Dow down −1,031.61 (3.56%),S&P 500 down −111.86 (3.35%) and NASDAQ falls by −355.31 (3.71%) on Monday's trading as the threat of coronavirus finally hits an overleveraged Wall Street.European and Asian markets get walloped also.

But will first world central banks allow a sustained sell off.Hell No.The US Fed,European Central Bank,Peoples Bank of China (PBOC) and Bank of Japan will unleash new oceans of liquidity (bigger than what they are doing now) to revive the markets.

US futures markets already point to a higher open.The Plunge Protection Team via the Fed will inject tens of billions of dollars in new money via the repurchase agreement market today and give it to the 6 Wall Street mega banks ie JP Morgan,Citigroup,Bank of America Merrill Lynch,Wells Fargo,Goldman Sachs and Morgan Stanley who will buy back the market.Then the investors who are short the market due to sell off jana will be short squeezed and panic to cover their shorts in a short covering rally hence its highly likely US equity markets will bounce back and who knows close at all time highs this week.



US bond markets also rallied with the 30 year bond hitting all time low yields OF 1.8% and all time high bond prices yesterday.US yield curve continues to invert as 1 month t-bill yields 1.57% while 10 year yields 1.39%.Nuts that a shorter dated treasury yields more than a longer dated treasury but its the silly nature of US markets.This is despite Fed buying 60 billion/month in shorter dated treasuries to uninvert the yield curve.All prior yield curve inversions in the US bond market have 100% predicted a US recession.Worse Eurozone and Japanese bonds sink deeper into negative yields as governments are being paid to borrow money as opposed to the reverse that is the norm.Trump wants negative yielding bonds in US so that investors lose money in buying them and governments gets paid to borrow money like in Germany but long term ends in catastrophe



https://www.cnbc.com/201...id-to-borrow-money.html

US Central Bank ie the Fed money printing shenanigans.The European,Chinese and Japanese Central banks are even worse in the percentage amount of electronic new money creation schemes relative to their GDPs.

Opus Dei cannot pull off a Fed type money printing scheme without hyperinflating the Kenya Shilling.The Fed and developed markets central banks can massively expand the money supply without experiencing instant hyperinflation since their currencies are always in demand in global markets.The US Dollar with its status as the reserve currency can quintuple its base money supply since 2008 meltdown but not crash as the USD is the lynch pin of global reserves and trade.80% of global trade is done in US dollars (for those who know the petrodollar system),60% of global central banks reserves are in USD,there is 11 trillion of dollar denominated debt outside the US so for now the Fed can print almost to infinity and the global economy will absorb the dollars.In fact now there is a USD crunch as foreign nations seeking dollars to bay back their USD denominated debt and the current flight from other major currencies like the Euro,Yen,Yuan that have printed even more money than the Fed relative to their GDPs is keeping the USD stronger relative to other fiat currencies.

This massive global demand of the USD and other major currencies enables the first world central banks to break rules of conventional economics.Its nuts that ever since 2008 crash,the first world central banks are explicitly buying treasury bonds.For instance the US treasury issues bonds to fund its obligations,the 6 Wall Street Banks plus other primary dealer banks buy these treasuries then they sell them to the Fed.The Fed creates new dollars from nothing and buys these bonds from the Wall Street Banks at a profit to the banks.The Wall Street banks then buy their own stocks or other US stocks pushing markets even higher and also loan to their hedge funds,private equity buddies and other major corporations like IBM,Tesla etc at ultra low rates then they buyback their own stocks pushing markets even higher.This entire mechanism is called Quantitative Easing (QE) and its responsible for the massive bull market in US stocks and bonds to all time highs.There is massive inflation from all the new Dollars but it doesnt go into consumer products yet but asset prices of stocks,real estate and bonds.Its no wonder US stock indexes like the S&P 500 have gone up 5 times ever since the 2008 crash as money supply has increased also 5 times.Inevitably this money will leak into consumer prices then things get really nasty.

Europe and Japan are even worse than the Fed.The European Central Bank (ECB)is more reckless than the Fed and buys even corporate bonds in addition to government treasuries.For instance Nestle,Unilever float bonds and ECB creates new Euros and buys them.Swiss and Japanese central banks are worse than this.Japanese central bank (BOJ) explicitly buys Japan's stocks and in the biggest holder of the Nikkei stocks plus has bought over half the Japanese treasury market.Swiss central Bank buys US stocks especially Tech stocks like Apple and Facebook.The ECB and BOJ have bought so many government bonds that treasury yields in the Eurozone and Japan have gone negative thus investors who buy these bonds and hold them to maturity are guaranteed to lose money hence investors in Europe and Japan flee these bonds to buy US bonds that have a paltry treasury yield of less than 2%.

Should CBK do the same?It would be interesting to see if CBK starts buying bonds that the Treasury floats and possibly engage in misbehavior like in Europe and Japan and buy corporate bonds and even buy stocks from newly created Kenya Shillings.If,Opus Dei did this Safaricom stock would trade at 1,000 KES our bond yields would drop to near zero or even negative yields,loan interest rates for mortgages and other loan facilities would drop to 5% and below (some mortgages in Denmark have negative interest rates) just like in the advanced world then Kenyans would go on a borrowing spree,buy houses just like in the US sub-prime debacle then the debt overhang would implode just like the 2008 housing crash.So it would create a sugar bubble high that inevitably crashes but by then the Kenya Shilling would have long hyperinflated.

So no Opus Dei shouldn't engage in such shenanigans and anyway the KES is too weak in global markets to successfully pull it off without hyperinflating the KES.

The developed world central banks have been very "smart" with their QE scheme thus far to ensure it doesnt leak to general consumer prices to a large extent at least for now.A vast proportion of these QE money sits in commercial banks balance sheet as excess reserves and the remainder they lend to their other rich elite buddies like hedge funds.private equity and corporates at ultra low rates to fuel asset price inflation of stocks,real estate and bonds as opposed to general consumer price inflation.To achieve and maintain the ultra low rates the developed nations central banks have to keep printing money and buy government bonds to suppress rates from newly created fiat.Kenyans are jealous of low loan rates in the West e.g. mortgage rates of 5% and below assuming its because Western markets are mature unlike high rates in Kenya but the caveat is Western central banks are buying bonds to suppress interest rates.If their central banks werent engaging in QE,rates in the developed world would be much higher and considering their ludicrous debt to GDP ratios US Debt to GDP ratio is 106% (possibly 1000% if you factor in unfunded liabilities,corporate and household debt),Japan is 250% and China a whooping 300% Debt to GDP so if the US as an example had like our CBK rate of 8.25% debt payments would be impossible and they would implode into a deflationary Armageddon.

As simple illustration of the debt bubble in advanced nations and why they are forced to print money to keep rates ultra low is shown by this simple video.



Also money velocity ie the rate of flow of money in the economy within the general populous is low causing relatively muted consumer inflation but recently the inflation is leaking out to consumer prices.Western central banks target an inflation rate of 2% and purport that inflation is less than 2% to justify their money printing shenanigans.They measure their inflation rate less food and energy in the inflation basket (totally ridiculous) to achieve their less than 2% inflation rate.Ideally inflation should be 5% and higher and recently even with the cooked inflation figures,the US inflation rate has surpassed the 2% target and if the money printing continues consumer inflation will go wild.

Bure kabisa huyo Gov.

Yes,the Dow records its greatest one day point drop in history.Interesting price action today.S&P had its 200 SMA at 3050 and when the index hit this critical technical level,the Plunge Protection Team (PPT) pulled all the stops with new Fed repo liquidity and tried to buy back the market which almost went positive but it was a bull trap as the markets seriously flashed out and algos just went nuts and sold in huge volumes in the last 3 hours of trading.Bond yields hit a historical low yesterday.

Now the Fed is under IMMENSE PRESSURE to cut rates and pump even more liquidity.Trump bullying the Fed to pump even more money but unlike prior market corrections caused by financial distress that was "resolved" by more money printing,the coronavirus is a black swan that cannot be mitigated by money printing.The only hope for this bubble market is that a vaccine or antivirus drug is found or as scientists hope the summer months in the Northern Hemisphere may subdue the virus.

For those of us shorting this market its serious $$$$$$ everyday

Great analysis! When did you go long bonds? Which tenor (s) ? Did you post that here? Can't seem to see that. Also what short positions did you take, and when? Can't see those here either. You can share link for ease of reference.

Wow MONSTER RALLY on Wall Street.Dow had its biggest single point gain in history from having its biggest single day point loss in history last Thurdsay.Dow up +1,293.96 (5.09%),S&P 500 up +136.01 (4.60%) and NASDAQ up +384.80 (4.49%).So why the record gains after record losses last week?Simple,as its always the case in first world markets;it all about the CENTRAL BANKS.Fundamentals and valuations matter little in US markets,its all about how much liquidity central banks pump out that determines stock and bond prices.

On Friday,the Fed assured the market they would do whatever it takes to support the market via extra liquidity.Yesterday the European Central Bank and Bank of Japan uttered same sentiments of additional liquidity support and European Stocks and Nikkei finished up.Of course another factor of the rally is that many investors had large short positions over the weekend expecting the market to continue its decline on Monday and were caught unawares by rising equities thus found themselves short squeezed and covered their shorts at losses forcing the market even higher.Bonds also sold off from their record highs as their safe heaven bid was lessened by rising stock markets.Seems the 50 billion USD repo injection by the Fed into the markets today did the magic also.

The market is forcing the Fed to inject more liquidity via rate cuts.Even the major Wall Street Banks that own the Fed expect the Fed to cut rates by at least 50 basis points and some expect this possibly this week before the official March 17-18 Federal Open Market Committee meeting.If the Fed doesnt deliver markets will sell off massively once more.Fed doesnt want to cut rates but the market is forcing its hand and rate cuts are already priced in so US central bank has no choice but to deliver.Fed may likely cut 25 basis points ,see market reaction and if the markets are negative,cut yet again.

Another factor that could throw a monkey wrench into the markets is the Democratic Presidential Nomination Super Tuesday race today.If socialist Bernie Sanders wins,the markets may puke again as Bernie has guaranteed he will dismantle the "corrupt" Wall Street money machine and tax them to death for more social welfare.If Biden or Bloomberg wins markets will breathe a sigh of relief as both are pro Wall Street.Thus Democratic primaries will affect the markets just as profoundly as central bank liquidity.

It will be interesting to see if this was a dead cat bounce or truly a sustainable rally.Central bank money printing cannot make people travel to coronavirus infected areas or bring Chinese workers back to their factories but can provide temporary relief to the markets.As the virus starts to spread in the US,there is already panic buying of essentials in US retail stores,business conferences are being cancelled and less are engaging in air travel.Such human caution and behavior cannot be remedied by central bank liquidity injections but can prop up markets temporarily

Stocks stabilised and we even have some gains. Even Tesla is stable and gaining with +79% YTD.

Wow a bloodbath in the Oil Market.Friday Western Texas Intermediate closed at around 41 USD per barrel and opened Monday at 30 USD and some point was down to 27 USD.The rout in oil also has tanked almost all asset classes with stocks in East Asia closing down about 5% and US Dow futures down over 1,200 points.US 10 year yield dropping to all time low of 0.34%.Cryptos also whacked

Crazy geo-politics.Russia walked out on an OPEC-Russia meeting that was to agree to cut production to prop up prices in light of reduced oil demand due to coronavirus.Moscow wants to keep pumping to push prices lower and punish the US shale oil frackers in retaliation to US sanctions on Russia.The Saudis angry that Putin refused to cut production,now wants to flood the oil market with even more oil to punish Russia and the Saudis also want to punish the US oil frackers.

The US shale oil frackers are in trouble.They need high oil prices to stay afloat and this dip in prices is causing serious distress.Moreover,these frackers are in business only because they can finance operations via borrowing through the US junk bond market where the bond rates are artificially suppressed by the Fed money printing shenanigans.The US junk bond market (where also Tesla gets lots of its financing) has been in distress for a number of months now.In fact recently in the last few days the junk bond market froze up with no new bond issuance.Same happened in late 2018 where the junk bond market froze for 41 days (also US stocks dropped 20% then)forcing the Fed to halt its rate hike and Quantitative Tightening cycle and reverse to Quantitative Easing and rate cuts.It gets worse that even some Investment Grade Triple BBB bonds have now frozen up also with no new bond issuance in over 1 week.The seizing up of the over 10 trillion US corporate bond market is a far greater threat to the US economy than falling stocks and the Fed is actually reacting to the distress in this sector.

The US corporate bond market is just as ridiculously leveraged as the sub-prime madness of the early 2000s.Cheap loans (called leveraged loans) to undeserving companies has resulted in zombie companies that just stay alive due to constant refinancing in the junk bond market and are similar to the sub-prime loans of the housing bubble.Then the corporate bonds from these leveraged loans are just as ridiculous as the Mortgage Backed Securities (MBS) of the housing meltdown.Furthermore,the derivative products called Collateralized Loan Obligations (CLOs) for these corporate bonds are just as leveraged as the Collateralized Debt Oligations (CDOs) of the housing bubble that collapsed spectacularly in 2008.

Again just like in the housing bubble,these corporate bonds are being deliberately misrated by the rating agencies Standard & Poor's (S&P), Moody's, and Fitch Group.During the housing bubble,these rating agencies over rated the MBS and CDOs giving them triple AAA rating because the banks were paying them to mis rate them so that they can sell to naive funds.Same thing happening now.35% of the Investment Grade BBB rated US corporate bond market is junk and should be downgraded to junk bond status but the rating agencies are refusing to do so.In the United States,large funds like pension and mutual funds are barred by law from buying junk bonds thus if the Triple BBB bonds are correctly downgraded to junk then these major funds would be forced to liquidate their positions and will be Armageddon in the US corporate bond market.

With all the drama going on the Fed is under IMMENSE pressure again to cut rates yet again.They already did 50 basis points last week and there is pressure they do another 50 basis or even 75 basis points in their next March 17-18 meeting or even earlier.I dont see how the Fed can withstand the pressure and most probably will cut again this month.

Things just getting thicker by the day and global recession far worse than 2008 screaming loudly.

Futures on the S&P 500 were halted Sunday night after they declined 5%. So-called circuit-breaker levels are the thresholds at which exchanges halt or close marketwide trading due to extreme declines.No pre-market trading until market opens on Monday at 9.30 am US Eastern Standard time




And as I stated below the corporate bond market has frozen up also





And of course oil suffered its biggest single day drop (30% decline) in history and US 10 year bond records its lowest yield in history.

History is being made folks.