The yield on the Ten Year Treasury Note rose for the fourth day in a row.
Energy, Banks Offer the Few Bright Spots, WSJ Friday
The author of that column went on to attempt to link the Omicron virus with FED Policy, I suppose because everyone is writing about the virus again. In my Market perspective weblog I commented that the market was not waiting on Jerome to take action next March, rates are already rising. I noted one analyst thought the Ten Year Yield would end at 2.5%. That is quite conservative as the yield is already 1.778% and as noted, continuing to rise.
Team Biden has it backwards. Inflation is not rising due to increased meat prices. Rather meat prices are following the highest rise in inflation in forty years.
And no wonder as the FED has injected some three trillion dollars to ‘stimulate’ the economy. The result was a year over year increase in money supply of a whopping 39%, yikes. In the 1970s, Milton Friedman tied inflation to money supply. Too much money chasing too few goods raised prices, bingo, we are back to 1972 all over again.
TBF is an ETF betting on falling bond prices which move opposite interest rates. TBF has moved from $15.50 to $18.36 in the last month!
Another columnist suggests that OPEC will keep a lid on oil prices by increasing production. West Texas Intermediate is already $79.46. Brent is $81.94. We will shortly have a test of its November high at $86. Recently half of all the options traded were bets that oil would h it $00 in 2022. For now the trend in price is up. The trend is your friend.
The great bull stock market of the last forty years kicked off in 1982 – 84. Paul Volker raised Fed Funds to 20% finally killing off the OPEC induced 1970s inflation. Money began trickling into stocks with high dividend yields. Back then Exxon was paying a 10% dividend. We are now at the end of the 40 year trend of lower interest rates. This will be the big news of 2022.
Energy trusts are soaring in value. Prudhoe Bay BPT jumped from $3.50 to $4.75 since early December. And some like Nustar NS are paying 9% dividends.
Tech stock prices are falling. This year is not likely to be a replay of 2021. Eventually higher rates will end the 40 year bull market. Be prepared.
