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Category: 1 – Liquidity Trader- Money Trends

How Fed and Treasury policy, Primary Dealers, real time Federal tax collections, foreign central banks, US banking system, and other factors that affect market liquidity, interact to drive the financial markets. Focus on trend direction of US bonds and stocks. Resulting market strategy and tactical ideas. 4-5 in depth reports each month. Click here to subscribe. 90 day risk free trial!

Market Sentiment vs. Liquidity Reaches Historical Hysterical

In last week’s report, we noted that “One of the key measures of animal spirits versus liquidity has reached an historic level of insanity that could mark the end of this move. Or it could signal the beginning of even more craziness.” Non-subscribers, click here for access.

Subscribers, click here to download the report.

The market’s verdict last week was “more craziness.” But the liquidity readings still are not cooperating. That craziness should end with a thud in the next couple of weeks. We’re already seeing the indigestion in the bond market. I think that that’s a sign of things to come, with worse news ahead for Treasuries and other fixed income. And then for stocks. Non-subscribers, click here for access.

The issue, as always is the timing. We’ve reached a stage in this market that the weekly banking data and real time weekly Fed balance sheet data is more important than ever. Therefore, I will go to a weekly follow up on this.  I’ll show you the charts, tell you what they mean, and we’ll formulate a plan for how to handle the tactical view from the TA.  Non-subscribers, click here for access.

This very well could be the week that was. One way or the other. This report shows what the key is, and what to do about it.  Non-subscribers, click here for access.

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THANK YOU FOR YOUR SUPPORT!

This Will Be the Week That Was

A potentially historic week is on tap. One of the key measures of animal spirits versus liquidity has reached an historic level of insanity that could mark the end of this move. Or it could signal the beginning of even more craziness.  Non-subscribers, click here for access.

Subscribers, click here to download the report.

This very well could be the week that was. One way or the other. This report shows what the key is, and what to do about it.  Non-subscribers, click here for access.

 

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

What’s Up with Down Withholding Tax Collections

Withholding taxes rebounded in January, but they were still negative year to year in inflation adjusted terms, and barely positive in nominal terms. Non-subscribers, click here for access.

Subscribers, click here to download the report.

By any standard, the withholding tax data doesn’t support the jobs report.  Non-subscribers, click here for access. 

But that’s not what matters. Here’s what does.    Non-subscribers, click here for access. 

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Fed Balance Sheet Right Now Says Bears Should Get Ready to Rumble

Despite the fact that the Fed is no longer the only driver of the markets in one direction, it still plays a role indirectly. So we still monitor the Fed’s weekly balance sheet. It is still the timeliest source of data on several critical market drivers. It’s published weekly, virtually in real time, with data through the current Wednesday, published on Thursday after the financial markets close.  Non-subscribers, click here for access.

Subscribers, click here to download the report.

The numbers and the discussion are dry, and can be dense, so I’ve been thinking about ways that I could relate those numbers to the reality of stocks and bond prices on the ground, without putting you to sleep.  Non-subscribers, click here for access.

Then it dawned on me!  Non-subscribers, click here for access.

So, in this report I present a few charts of the Liabilities side of the Fed’s balance sheet. They show us that maybe we shouldn’t be so sanguine about the continuation of this bull market. In fact, it looks like something bad is coming, and soon.  Non-subscribers, click here for access.

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KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

Primary Dealers Are Maxed Out Again

The dealers have gone to an extreme of leverage against their bond positions for the second time since last July.  Back then, the extreme lasted for about a month, and it coincided with an intermediate top in stock prices and an accelerated decline in bond prices and the necessary inverse rise in yields.  Non-subscribers, click here for access.

Subscribers, click here to download the report.

This report shows the pictures that tell the story, and that tells us what to do about it.

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Weekly Bank Data and Fed Balance Sheet Say the End is Nigh

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

Bank deposits, repo borrowing, and the Fed’s RRP facility have been the fuels for the rally. There are strong correlations between them and stock prices. In the past two weeks they’ve reached an inflection point. Depending on how they break, we should get a signal on the most likely intermediate term direction of stock prices. Non-subscribers, click here for access.

However, liquidity only establishes market context. Technical analysis of price trends shows action and timing. Context helps us to better understand the timing indicators when they are ambiguous. I cover that in the Technical Trader reports. Non-subscribers, click here for access.

Subscribers, click here to download the report.

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KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

US Economy Didn’t Crash in December?

Yesterday I posted a report on the plunge in the withholding data. Non-subscribers, click here for access.

Subscribers, click here to download the report.

That conclusion may not have been correct. A reader brought to my attention that there was apparently a tax law effect. Another tax tracking service estimated that the effect of this change was 17%, so that there would have been a net year to year gain of 6.1%. This would have been the rate of change, in the absence of the effect of deferment of withholding in the prior year due to pandemic relief legislation. December 2022 was the giveback.

In reviewing the data, I noted that there was a 21% surge in year to year withholding tax collections in December 2022. You can see that on the withholding tax chart in the report. Non-subscribers, click here for access. Therefore the effect of the tax deferment may well have been 17%, or close to it. The analysis of that impact appears to be accurate.

Assuming the adjusted figure of a year to year gain 6.1% is correct, then the real growth rate would have been 2% based on recent BLS earnings inflation reported at 4%.  The adjusted data presented in the other report claims that withholding growth was equivalent to the BEA rate of wage inflation at 6%. That implies zero job growth.

I apologize that my analysis posted yesterday appears to be materially incorrect because of this factor. However, my broad conclusions remain the same. There’s still lots of Treasury supply on the way. The deficit will apparently not grow beyond the official forecast but it remains enormous and isn’t going away.

In January, the effect of the deferred withholding back in December 2021 that was recaptured in December 2022, will be zero. We’ll then get an apples to apples comp. I will provide an interim update on the January year to year change during the month.

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KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

US Economy Crashed in December – Nope, See Update

NOTE! This report has been updated here with important previously overlooked information. 

Withholding taxes plunged in December. They are by far the largest component of Federal tax revenue. This was not an anomaly. It was a continuation of a downtrend that began in November. This trend is a sign of economic weakness, recession, and most importantly, the fact of less revenue than expected. The US Government schedules Treasury issuance on the basis of revenue forecasts. When revenue falls short of the assumption underlying the supply forecast, it means that Treasury supply will increase. Now this will come from an already heavy forecast level in the first quarter. Non-subscribers, click here for access.

Subscribers, click here to download the report.

Despite market expectations of lower interest rates ahead, the Fed is not yet refilling the punchbowl. The existing punchbowl, the Fed’s RRP facility, continues to be drained. It will run out of funds xxxxxxxxz xxxxxx xxxxxxxx xxxxx xxxxxx. Only the timing is at issue. The fall in tax revenues suggests that the day of reckoning will come sooner rather than later. I’m back to projecting xxxxxxxxx xxxxxxxxxx xxxxxxx, but we’ll adjust that expectation as we determine day by day xxxxxxxxx xxxxxxx xxxxxxxx xxxxxxxx, and whether RRP slush fund withdrawals are xxxxxx xxxxxxxx xxxxxx xxxxxxxxx.  Non-subscribers, click here for access.

 

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KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Macro Liquidity – The Party’s Over

The market has reached maximum extension versus the Composite Liquidity Indicator. The indicator remains flat despite surging bank deposits. Investors and dealers appear to be pulling cash from money market funds to buy stocks and bonds. That’s bulking up bank deposits, in a bullish self feedback loop. Non-subscribers, click here for access.

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But that only can go so far as the Fed continues to work to blunt that via QT. QT or Quantitative Tightening is the act of the Fed shrinking its balance sheet, which in turn destroys bank deposits. Foreign central banks have also been uncooperative in supporting the bull moves in US stocks and bonds. That reduces systemic liquidity. Non-subscribers, click here for access.

In recent months animal spirits have resulted in enough private credit creation to outstrip the Fed. The US Treasury has goosed the process by stopping the issuance of more T-bills than are expiring. With a reduced supply of T-bills, investors have had more cash to play with, and play, they did. But all that will come to an end over January and February. There are already hints from these liquidity measures that a market top may be at hand. Non-subscribers, click here for access.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Happy Holidays to All!

I wish you and yours the happiest of holidays, a Merry Christmas, and Happy New Year!

And a special thanks to you, Liquidity Traders! While 2023 has been trying, you have made it a very good year for yours truly. I thank you for your business, your confidence in my work, and for your support! Here’s to an even better 2024!

I will take a break from publishing any reports this holiday week. Regular publication will resume on January 2. Enjoy your holiday week and I’ll see you next year! 😊

From Nice, France,

Joyeux Noel!

Lee

 

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