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*                       FIEND'S SUPERBEAR MARKET REPORT                     *

*                                December 9, 2025                           *

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*                       e-mail: fiendbear@fiendbear.com                     *

*                    web address: http://www.fiendbear.com                  *

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Fiend Commentary

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The 5–5–30 Scenario

What a 5%+ 10-year, 5% inflation, and a 30% Dow drawdown would actually look like—and how it could happen.

If the floor gives way, it won’t be from one headline. It will be a chain. Here’s the plausible chain that gets you to 5%+ on the 10-year, 5% inflation, and a 30% Dow drawdown.

The spark (pick one, they rhyme)

  • Treasury supply shock: a sloppy auction sequence (ugly tails, weak indirects) + foreign buyers stepping back. Term premium jumps; the curve bear-steepens.
  • Carry trade break: a disorderly yen rally forces unwind; U.S. duration is dumped to cover FX losses.
  • Energy/commodity spike: a policy or geopolitical jolt pushes fuel and food higher; CPI accelerates.
  • Tariff/rebate loop: new trade frictions + fiscal sweeteners lift headline inflation even as growth softens.

The transmission

1.     Bonds first: 10-year races through 4.25 → 4.50 → 5.00% on term premium, not growth. Mortgage rates reprice; capex hurdle rates jump.

2.     Then credit: HY spreads widen > 600 bps, new issuance stalls, marginal borrowers hit the wall (autos/cards/CRE first).

3.     Then equities: multiples compress while earnings slip. The Dow, rich on low long rates, gives back ~30% from highs as defensives can’t absorb the hit.

4.     Then the currency: the dollar pops on stress—or flips lower if policy response looks inflationary. Either version is bad for risk.

5.     Then collateral: margin calls, VAR cuts, basis trades unwind; liquidity disappears where you didn’t expect it to.

Why inflation can still hit 5% in this mess

  • Cost-push: higher energy/shipping + tariffs feed through fast.
  • Wage floors: tight sectors don’t cut pay; services inflation stays sticky.
  • Policy mix: cuts/QE into a price shock = negative real policy rates, the classic gasoline on the fire.

What policymakers would try (and why it’s messy)

  • Emergency QE / facility tweaks to cap term premium.
  • Swap lines / SRF expansions to stop the plumbing from rattling.
  • Jawboning “temporary” inflation while easing anyway.

    This stabilizes markets, not prices. The immediate fix raises the longer-term bill.

Tells that we’re entering 5–5–30 (hard thresholds)

  • Treasury auctions: 3–5 bps tails, weak bid-to-cover; a “failed” auction talk anywhere.
  • MOVE index > 150 and VIX > 35 together (rates + equity stress).
  • Credit: HY OAS > 600–650 bps for a week, not a day; CCC issuance shuts.
  • Funding: standing repo facility and discount window usage hit records; commercial paper spreads widen.
  • Metals: gold keeps bid with rising real yields (credibility break); silver stays backwardated on spot tightness.

If we avoid catastrophe (the “hard landing, not crash” variant)

  • 10-year peaks 4.6–4.8%, not 5+; HY OAS stalls under 600 bps; equities drop 10–15%, not 30; metals consolidate near highs instead of vertical.

My plain call for December–Q1 (no mealy-mouth)

  • Probability crisis path (5–5–30) in next 4–6 months: 30%.
  • Probability hard landing without systemic break: 45%.
  • Probability soft-landing sequel: 25%.

What to do now (actionable)

  • Respect 4.15% on the 10-year. Above it, expect multiple compression; above 4.50%, price liquidity like it’s scarce.
  • Own an insurance sleeve. Core gold/silver allocation; treat spikes as trims, dips as reloads while policy stays easier than prices.
  • Upgrade balance sheets. Prefer cash-flow compounders and short-duration equities; avoid models that need cheap capital to work.
  • Credit hygiene. Step up in quality; stagger maturities; keep dry powder for forced sellers.
  • Watch these dials daily: auction outcomes, HY OAS, MOVE/VIX, SRF usage, and the silver curve (spot vs. front futures). They’ll turn before the headlines do.

Bottom line: A repeat of 2008 isn’t required to do real damage. A term-premium shock plus a policy response that protects markets more than prices gets you close enough: 5% yields, 5% inflation, and a Dow that’s 30% lighter. If those dials start flashing together, treat bounces as exits until the bond market stops shouting.

 

 

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