There’s more evidence in the weekly data on the biggest US banks .of the sea change in psychology and financial conditions that is triggering this bear market environment
The Fed is mandated to control inflation. That means that it has no choice but to follow the conventional economic prescription for doing so. Tight money.
Tight money means death, destruction, and chaos, given how much debt and leverage now overburden the banking system in general, and the Primary Dealers in particular. As they become increasingly stressed, the effect will show up in the markets as lower prices. That will increase the stress, and so on.
The Fed will have its hands tied as long as the CPI and PCE measures remain elevated. Therefore, a resumption and continuation of the crash that has already begun in both stocks and bonds is baked in. It won’t be a straight line. There will be rallies, and they will represent profit opportunities for those willing to short them when they run out of steam.
The big surprise in this data is the evidence that both Primary Dealers and money managers are already hoarding cash. This is a reversal of their past behavior of immediately redeploying cash when speculation and bullishness ruled.
If this is the new mindset, we’re about to reap the whirlwind. Here’s what to do, along with the supporting charts, data, and analysis to help you understand what’s really going on behind and beyond Powell’s tortured dissembling.
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