The pause in the growth of the Fed’s balance sheet over the past 6 weeks isn’t what the pundits are telling you. Some are saying that it’s evidence that the Fed is not doing QE. They’re either gaslighting, or clueless. But we know what it is, and we know what happens now.
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Withholding tax collections are soaring. But despite that and the massive stimulus of skyrocketing government outlays and ever widening deficits, the ‘conomy is only so-so. Here’s why, what it means for liquidity and the markets. And of course, what you should do about it.
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I just discovered today that Liquidity Traders email system had malfunctioned and had stopped sending notifications to you last week. All posts were available here onsite, but you may have missed one over the last few days if you have not visited the site.
The emails are now sending again and you should be notified instantly when a new post is published.
I apologize for the inconvenience! My apologies as well if you have recieved multiple emails in the past few minutes as we cleared the block. Thanks for your patience and support!
Lee
With the light supply and the Fed money putting the wind at their backs, Primary Dealers got a gift on top of that. Coronavirus. The panic that induced has driven money out of stocks and into bonds. Just what they needed.
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Dealers cut back their fixed income inventories ever so slightly over the past month. They also increased their hedges, but again, slightly. They are still near historical record net long positions, and still carry historic levels of leverage.
With a bulge in Treasury supply on the way, is this where the bond market might trigger them throwing up their hands and saying WTF, despite the Fed?
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Also, I have republished Thursday’s Treasury market update due to a faulty posting with links to an earlier report. Those errors have have now been corrected. I apologize for the delay!
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Supply and demand conditions for stocks and bonds have been as good as it gets over the past month. We can thank the Fed’s Not QE program, and light Treasury supply for that.
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It ain’t rocket science. The Fed drives liquidity and stock prices are the first order effect because that’s how monetary policy transmission is designed. These charts show you the way!
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Federal revenues softened in December. That could be just a blip, or it could be the first signs of a looming recession. It’s bullish if it is, and bullish if it isn’t. Here’s why everything is bullish.
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The Fed has monetized 99 percent of the Federal Debt since it started Not QE. That’s been bullish. Here’s what to look for and how to position, going forward.
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There are growing signs in the banking system that the Fed will lose control, and this won’t end well.
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Lee Adler