Wu-Tang Clan vs. TINA

Let’s set aside global pandemic concerns for a moment and examine an important underlying technical driver of global fund flows today. 

I believe it was Jason Trennert of Strategas that cleverly came up with the acronym T.I.N.A. (There Is No Alternative) to describe the post 08 QE regime that has been contributing to the reflation of asset prices over the last decade. Not only was it spot on back then, but it is arguably even more relevant today as the value of cash is now negative and continues to trend lower. I like to use real rates as a proxy for this dynamic as it reflects the risk-free rate of return of US Treasuries less inflation. Today those values are negative across the curve as the Fed has made it clear that they will continue to keep nominal rates low for the foreseeable future in an attempt to drive inflation higher (Fed to keep rates at 0% into 2022). So by definition, the Fed is telling us that they will keep nominal rates pinned at current levels even as inflation trends higher which in drives turn real rates lower (and thus eats away at cash balances).  That message is clearly being factored in by the market as asset allocators and CFOs move out the risk curve to take advantage of all time low costs of capital and deteriorating cash values. Look no further than the price of gold and crypto currencies as evidence of lower real rates increasing alternative stores of value. Needless to say, it’s a powerful force and one that appears to be firmly in place for the time being, but increasingly has the potential to be reflexive if the value of cash ever goes positive again. 

So although the T.I.N.A. acronym gets all the attention, this real rates / cash value dynamic has me thinking Wu-Tang clan circa 1993 --- “C.R.E.A.M. Cash Rules Everything Around Me”, each time I log into the bloomberg terminal and see real rates negative and equity futures up again.