Investors Face Reality

Here are a couple of noteworthy articles that appeared last weekend. The first indicates the trap the Fed has maneuvered into. The second provides reasons for the collapse in labor productivity numbers.

Monday, stocks rose 0.3% in Asia and 0.4% in Europe but closed nearly unchanged in the U.S. on 10B shares traded. The 10-Year U.S. Treasury bond yield fell 2% to close at 2.79. Precious metals and their miners fell 2%.

Tuesday, stocks lost 0.4% in Asia but gained slightly in Europe and 0.3% in the U.S. on 11B shares traded. Precious metals closed off 1%. The Dow Jones Industrial Average ended above the 34,000 benchmark.

Wednesday, stocks gained 0.3% in Asia but lost 0.8% in Europe and in the U.S. on 11B shares traded. The 10-Year U.S. Treasury bond yield rose 2% to close at 2.89. Precious metals fell 1% while their miners plummeted 4%. The Dow, NASDAQ, and S&P 500 closed below their respective 34,000, 13,000, and 4300 benchmarks.

Thursday, stocks fell 0.9% in Asia but rose 0.4% in Europe and slightly in the U.S. on 10B shares traded. Precious metals declined 1%.

Friday, stocks fell 0.9% in Asia, 0.6% in Europe, and 1.1% in the U.S. on 10B shares traded. The VIX moved up 5% to close at 20.60 and end the week on the fear side. The 10-Year U.S. Treasury bond yield gained 4% to close at 2.99. Precious metals fell 1% and their miners lost twice that amount.

For the week, the Fed balance sheet declined $29B to end at $8.85T. Here’s an article that shows that the bloated balance sheet increases velocity. Velocity of money is a key component that stokes inflation.

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