What the market doesn’t know, will hurt it.
The US economy slowed radically in November. It may have even contracted. We don’t need jobs data or economic survey data of any kind to know that. We know it from the November tax collection data. As of Friday, we had that data for the full month, and it is ugly. Non-subscribers, click here for access.
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It means that Treasury supply will get even heavier than the gargantuan amounts already forecast by the Treasury Borrowing Advisory Committee (TBAC) for December and the first quarter of 2024. Non-subscribers, click here for access.
Meanwhile, cash keeps gushing out of the Fed’s RRP slush fund. Market participants have pulled hundreds of billions in cash out of the Fed RRP account month after month, and especially in November. They used some of that cash to buy the flood of T-bills issued by the US Treasury, but less than usual in November. Because they used more than usual to buy longer term Treasury notes and bonds, and… oh yes… stocks. Non-subscribers, click here for access.
But as the Federal deficit grows because of weak revenues, that money will run out, as I pointed out last week. And it now looks at thought it will be gone before April Fool’s Day, which is what my guess was last week. At the current withdrawal rate, it will be gone within 3 months. Non-subscribers, click here for access.
Meanwhile, these market rallies have already sucked a lot of stock and bond bulls into the market. I don’t know that we can say that the markets are overbought, but I can say that we’re getting closer. Non-subscribers, click here for access.
That’s because… Non-subscribers, click here for access.
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