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I am not sure if you are familiar with Rudolf E. Havenstein. Rudy (as his friends call him) was the German lawyer turned Central Banker in charge of the Reichsbank during the great hyperinflation of 1921-23. Although his legacy is tarnished in a cloud of shame, over the past few years he has managed to turn his career around, and develop quite a following on Twitter. Not bad for a guy who just recently turned 156! If you don’t follow him, you should immediately sign up (@RudyHavenstein) - it’s hands down the best finance twitter account out there.

Apart from insights from his years of hard learned lessons presiding over one of the worst Central Bank episodes in history, you get gems of wisdom such as the following:

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Rudy’s point is that although many market pundits are hysterically waving their arms moaning about the terror of this sell off, in the big picture, the dip is shallow.

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I know it is hard to stay bearish when we are down more than 100 handles from the highs. Buying the dip has worked for the past 8 years. It’s tough to change the habit.

But until the Federal Reserve changes its stance, their withdrawal of liquidity will result in lower equity prices. Their tightening has set in motion a deflationary self reinforcing feedback loop that will be hard to stop.

In the mean time, we are getting short covering rallies in equities, but credit is not playing ball.

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The cheap funding that has driven this monster bull market is not only not returning, but credit spreads continue to widen.

Why would you want to own equities when you can buy high yield credit at these levels? If you want to get bullish on risk assets, buy some JNK or HYG. Until they start rising, the stock market rallies are a sucker’s bet. Sure there will be squeezes higher, but they will be opportunities to write some pink tickets, not the other way round.

Thanks for reading,
Kevin Muir
the MacroTourist