Dirty Dancing 2: The Climax

Are we having fun?

We are saved! The Treasury’s Quarterly Borrowing Requirement came out earlier today and the Treasury (aka Tamagotchi Yellen) will now “only” borrow $760bn for Jan-March, down from a previous estimate of $816bn.

That’s a whole $50bn less than expected!

Since the US government will borrow $50bn less this quarter, it’s only natural that Tesla and Nvda added $50bn of value today. You see? The Stock Market is rational after all!

What did we learn here kids? You can be as fiscally reckless as you want, but the key is to manage expectations correctly and you will get away with it and even applauded :)

But the party is not over yet.

On Wednesday, we have a Dance Off: in the morning, Tamagotchi Yellen will give us the composition of the QRA (Bills vs Bonds) and in the afternoon JPow will honor us with a Fed presser where he will no doubt talk about QT.

If the “game” is really rigged (which it is, don’t be stupid), then it’s not going to be a Dance Off, but more like a harmonious push-pull between Janet and Jay. Think with me:

• Scenario 1: Janet adds a lot of Coupons. Monkeys panic. Then Jay comes out and says “We need to roll down QT”. Monkeys calm.

• Scenario 2: Janet doesn’t add much in Coupons. Monkeys rejoice. Then Jay comes out and says “We need to be patient with QT”. Monkeys panic. Nah, they probably keep buying who are we kidding.

I’m over-simplifying it, but frankly I don’t care because ultimately the monkeys won’t care either. The point is, Janet and Jay have the tools to play the market like a fiddle, if they so wish (This piece on plumbing is worth re-reading if you are lost).

The meme below captures the interaction, and you can switch the labels the other way round it’s the same outcome.

In December I gave my outlook for 2024 as such: “$SPX crosses 5000 and then has a flash crash . I don’t know why, but I kept having vibes of January 2018 in my mind. The “SPX 5000” is too big a milestone for the monkeys, and they will chase with all their remaining bullets to finally get their “SPX 5000” hats.

So maybe this Dance Off does lead to a crescendo of monkeys going all-in that climaxes to a spectacular Volmageddon. Or maybe we keep going to the Moon, if Tamagotchi Yellen so wishes. This will be fun either way!

Disclaimer:

This isn’t financial advice.

This is the trading blog of a shrub.

By now you should know: Don’t be Stupid.

Like, seriously … Don’t be stupid …