Maybe NOT September.

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life maybe not september hey everyone me

kevin here yesterday we talked about a j

pal tapering at some point and all eyes

went straight to september 22nd which is

the next fomc meeting which will follow

a likely strong jobs report on the 3rd

of september and then inflation on the

14th of september that is inflationary

cpi readings coming out on the 14th of

september both of those reports coming

out right before the september 22nd fomc

meeting the end to the meeting where

jerome powell will come out and release

his statement as to whether or not he

will start the taper so right now a lot

of people are marking september 22nd on

their calendar that's it tapers coming

but wait a minute what if the taper

doesn't come september 22nd and why

might it not well the wall street

journal today talked about exactly that

they mentioned that they actually don't

expect the federal reserve to taper

until november at the earliest their

logic behind this is that the fed will

likely want to figure out what's going

to happen in congress with the debt

limit political standoff remember every

year congress is supposed to get a

budget done by september 30th now

oftentimes they end up doing these stop

gap measures and they have these

political debt ceiling fights but there

is always this uncertainty that happens

around these negotiations that oh my

gosh what if we run out of money then

the treasury is no longer able to pay

its bills and then we have big o

problems like we have a big shutdown

we've seen big shutdown

debacles before uh the united states

bonds lose trust the dollar loses value

everything ends up turning into a

disaster now what's interesting is the

timing here see the treasury on the

treasury's website literally says we

will run out of money sometime in

october or november without a debt

ceiling increase they literally say that

on their website

like i wonder if you called up your

spouse one day you're like yeah hey

we're gonna run out of money in october

or november unless we get our credit

limit bumped up

that doesn't sound very stable when you

think about it that way but that's how

our government operates uh and these

these negotiations

uh can definitely lead to uh

fluctuations in bond prices now we don't

actually expect to not raise the debt

limit we always end up raising the debt

limit uh you know mitch mcconnell ends

up trying to sand back the negotiations

to say i won't raise the debt limit if

you're going to spend all this money on

infrastructure which is exactly what we

expect him to do so we do expect this to

be a tenuous and uncertain time so there

could be potential for a market catalyst

uh towards the downside between the end

of september and the middle of october i

expect this to be

somewhat short-term though because they

generally always raise the debt limit

which

you know that has its own implications

but the point of this is all of this

this debt ceiling discussion is that the

very next fomc meeting

after september 22nd

isn't actually until november third so

it's entirely possible

that we could spend all of september and

october

without a taper that is the taper won't

actually have started yet we could

potentially see

yields on treasuries remain low we do

expect that once the taper begins that

treasury yields will bump in fact i saw

this very interesting chart look at this

right here no tapering

expected tapering

surprise tapering and these are sort of

the expectations for what 10-year

treasury rates might do and i think it's

very interesting that right here this

white line is what we saw in terms of uh

10-year treasury yields skyrocketing at

the beginning of the year

and in order for michael bury to be

right according to this projection of

what 10-year treasuries do so if you're

following michael bury short by shorting

the 10-year

bond etf you would really want to see a

surprise tapering because a surprise

tapering might push the 10-year treasury

yields back to about 1.5

an expected taper is really only

expected per bloomberg here to keep

10-year treasury yields around 1.2 which

i thought was interesting that

once the taper happens bloomberg

actually isn't really expecting the

10-year treasury yield to skyrocket and

if they just delay their taper the

10-year treasury might just continue to

slip until the fed actually does taper

now keep in mind right here this sort of

inflection point list here probably

looks like it's somewhere around

november

and then this year is about january so

if we go with the expected taper

direction then then we'll still have

treasury yields rotate down even with

the taper which is not so good for

michael bury so in my opinion this is

actually quite fascinating because we've

got the market suggesting whether we

have a taper or not we really don't

expect 10-year treasury yields to

skyrocket like the market's kind of

pricing in the taper we expect the taper

to come september 22nd but there's room

for the fed to delay it because of debt

ceiling negotiations which debt ceiling

negotiations could lead to a little bit

of fluctuations in the market but

because of jerome powell kind of being

like i'm not so terribly worried about

inflation

maybe there's room for waiting which the

white house the office of management and

budget just released their mid-session

report and they actually revised their

original inflationary forecast from two

percent

for uh for for the fourth quarter of

2021 so the last part of this year their

forecast was two percent inflation they

bumped that to four point eight percent

inflation and when i pull up their

document here take a look at some of the

things they mention here and it's really

important for interest rates look at

this in the document they see here

lastly faster expected faster than

expected rates of economic growth and

temporary inflation pressures have

caused financial markets and

professional forecasters alike to rise

upwards their estimates for interest

rates in 2023 and beyond

and this is where they make the revision

to 4.8 percent but this was interesting

here

the mid-session report projections take

into account that this shift on interest

rates

won't happen in 2024 which is what we

originally expected instead it'll happen

uh some sometime in the beginning of

2023

so basically here you have the federal

government saying hey we're going to

start expecting to spend more money on

interest at the beginning of 2023

because we do think that interest rates

will go up now that was pretty neat

because when you start having the

federal government budget in that

they're going to pay more in interest

that might in my opinion i don't know

how much talking they do with the fed

but it's certainly more than i get to

talk to the fed uh to me that's a little

bit of a sign that okay so 2023

beginning of 2023 that's really what

we're looking at huh

now in the meantime and these are some

of the things that jerome powell is

looking at we obviously see some

inflections to the downside in inflation

already such as spending on cars and

durable goods like refrigerators those

are falling we also saw that household

income

did go up about 1.1 percent in july but

consumer spending only went up 0.3

percent and sometimes you see consumer

spending

go down when people fear inflation so in

other words when when there's more fear

of inflation

people tend to save more money in fact

take a look at this chart right here now

this chart the spikes here have to do

with the on the left the 1200 stimulus

check then 600 then 1400

but a lot of folks pay attention to this

particular chart here to suggest that

hey if people fear inflation more they

will save more money

so obviously we're in this phase of a

lot of inflation uncertainty and so how

do we pull all of this madness and

information together well the best thing

to do is just write these catalysts down

remember we've got jobs report on a

september 3rd we've got cpi data on

september 14th we've got the fomc

meeting on the 22nd which is where we

think there could be a taper but the

wall street journal is now expecting

this to potentially get delayed to

november 3rd which means we might have a

little bit of uncertainty in the

marketplace between the end of september

and mid-october thanks to the budget uh

discussion and the debt ceiling

discussion and then maybe we get that

taper in november because after all

jerome powell is not as worried about

inflation as a lot of consumers are who

are pulling back and spending a little

bit less now spending a little bit less

could obviously also be due to delta but

right now we see that almost no

forecasters or the fed really think that

delta is going to be a massive impact to

the economy like it previously was so

fascinating insights it definitely

revised my expectations a little bit

wanted to share those with you if you

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