Macro liquidity has slowed slightly in recent weeks as the Fed has taken its foot off the accelerator. But it continues to grow at an historic pace. What does that mean for the short term and the long term.
Oh, wait.
There is no long term.
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The Fed has cut back its POMO purchases to an average of $8 billion per day of Treasuries and $6 billion of MBS this week. That’s down from $10 billion and $8 billion last week, and hundreds of billions in the peak of the panic in April.
The effects of that are beginning to show up in stock prices. Be prepared because here’s what happens next.
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Gold is consolidating. The uptrend will be safe as long as a key support level holds. This report looks at where to start worrying, and where the upside targets are if all goes well.
I am rescinding the comments I made last week about the long term trend. The Fed’s commitment to maintaining a bullish trend in stocks is now in doubt, and the long term indicators on the market index charts are ambiguous.
The outlook is rife with uncertainty. We don’t know when or if the Fed will re-deploy its tactical carpet bombing of deeply embedded, indigenous bearish forces.
It’s like the Viet Nam war. The Fed has overwhelming firepower, but it may not be committed to using it because of the astronomical long term cost fighting an entrenched enemy. We need to watch to the technical indicators closely to try to determine what each side is doing and will do, and which might have the upper hand.
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The Federal deficit hit $1 trillion in April. That’s a cool 1,500% increase year to year. That’s for one month.
This is based on the April 30 Daily Treasury Statement month to date totals. It is an estimate based on my simple subtraction of outlays from revenues. It is not official, and the official number may differ when the Monthly Treasury Statement is released on May 13.
Still, a trillion, is a trillion. And the final, official number should be in this ballpark. This is an increase of $941 billion from the April 2019 deficit. Keep in mind that back in the “good old days, before the 2017 tax cut and spending increase, April typically saw a surplus. So even before the pandemic, these numbers were bad.
Obviously, this blowout is due to the Pandemic Pandemonium Panic Relief Programs spending. But it’s also partly due to the plunge in revenue, and embedded increases in regular budgetary spending.
Here are the current horrible numbers, along with the immediate outlook, and what it means for stocks and bonds.
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The Fed just posted how much help it will give the market next week and son of a gun! It’s cutting again. The implications of this are yooge! Apparently Jaysus saves not! At least not the stock market. Doesn’t he care? Is this ritual sacrifice?
Here’s what you need to do now to protect yourself from Jaysus Powell’s Revenge.
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Today’s the day. The Fed announces its next plan. You may have already seen it by the time you read this.
But really. What difference does it make? The Fed has trashed its plan without notice 3 times in the past year and a half.
In the past 2 months, it has had no plan at all. It just responds willy-nilly to whatever happens in the news. My god! The Fed bailed out Carnival Cruise Lines. You know we’re in trouble when the Fed bails out Carnival. The blatant cronyism of the plutocrat class is breathtaking. And the sheep just yawn, placated by a few crumbs thrown their way.
So Jerry and the JayJays will sing yet a new song today. Maybe they’ll stick with the new tune for a few weeks or months. Maybe they won’t. We just have to keep tracking what they do and watching the market response.
Here’s what you need to know.
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It may be. Here’s what to look for, and a few mining stocks to ride along the way.
Massive Fed intervention has once again tilted the long term playing field. Evidence is increasing that we will not see the March low materially exceeded in nominal terms. This may have little meaning in terms of the future purchasing power of a dollar, but at least nominally the worst seems over. The Fed has won this round and is, for now, again in control of the stock market.
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Ever resolute, the Fed kept pumping the cash into Primary Dealer accounts. It kept at it until, as I calculated elsewhere, it had pumped in about $800 billion more than the dealers, and indeed the entire world, needed to absorb the flood of Treasury supply that was hammering it. That happened by the middle of April.
It was enough for the dealers to get back to their fun business of acquiring inventories of stocks, marking them up, triggering short squeezes, and convincing their herds of institutional sheep customers to follow the shorts and dive back into the market with whatever cash they had raised on the way down.
It worked, as we all know. Stocks have recovered around 55% of what they lost in the crash.
But the Fed has started to do the tighten up. Here’s what you need to know.
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Lee Adler