frivolously.

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Macro Man
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March 2, 2016 at 1:06 PM ×

Dunno...he does tend to flip flop quite a bit. I just found it really ironic that he's make those comments right after his own research group published work suggesting that breakevens are pricing an absurdity (albeit with the caveats of how much was assumed...which is why I did the work in this post.)

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washedup
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March 2, 2016 at 2:11 PM ×

@MM - BTW, I have a friend who thinks that instead of raising rates this month the Fed should announce an end to securities reinvestment. Now that would be interesting...

I think most sane people agree thats what SHOULD happen - if your mate is suggesting it WILL happen that is newsworthy, if not outright explosive!

Re: the budget balance thumb rule (i thought it was 30 bps/1% not that I am quibbling) the problem is empirical facts do not support it - in the US, LT yields have risen after bouts of QE, and really thats what CBs would desire, because of movement to risky assets as a consequence - in other words, portfolio re-allocation is seemingly a more powerful force than the budget gap, and I would posit the solution to the conundrum lies in that line of questioning, if only I could figure it out.

@anon 12:14 One way of doing this is to use some sort of a term structure model. Ideally, you need one that corrects for the non-linearities that arise near the zero lower bound (ZLB) and invalidate the assumptions made by typical affine TSMs. The residual should give you a sense of "abnormal" risk premia, with all the usual caveats

Thanks for that thought anon - the issue is that the 'usual caveats' are all unusually big in this instance, leading to dislocations in swaption vol markets among other issues - its a bit of a chicken and egg in that you can't prime those models properly without relying on the current market(s) being correct in some sense, so I may conclude the market likes 150 bps of abnormal risk premium, but it won't tell me anything reliably about the future trajectory of that premium.

As for Bullard, picture a kitten chasing a flashlight beam - thats him with macro data - someone hand this guy a kalman filter please.

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Leftback
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March 2, 2016 at 2:41 PM ×

Great discussion. It's been obvious for a while that there was some mispricing there.

In the immediate future, we noted yesterday that crude and some equity indices kissed the upper Bollinger band and so we took down a large fraction of our risk, so that we are partially restored to Hammock mode, and also have some XLE puts. Yesterday's exuberance notwithstanding there are some signs of risky assets being short-term extended.

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Anonymous
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March 2, 2016 at 2:43 PM ×

I see the W's but there is more pain ahead...

http://imgur.com/WA07q6S

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Anonymous
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March 2, 2016 at 3:54 PM ×

re-pol 1214...agree with the bunds call...have that myself...just not sure about commodities...im not bearish on them and neither am i long ,pretty much sums up my view- i think even if then going a range here bond yields just look way out of whack
short bunds bobls and edz17- i also think dollar longs have unwound a fair bit so looking for another leg up there- what do u guy think of aud..nice bounce to sell into or wait for 75ish?

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Anonymous
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March 2, 2016 at 3:54 PM ×

@BnT,

I think that the increasing long bond yield is more likely to be the result of risk off and rising inflation numbers, it should have dropped even further since the market really had not priced enough of inflation ahead.

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Anonymous
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March 2, 2016 at 4:06 PM ×

I think Australia's economy had already adjusted to the China's downturn, their private capital expenditure forecast had dropped back to 08-09 level. At this speed, they would be back to 03-04 levels in two years, which is still a small probability event. Its currency depreciation is way ahead of its real economy so my long term view is that AUD is much closer to bottom.

My short term view is that AUD would test the bottom once more then take off.

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Anonymous
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March 2, 2016 at 4:22 PM ×

To anon 4.06, unless our housing mkt goes down, in which case might get messy

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Ghost of Walter Bagehot
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March 2, 2016 at 5:36 PM ×

FYI Garzarelli at Goldman published this same analysis on Feb 23. He found that, if WTI is realized along the futures curve, then y.o.y. core CPI inflation has to fall below zero in 2017, which has never happened, as you note. Great minds think alike!

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Anonymous
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March 2, 2016 at 6:44 PM ×

Elon Musk on Japan's demographic crisis: "adult diapers are now outselling baby diapers". Too much, if true ...

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Bruce in Tennessee
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March 2, 2016 at 8:31 PM ×


"I think that the increasing long bond yield is more likely to be the result of risk off..."

?...Not sure I follow that anon@3:54

...If the globe were trending to risk off, wouldn't the yield go down? Of course, we are in the new lecture series on global economics.... :)

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washedup
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March 2, 2016 at 8:51 PM ×

BinT - I think anon 3:54's point, and one that is under-appreciated by most, is that a major sell off in treasuries (not precipitated by portfolio allocations in favor of equities and away from bonds) would in and of itself constitute a catalyst for an equity selloff - given the number of institutional LT portfolios, especially insurance and pension funds that rather carelessly assume that the two shall remain negatively correlated forever I would certainly see it as a risk - I don't think the moons are aligned for something like that to happen yet, however, although we did get a bit of a taste of what that looks like in summer 2014 for about a fortnight right before everyone got intellectually swept away in a deflationary tsunami from the crude crash. The last time we saw a full blown scare of that type other than the 70's was probably in 04-05.
Al is the resident portfolio allocation guru so he may have a more nuanced opinion. The larger point of course is that flows will trump fundamentals.

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Millennial PM
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March 2, 2016 at 8:51 PM ×

@BnT I believe the comment was assuming risk off -> decrease safe asset demand + risky asset price inflation -> Treasury sell off + increase Inflation exp + increase Fed Rate hike exp -> long dated Treasury yield increase from current levels.

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jbtfd
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March 2, 2016 at 9:04 PM × This comment has been removed by a blog administrator.
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Whammer
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March 2, 2016 at 9:07 PM ×

@Millenial PM, I think there is some confusion on "risk off" and "risk on".

Where -- "risk off" means flight from risk and increased safe asset demand, and "risk on" means ditch those USTs and buy yourself some TSLA.

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Polemic
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March 2, 2016 at 9:08 PM ×

Metals. Just look at the price moves in metals.

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Millennial PM
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March 2, 2016 at 9:20 PM ×

@Whammer, Touche. I miss read and miss typed that entire exchange...(slowly backs out of the comments section hoping no one notices)

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abee crombie
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March 2, 2016 at 9:20 PM ×

Great post MM, I'm curious to hear if any of the other world markets are better at predicting inflation vs the clearly distorted US TIPs market. From the comments, apparently not in JP or EZ. Any additional input would be appreciated. I know Brazil has some inflation paper as well.

FWIW I find it funny this whole notion of trusting in markets for accurate data in the future. Financial markets are like democracy, they are the least worst option and they certainly arent perfect forecasters. I found it interesting to recently learn that the fed funds forward rate has systematically underestimated Fed rate hiking cycles in the past, and got it right only 6 times in the past 30 years. So if the liquid fed fund futures market has a horrible hit ratio, what are we to make of the smaller, less liquid TIPs market?

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Anonymous
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March 2, 2016 at 9:25 PM ×

@jbtfd - in your considered analysis, how do you account for new highs in the US? Say we were to rally further here, and with decent US data & Europe Japan rallying on their own QE, do you not think the FED would be boxed in and have to raise sooner than expectations? Do you not think the FED has set a ceiling on equities?

Personally, I think they're boxed in. Any extended period above, say 2000, pushes them to raise. Limited excuses with the data out there.

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Anonymous
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March 2, 2016 at 9:47 PM ×

This is anon3:54,

Sorry I meant to say risk on, but typed risk off instead. Thanks Whammer for pointing that out...

Sorry for the confusion folks.


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Leftback
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March 2, 2016 at 10:47 PM ×

Good day for the portfolio in terms of EM and European energy stocks, and a bad day to have decided to hedge. Still.. crude oil, EEM and XLE all now kiss the upper Bolly band or have pierced it to the upside, so the same diagnosis of the energy sector being overbought still applies. Natty inventories and Cushing storage levels are through the roof, so if and when fundamentals apply and/or Bucky surges again, some mean reversion would seem likely. Another case of LB being early and/or wrong? We'll see.

Btw, the discussion here has been great and I really enjoyed the dissection of the TIPS market and break-evens, which was very informative. Millennials are encouraged to hang with the old folks. Nico G would be welcome back, of course, trolls less so.

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Leftback
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March 2, 2016 at 11:19 PM ×

A few other people have that "overbought" feeling about the market today. McClellan oscillator now above 90:

McClellan Oscillator Flashing Overbought

A few other charts from Northman Trader. The $vix collapse is quite interesting, fits in with the low volume action we saw today and the extensive return of vol sellers that we had predicted ten days ago here and have seen in the last few trading days:

Northman Trader technical charts

Not to say this low volume melt-up can't continue (how many times have we seen these moves, Jbtfd would ask us here?), but the present leg of the W may be getting a bit long in the tooth. A pause and retracement would not be a surprise here.

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Anonymous
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March 3, 2016 at 12:51 AM ×

Godfather. What say ye..

http://www.marketwatch.com/story/trumps-godfather-like-ultimatum-to-paul-ryan-get-along-or-pay-a-big-price-2016-03-01?dist=countdown

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Anonymous
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March 3, 2016 at 1:01 AM ×

How fortunes change. Few years ago when natty was in teens, he garnered so much attention...

Aubrey McClendon.

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Anonymous
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March 3, 2016 at 1:04 AM ×

"The charge that has been filed against me today is wrong and unprecedented. I have been singled out as the only person in the oil and gas industry in over 110 years since the Sherman Act became law to have been accused of this crime in relation to joint bidding on leasehold. Anyone who knows me, my business record and the industry in which I have worked for 35 years, knows that I could not be guilty of violating any antitrust laws. All my life I have worked to create jobs in Oklahoma, grow its economy, and to provide abundant and affordable energy to all Americans. I am proud of my track record in this industry, and I will fight to prove my innocence and to clear my name".
http://www.businessinsider.com/former-chesapeake-ceo-aubrey-mcclendon-has-died-in-a-car-accident-2016-3

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Whammer
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March 3, 2016 at 1:11 AM ×

Wow re McClendon..... Pretty obviously not an accident.

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Anonymous
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March 3, 2016 at 1:48 AM ×

Survival of the fittest. During mkt downturn,the weak..

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Bruce in Tennessee
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March 3, 2016 at 3:07 AM ×

That's ok, boys....I watched no less a personage than Maria Bartiromo a few years back in a discussion about bonds on CNBC...she obviously knew very little about the bond market, and I was floored. I don't think I can recall another discussion by her about bonds in the remainder of the time she was on CNBC, but I don't watch it that much...

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jbtfd
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March 3, 2016 at 7:13 AM ×

I hear what LB is saying (above) but in answer to anon 9:25 PM I still think we see spoos go higher. Yes the Fed may (probably will) raise rates again this year, but I think the hysterics over the 25 bps raise was massively over-hyped. The US economy is doing fine, oil is unlikely to fall much further and there is still CB stimulus from ECB, BOJ, PBOC for global stocks. All these are equity positive. Net result, spoos should push through 2000 in short order, and I will be shocked/dismayed if we don't take out the 2015 highs before summer.

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Anonymous
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March 3, 2016 at 3:30 PM ×

jbtfd -

How about corporate top-line revenue and SnP earnings? Even non-GAAP earnings are rolling over.

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jbtfd
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March 3, 2016 at 4:55 PM ×

Anon 3:30 PM - These are valid points, nevertheless I believe them to only be meaningful to intelligent people (probably like you). The rest of the market will continue to rotate from bonds back into equities rabidly buying-up such quality stocks as banks & the new oil equity issuances that have just hit the market. Desperate in their search for yield in a ZIRP/NIRP world, they will blindly ignore any semblance of risk management and comfort themselves with seasonality factors such as March/April being +ve for equities. Algo's will of course front-run all these flows pushing prices way higher than should logically be expected and the ECB, BOJ and PBOC will promise to backstop everyone forever. What could possibly go wrong ;-) ?

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Anonymous
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March 15, 2016 at 11:48 AM ×

Here's a brief teaser of what our friends at PIMCO think of this:
http://blog.pimco.com/2016/03/14/is-the-fed-ignoring-an-important-signal-in-market-data/

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