LIQUIDITY ANALYSIS. A NEW HIGH FOR THE GOLDILOCKS/STAGFLATION INDEX (IF YOU CAN BELIEVE IT)
[Latest Endogenous Liquidity Index: -65.8%; Latest Global Dollar Liquidity measure: +28.7%]

- The TED spread & credit spreads. Pointing to the slightly lower TED spread, CNBC's Steve Liesman keeps talking about "improving credit markets" conditions. Wrong, in my opinion. Money markets are not credit markets. Take a look at the 10-year Moody's Baa spread: at 560 bps, it trades at an all-time high. This is hardly what you would expect in the context of "improving credit markets". [Selected Interest Rates]
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- Don't cry for me, Argentina (again). Argentine policymakers just don't get it. If you destroy property rights, credit markets will respond in kind. The supply of loanable resources is all but collapsing; interest rates are skyrocketting in Buenos Aires and beyond. Ladies and gentlemen: checks and balances do matter. The arbitrary exercise of government power generally results in very high long-term (real) interest rates. The great Montesquieu said as much in The Spirit of the Laws. Now just ask Vladimir Putin and Nestor Kirchner. [Financial Times: "Argentine own goal"]
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- The Goldilocks/Stagflation Index at a new high (if you can believe it). Inflation expectations are collapsing at a much faster rate than economic growth: that's the message behind the new high in my Goldilocks/Stagflation Index. With the denominator (ten year-inflation breakevens) at such an impressive all-time low (77 bps), even the lackluster performance of the numerator (the platinum-gold ratio) cannot impede the index to reach new highs. Does that really matter? When valued against the Goldilocks/Stagflation Index, the S&P500 trades at a new all-time low. If credit spreads would collaborate (not a sure bet, by any means), the ensuing rally would be —as a well-known CNBC commentator recently put it— "jaw-dropping".
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