Are we allowed to talk about Bitcoin?

The jobs report is noise. I think what the bond market wanted to see today was the wage growth rate. ... The rest of the report is so meaningless at this point, to the point that now good news is bad news. The wage growth was important to the bond vigilantes who want to pretend to read tea leaves about whether the Fed is going to do an extra rate hike this year on top of what they were already guessing. The irony is that the Fed is so far behind the curve with real rates way below their silly nominal rate path, and the yield curves all flattening, that it doesn't matter much what they do. They can either buy more time by finding another way to put their thumbs on the scales of finance as they have for the last decade. ... or they can try to play catch up (as they did before the housing crisis) and bring on the credit crisis themselves (they won't; they are too afraid now -- why we are 10 years into a "recovery" with central bank balance sheets taking off like a kite). ... or they will lose control and the credit crisis will happen with them flailing away and assigning blame everywhere except where it belongs.

The jobs data is all nonsense. But this is the way Wall Street thinks. There was modest wage growth (.3 percent), which was enough to make the computer algorithms act a bit shaky so far today. The bond sell off has continued, although it is muted compared to the last few days. But it's stunning. We have yields on the 10 year pushing up toward 2.9 percent as I type this. You had people saying that 2.6, 2.7 would be enough to start to pop the equity bubble. I had no idea what the level is, but we blew through those levels with no resistance. It has been a stunning move the last few days.

Anything more on wage inflation this morning and I think you would have seen way more of a sell off on bonds and equities than we've even seen so far today -- and today has not been pretty. But who knows? Maybe it will even rally a bit into the close. although bonds are still selling off as I type this and equities are very weak -- even as they try to hang in there). This should be way overdone by now, at least on a short term basis.

This is all about central bank support, Michael. You are going to get that soon. For the first time since 2008, the Federal Reserve is not expanding its balance sheet. It's not exactly as if they are letting it run off quickly -- in fact, it has been very modest (out of $4.5 trillion worth of crap they bought with no regard for price, making them insolvent on a mark to market basis, they have only let a few billion dollars worth of bonds expire without reinvesting so far). That leaves the ECB and BOJ as the buyers supporting the carry trades blowing asset bubbles, except their rhetoric has been confusing. They really WANT to stop digging their holes deeper (with the Germans in particular making noise about it), so they have gingerly tried to prepare markets (no really, this time we mean it!). ... which suddenly began to take seriously the notion that they ECB might potentially stop adding to their balance sheet in September of this year. Mind you, that isn't unwinding the balance sheet -- they'll still be reinvesting expiring bonds keeping support underneath their debt calamity. It's just stopping adding (which was going to be necessary anyhow soon, because they are running out of issuance to buy -- they own the whole sovereign debt market in Europe), and it isn't even a definite that it is going to happen yet. And as I keep saying, any of them can panic and reverse course and try to expand their balance sheets even more to prevent the inevitable. We've seen it multiple times already over the last 9 years.

Look at it this way. If $20+ trillion in asset buying was "stimulative" as they sold it (and you can see it in asset prices) and it was "quantitative easing". ... What do you expect the opposite (i.e. quantitative tightening) to do? Without central banks conjuring money out of thin air and buying up debt, who are the buyers going to be? Especially at artificially low prices because of their destruction of those markets for the last decade?

All of that intervention in the debt markets is what blew the asset bubbles and is keeping it propped up. The business cycle you are talking about is beside the point. The recovery we got for all of that monetization of debt was weaker than the recovery seen during the great depression. It was still a recovery -- with very anemic growth -- and it is now very long in the tooth as far as recoveries go. Sure, eventually, things are going to roll over and we'll have a recession. I'd guess sooner rather than later, just based on the odds (how long the recovery has been). But that has nothing to do with the anchor they have saddled us with -- massive debt levels and a multi-decade price-fixing scheme that fixed the price of money at insanely cheap levels to enable the creation of debt beyond what a market operating with price discovery would have allowed.

There is going to be payback for that. ... A LOT of misallocated capital (including, yeah, a bitcoin bubble).

What that led to, in their last gasp effort at reinflating things after 2008, were the asset bubbles and potential debt / default crises (such as pension funds, student loans, subprime auto loans, not to mention the staggering amounts of debt permeating China and Europe) all around us. When the credit crisis (and it is inevitable) happens, those asset bubbles are going to pop, a lot of debt is going to default (along with markets that are way mispriced coming back to reality), and again there will be talk of "crisis" with the same arsonists trying to ride in on their fire trucks to save the day.

In reality, it is just going to be a VERY necessary deleveraging at some point. ... one that was made necessary by a lot of stupidity because the world gave broad price-fixing powers to a bunch of political hacks, and there were no adults ever in the room willing to treat credit and currencies responsibly. This was decades in the making, with the last decade a last-gasp effort to avoid dealing with the consequences of what they created in the first place. Next time, hopefully their ability to hijack the debt markets and dig the hole deeper isn't there because markets won't let them.

 

It is playing around with the $10K level again, today.

Zero Hedge had something earlier about rumors that a mystery buyer (Bitcoin address 3Cbq7aT1tY8kMxWLbitaG7yT6bPbKChq64) bought $344 million (not a typo) worth when the price dropped, at a blended cost basis of around $8,400 from 2/9 to 2/12. Whoever that person or entity is, it is the third richest Bitcoin address in the world. ... owning a total of 96,000 coins worth between $900 million and a billion dollars at the current price.