Thank God for Yellen's Conundrum

New lows for oil on no news for all -- it probably means all the n egatives are out, making what amounts to a double - bottom, and leaving only surprises on the upside. Yet there's a deflationary smell in the air, as "liftoff" approaches next week -- a mistake based on a misbe gotten belief in the Phillips Curve. The Fed is ignoring that the back - up in credit spreads, accelerated by new agonies in the junk energy sector, is already the equivalent of thirteen rate hikes. Good news: long - term Treasury yields haven't budged, signal ing that markets see the deflationary implications of a "liftoff" error. This supports equity valuations through equity risk premia. It is also good that the RMB continues to weaken, as we expected. These factors limit the depth of the tantrum that will ma ke this rate hike "one - or - two and reversed."