COULD HAVE BEEN WORSE

Well, perhaps not.  The DOW was down almost 400 points at one point today but rallied to close down only 177.  The 10 year was at a 1.75% yield separated form the 2 year by about 110 B.P. and the ten year by less than 200 B.P.  In the trade that is known as a flattening yield curve; in the real world it is know as "Oh &^%$!"   Nothing good comes from a flattening yield curve especially when the curve was flat to start and REALLY especially when it was the intention of the Fed through its actions to steepen the curve.  We are at an inflection point here, gang.  If this continues for the remainder of this week I think the result could well be the GDP for the quarter coming in flat or in negative territory signaling the onset of a recession, and while there is no direct correlation I cannot believe that the pessimism and in some cases outright fear being expressed in the capital markets has not slid over into the economy in general.

Janet heads to the Hill this week for her scheduled two-day pow-wow with both houses of Congress and all will be waiting to see if Grandma will make us feel better with one of her magical potions or some chicken soup.  Memo to the street:  The chicken got killed crossing the road.  The answer is at the other end of Constitution Avenue but there are two things missing here.  Firstly Il Duce is engaging in one of the great pieces of self-delusion even for him in that he doesn't see a problem  (WOW! Unemployment at 4.9%...yeah, sure) and secondly, bad is going to be perceived as being good for the other side.  Try getting something accomplished under that scenario.

I suppose we wait to see the reaction to Janet's revelations and in so doing there will probably be a continuation of what we have been witnessing since the start of the year.  Unfortunately, signs elsewhere are not good at all including the stark realization that Mr. Cameron may have played this one all wrong and the threat of a Brexit may well become a reality in the coming months.  We'll explore that a bit more in the coming days.  In the meantime, a prayer or two couldn't hurt.  At least Peyton Manning went out a winner.