The screaming has started.
Yes the torrent of fed criticism has begun.
More and more public pressure will be placed on the fed to pivot.
But pivoting is no solution.
It will just lead to more inflation.
There are no good solutions left.
Can't wait for the requisite Cramer meltdown to "do something".
The fed has just let the market find its own level on rates.
The calls to pivot are profoundly anti market.
I did the thing today that brings me the most joy and which is the greatest use of my fleeting time on this dumpster-fire planet.
I sat next to my wife somewhere and we watched our boy play baseball.
Life is good.
Glad to hear your procedure went well. Great call on the markets. Been following closely. I am in the metals business and what we are seeing are premiums on products across the board are rising on the bid and offer side. Although the paper price is going down, rising premiums are offsetting some of the pain. Number of large wholesalers are running out of inventory.
Maybe Powell will come out and give another speech?
Maybe he'll even travel to Jackson Hole and invite the plutocracy to attend?
I called that speech "stupid," because it was a substitute for action.
The Fed never hesitated to cut rates in between meetings the past 30 years.
It should have raised rates once between meetings to demonstrate some measure of catch-up.
It should raise rates today.
Tell me I'm wrong.
Sandy Beach mentioned money market funds. Some interesting data here. Not as much growth as you'd think. Retail funds only up $85 billion since December per FRED data, and the OFR shows a persistent decline in government MMFs over the same time frame. This includes institutional MMFs, which are twice the size of retail funds.
ICI has granular weekly and monthly data. It shows Retail funds up only $40 billion since March, when short term rates began to rise sharply. All of the gain was in non government MMFs. Government MMFs declined.
Another OFR data set shows how the Treasury's T-bill paydowns forced the MMFs out of their T-bill holdings. That money went straight into the Fed's RRP fund for MMFs.
MMFs are really a sideshow to the main event, the Primary Dealers. That's what I focus on in my research. They're the house. They run the markets, normally on behalf of the Fed. But the narcissists at the Fed no longer have any use for their strawmen dealers. So the Fed has abandoned them to the whims of their institutional customers.
The Bond Rally That Fooled The Majority And Didn’t Help Dealers
Honestly gave up trying to understand what Jeff Snider's point was a long time ago. I suspect that he may be clinically insane.
The only person I find worth reading is Doug Noland, and I don't have time even for him. But often when I do read him, a lightbulb goes on for something for me to think about, even things that I disagree with.
Rental real estate is different that stocks because the tenant is not only paying your mortgage, he's paying the interest on it also. So as long as you are cash flow positive, you come out ahead if you just hold. The tenant gives you a return on capital and of capital, regardless of price, if you just hold long enough.
I know plenty of people who did very well by buying well located residential real estate and holding it forever. The increase in income enabled them to buy more property. Wash rinse repeat, and never sell. Cash flow just grows forever.
But it's always about location.
Six months ago, separate friends of mine who know each other bought some residential real estate. We got into a four-way text conversation in March as rates crept up about the impact of rising rates on real estate. Did the basic math to calculate the erosion in financing power that the move from 2.5% to 3.5% or whatever had generated; and the difference between what loan/property someone might afford with an ability to spend $3k/month on a mortgage payment. Told ‘em prices must go lower. Fourth buddy agreed emphatically with basic math, but the other two insisted somehow magically purchasing power would prove robust & sticky. Didn’t matter for their small rental properties per se - although, their capital is definitely stuck at cost… indefinitely. It’s just an anecdote about people, capital, hope & math.
Your chart is about people, capital, math & despair.
Moved some of it. Not all of it. Too much, unfortunately. Coulda shoulda woulda.
My bank has a euro deposit account, but the haircut is obscene. I should have opened an account at Interactive Brokers, deposited the doodahs there and made the switch there. Would cost next to nothing. Thing is, I despise Thomsass Petersflysopen, and I didn wanna do it. Didnwanna do it. So I paid through the nose instead.
The chunk I left in doodahs will be moved to an IB Yourapeein account that I open here. Probably will open the account next week now that I will have a permanent address Tamara.
From my perspective. It's just a continuation. 2000 never ended.
I traded each leg of the crash in the Nasdaq on this very forum. From top to bottom. I will mention...my was handle was "Ora(c)l(e) of Omaha" before Doc kindly changed it for me. I showed up shortly after the site started. I think there were about 30 guys here when I showed up and that swelled up another 100 or so shortly after and just slowly expanded from there.
While on that topic...
Where's that tip button Doc? I remember being able to PP you some tip money now and then?
Is the "Support your Local Stool Board" the right button to punch?
Bread and pastries aren't free in France are they?
Meanwhile, back at the bond market, the chart of the 10 year yield looks bullish as hell. Bullish for yield, bearish as hell for bond prices.
Below is the weekly chart of the 20 Year Treasury Bond ETF. Oh, the humanity.
This, ultimately is bearish as hell for everything. Historically, stocks have lagged bonds by 4-6 months. But this bond bear market has been going on for 20 months. When will it matter? Soon.
A BAD WITHDRAWAL
Mr Market is having a bad withdrawal.
Dealer Jay has cut him off.
But only temporarily....to teach him a lesson.
The simple fact is the Fed has to print and inflate to sustain the system.
If it does not then it's hard default.
That's why it chooses inflation.....soft default....every time.
We know from the real time US Federal tax withholding data that the December jobs gain was NOT just 199k jobs. Withholding had a 3.2% higher annual growth rate in December than in November. That would equate with not 199,000 new jobs. More like 1.99 million.
Now before you get too excited, not all of that increase in withholding was an increase in the number of jobs. The average weekly earnings rose by 0.8% M/M so that the real rate of change was 2.4%.
We also know that withholding taxes include distributions other than regular income, particularly employee 401K and IRA distributions, which are subject to withholding. We can assume that these were higher this year than last year, but we don't know how much. It's unlikely that this would account for all of the difference between November and December.
The 2.4% month to month real increase in withholding is the biggest since the initial post pandemic y/y surge in May. That surge settled down in June. December's is the strongest monthly performance since then. It is a full 1 % better than the previous peak in the year to year growth rate, in October.
The BLS said that October jobs increased by 648,000. We have a 1% stronger annual increase in withholding taxes in December and yet the BLS reports only 199,000 gain in jobs? I mean WTF are they doing? Where are the other 447,000 jobs? Plus 1%. How did they miss that? Forget the tax data.
Their own data says they missed a huge chunk of the jobs that were added last month.
Let's use the BLS's own data. Let's look at December, not seasonally manipulated data, in other words, the actual number that they derived from their survey's before seasonal adjustment, for the previous 10 years. This is the month to month change that they themselves derived from their own surveys.
What do you notice about this data?
That's right. Every single December there were fewer jobs versus November.
Except for one. This year.
December 2021 has the only gain in jobs in the last 11 years. It was the best performer, by far, of all of the last 11 Decembers. Yet the BLS managed to see only a tepid gain of 199k in its headline number.
Now let's see how the BLS ranks this December with the past 10 Decembers on the basis of their seasonally adjusted headline number. The M/M column shows the change from November each year. Rank is how that December ranked among the 11 years. December 2021 ranked 7th, that is, fourth worst of the last 11 years.
How is is that they only managed to see an increase of 199k, ranking the 4th worst in the last 11 years, when last month was actually the best of the 11 years.
How is that reasonably possible. It's ridiculous. It's absurd. It's criminal. And yet Wall Street takes this garbage seriously.
Here's another way to look at it. Based on the BLS headline number, the December 2021 M/M change increased over December 2020's performance by 505K. That makes sense because December 2020 was terrible.
But the actual data, NSA, says that it really increased by 591K. The BLS's own data shows that it missed at least 85,000 jobs. It also shows that the NSA data for December was +74,000 over December 2015 which BLS says was the best December of the previous decade. If last month was 74K better, then the headline number should have been 273k+74k= 347k.
So even the BLS own data shows that they undercounted by anywhere from 85k to 306k.
The only miss here was by the BLS. It missed the creation of a couple hundred thousand jobs. Based on the withholding tax data, they actually missed far more than that.
Bond traders are not fooled by the BLS's statistical garbage.
The 10 year yield has broken out and is headed for the projections I reported yesterday.
They're so full of crap. He knows that any reduction in QE, let alone a balance sheet runoff, will be disruptive. Yellen already tried it and look how far that got. The answer is 3.2%. That's how high the 10 year got in October 2018 when the Fed started to choke on its vomit.
SPX: Here is an updated copy of the "Canary in the Coal Mine" chart. From my perspective...once 3750 falls in the ^GSPC...then the decline BEGINS. Until then, you're still in the topping formation from the January 4th peak.
Here is a convenient copy of the Twin Peaks Formation Reference Chart.
Along with the updated Canary in the Coal Mine chart....here are two Companion Charts that take a closer look at PYPL and NFLX against the decline from the January peak in both the ^DJI and ^GSPC.
Companion Chart 1a - ^DJI vs PYPL
Companion Chart 1b - ^GSPC vs NFLX
Finally...I'll post these two charts as "Food for Thought". More on both will be coming later...
This bears watching...
GLD: No comment other than watching 160. Although, from my own perspective...At this moment, I do believe the shares are taking it on the chin disproportionately(aka, leading the decline).
Patiently waiting for...It.
"As I am fond of pointing out, the long term conventional measured move target for BTC is negative 5000. That's right. 5000 below zero."
5000 below zero is its actual intrinsic value. That's because BTC is the only fake money that takes a ton of energy to maintain. It's as though instead of Monopoly having paper money, it had battery powered electric money that you had to keep plugged all the time or the denominations disappeared.
Mining bitcoin is like mining gold, except that instead of ending up with gold, you end up with a higher electric bill.
I’m in Croatia with the wife & kids. At dinner last night, the Slovenian leading our tour says he’d “saved” a lot in crypto which looked great a year ago, but now he’s getting killed.
I silently studied the grilled squid.
WHAT IS PRICE??????
Price equals the function of information divided by time.
Stock prices and any other asset prices are "particles" brought into being by the interaction of the information field with the time field.
The information field acts on the time field to constanty alter the value of the price particle.
However the information in the information field (both past information which is known and future information which is not curently known but is estimated) is viewed through the markets collective bias lense to determine the price value.
This market bias lense unreasonably discounts the probabilities of certain events:
It tends to ignore the probability of wars.
It tends to ignore most fat tail events (see the writings of Nassim Taleb).
It tends to ignore the lack of property rights and legal protections of those rights in certain countries.
It tends to ignore acounting frauds/irregularities.
It tends to ignore value metrics.
It tends to ignore the fact that bubles and fads eventually end.
The markets bias lense ignores a lot of things.
It is constantly under weighting some types of information and over weighting others.
Understand what the markets bias lense unfairly ignores and unreasonably discounts and you have an inbuilt advantage over the market.
Your own individual investor lense needs to be clearer, less distorted and see farther than the markets lense.
Calling "Reserves" a bank asset is misleading. They are only a small fraction of a bank's cash assets.
Reserves are the minimal amount of cash that banks set aside to handle customer demand for cash. It can be vault cash, or cash deposited at larger banks, or the Fed.
What's that have to do with stock prices?
Excess reserves are the amount set aside in excess of the reserve requirement. Total "reserves" in the banking system, are a function of monetary policy. Banks have no say on the amount of total reserves. That's purely up to the Fed. The Fed injects cash into the financial markets via the Primary Dealers, resulting in reserve creation as a second order effect. The amount of cash injected is orders of magnitude greater than any reasonable amount of loan demand. What are banks supposed to do?
They do as much lending as they can to meet loan demand. But they still have all this excess cash. They can freely use it to buy other assets without restriction up to reserve and capital requirements. And so they must, because there's not enough loan demand to absorb it all.
Turns out, the Fed was injecting so much cash because the US Treasury was asking for it, with massive, unprecedented debt sales. Had the Fed not bought this paper, god knows what interest rates would be right now.
Well, the Treasury is now demanding less cash, and the Fed has decided to experiment with seeing how far it can cut its purchases before the system chokes.
What does that have to do with bank lending?