As we kickoff what may be another wild month of trading in September, it appears that we are now reaching the monetary policy endgame.

Serious Problems
September 3 (King World News) – Peter Boockvar:  So the initial washing machines and solar panels tariffs were announced on January 23rd, 2018 that started this whole battle. Notice in this chart the 2s/10s spread that widened in the early 2018 right after the tax bill was passed but then topped out just weeks after that tariff news.

2-Year & 10-Year Treasury Spreads Since Early 2018

There is this nonchalance on the part of some when looking at the stock market and thinking that just because the S&P 500 is only a few percentage points from its record high that all is fine. Looking underneath though has the Russell 2000 14% below its closing high, the Value Line Geometric index of about 1700 stocks down 15% from its closing peak and the cyclical Transportation index 12.5% under its 2018 high. If you’re a bank suffering from a disappearing yield curve, the BKX index is down 20% from its early 2018 top closing level…

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Death From A Thousand Cuts
As for those banks overseas, they continue to bleed from a thousand cuts. The BoJ ‘yield curve control’ plan didn’t want the 10 yr yield to swing more than 20 bps in either direction from zero. It now sits at -.28%. We talk about ‘pushing on a string’ here with respect to the impotence of the Fed. In Japan now they talk about ‘the reversal rate’ which is the level of rates that becomes a detriment to growth.

I believe we are clearly there but what I think doesn’t matter. What matters now is what the BoJ thinks and last week a member spoke out and said “It’s hard to predict when Japan will see borrowing costs reach a reversal rate. But it might not be too distant in the future.” He doesn’t “see the need to ease monetary policy further now.”

Reaching The Monetary Policy Endgame
We also heard from some hawkish ECB members last week who are pushing back against more monetary largesse. They don’t carry enough weight however but we are reaching the monetary policy endgame people. What this means, if right, is that we are possibly at the end of this epic decline in global bond yields where about $17 Trillion of assets have become liabilities for its holders such as banks, insurance companies, pension funds and savers.

We also have the continued rally in the US dollar that is just squeezing global liquidity. Interesting times. The pound in particular did break below $1.20 but bounced back above. I do give credit to PM Boris Johnson who finally said enough is enough, it’s do your thing or get off the pot already.

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More articles to follow…

In the meantime, other important releases…

GOLD UPDATE: One Of The Greats Says Despite Volatility Gold Bull Is Headed To $1,800 CLICK HERE TO READ

What A Wipeout, Hedge Fund Gold Bets Increase, China Can Play The Game…But They Are Losing, Plus A Reality Check CLICK HERE TO READ

This Is What Is Really Driving The Price Of Gold Higher CLICK HERE TO READ

Bullion Banks And Commercials Remain Near All-Time Record Short The Gold Market! CLICK HERE TO READ

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