If you want to know just how clueless our Treasury secretary is then please consider Treasury Chief Calls Market Reaction to Fed 'Overblown'.

Steven Mnuchin, in an interview with Fox Business Network, said he believes U.S. equities are a “tremendous value,” and that investors would now move from bonds into stocks.

“The market reaction is completely overblown,” he said. “I think you’re going see rebalancing out of bonds (and) into equities at these levels.

Opinions vs. Errors

I strongly disagree with Mnuchin on valuations. But he is entitled to his own opinion, no matter how silly it seems.

His opinion is not the problem. His comments prove he is clueless how markets even work.

Mathematical Impossibility

It is mathematically impossible for investors, in aggregate, to "rebalance out of bonds into equities."


The explanation is easy. For every buyer of a stock or bond there is a seller. For every seller there is a buyer.

Someone much hold every stock or bond issued, 100% of the time.

Individual investors may take action, but rebalancing cannot and will not occur in aggregate because it is mathematically impossible.


Don't expect rebalancing (because it's impossible). Instead, expect repricing.

Equities are not cheap. Expect them to get hammered and junk bonds right along with them.

Buy gold, that's what's cheap (obviously my opinion).

Mike "Mish" Shedlock

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