In the early August update we saw that withholding tax collections had gone flat. They have not improved since then. Collections remain weak. Non-subscribers, click here for access.
BLS jobs reports have begun to adjust to that fact with tepid growth reported for August, but the reality is much worse. Over time the numbers will reflect that. But we don’t know when. Nor do we know how the market will react to the news when that adjustment finally comes. Non-subscribers, click here for access.
We do know however, that weak tax collections mean bigger deficits. Bigger deficits mean more supply. For the time being there are no increases scheduled in long term paper during the current quarter or Q4. The supply hits will come in the T-bills. And that often works in favor of stocks as market participants use the bills for collateral. It means more money and more leverage. Stock prices rise, but the system grows increasingly fragile as leverage increases. Non-subscribers, click here for access.
We live in “interesting” times, and the longer this goes on, the more interesting it becomes. There’s opportunity, and there’s risk. This report should help you take advantage of the former and minimize the latter. Non-subscribers, click here for access.
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