I have been clear for a month on Market Volatility and Drawdown:

  1. This was not about VIX funds ( they were a symptom of, …a victim of…)
  2. This was not a nice easy pause that refreshes, that was what we needed in order to move higher
  3. I speak to a lot of wealth managers and their heads are in the sand.  They are talking about great opportunity to nibble on the test of new lows as if it has to hold
  4. Markets haven’t priced in any Washington crash – which on some level needs t price in losing House or some part of Senate in mid-term elections
  5. Fed risk from Powell being new hand is not understood; this guy may be interested in being the first guy in a while who isn’t held hostage by markets
  6. Fed risk from the reality of what they need to do unwind years of accommodation is incalculable
  7. Rates risk from 2X issuance in 2019 over 2017 is still unknown
  8. The minute the ECB moves tighter, our rates go significantly higher
  9. Dollar – twin deficits will have a significant impact on the ability to refinance
    1. Projecting 3% GDP growth for next 10yrs to pay for a corporate tax cut (that comes when corporate America has never been more profitable, BTW ) is laughable to me and will be to the rest of the world who buy our bonds
    2. Weaker Dollar is inflationary

Everyone is overly sanguine about a test of the lows then we go to new highs…  whether that is right or wrong, few are acknowledging the realities above.


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