Posts Tagged ‘Excess Reserves’

Rep. Suzie Bassi: “Illinois in Utter Crisis, Next to Bankruptcy, $13bn Hole in a $28bn Budget”; Ambrose Evans Pritchard Inflicted with FIV

Rep. Suzie Bassi: "Illinois in Utter Crisis, Next to Bankruptcy, $13bn Hole in a $28bn Budget"; Ambrose Evans Pritchard Inflicted with FIV

Courtesy of Mish 

French mime artist Marcel Marceau's items auctioned at Drouot in Paris

Ambrose Evans-Pritchard has the right facts but the wrong cure in Don’t go wobbly on us now, Ben Bernanke, an article detailing the problems in many US states, notably Illinois.

Barack Obama’s home state of Illinois is near the point of fiscal disintegration. "The state is in utter crisis," said Representative Suzie Bassi. "We are next to bankruptcy. We have a $13bn hole in a $28bn budget."

The state has been paying bills with unfunded vouchers since October. A fifth of buses have stopped. Libraries, owed $400m (£263m), are closing one day a week. Schools are owed $725m. Unable to pay teachers, they are preparing mass lay-offs. "It’s a catastrophe", said the Schools Superintedent.

In Alexander County, the sheriff’s patrol cars have been repossessed; three-quarters of his officers are laid off; the local prison has refused to take county inmates until debts are paid.

Florida, Arizona, Michigan, New Jersey, Pennsylvania and New York are all facing crises. California has cut teachers salaries by 5pc, and imposed a 5pc levy on pension fees.

This is not to pick on America. Belt-tightening is the oppressive fact of 2010-2012 for half the world. Hungary, Ukraine, the Baltics and the Balkans are already under the knife. Latvia’s economy may contract by 30pc from peak to trough as it carries out an "internal devaluation", ie wage cuts, to hold its euro peg.

The eurozone’s fiscal squeeze is well advanced in Ireland. Brussels has told Greece to cut by 10pc of GDP in three years, Spain by 8pc, Portugal by 6pc. Britain must slash soon, or face a gilts strike.

The Bank for International Settlements says Britain needs a primary surplus of 5.8pc of GDP for a decade to stabilise debt at pre-crisis levels, given the ageing crunch as well. The figure is 6.4pc for Japan, 4.3pc for the US and France. It warns of "unstable dynamics", posh talk for a debt spiral. "Action is needed now."

The West risks a slow grind into debt-deflation unless central banks offset fiscal tightening with monetary stimulus – QE, of course – to keep demand alive. Yet the Fed and the European Central Bank are letting credit contract.

So why has Bernanke broken ranks with King and…
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Money Markets are the New Suspenders

Money Markets are the New Suspenders

By EB, courtesy of Zero Hedge

The Financial Times recently reported on the Fed’s latest exit strategy to eventually contain the inflation zombie:

 During the crisis, the Fed created roughly $800bn of additional bank reserves to finance asset purchases and loans. This total is likely to rise in the coming months as the central bank completes its asset purchases and the Treasury unwinds financing it provided to the Fed. Fed officials think they could raise interest rates even with this excess supply of reserves by offering to pay banks to deposit their surplus funds with it rather than lend them out. However, they also want to use reverse repos in tandem to soak up some of the excess reserves. Policymakers call this a “belt and braces approach”. [The latter, clearly a nod to the great Gekko.]

nice suspenders, zero hedgeTD touched on this last Thursday, and we will expand upon it here as it is particularly relevant to our ongoing theory that it is the proceeds from permanent open market operations (POMOs) and their close cousins that are driving equities.  Though this may be received wisdom to ZH readers, the Fed has done us the favor of providing additional evidence through the FT story.  A bit of background, as we are new contributors to this forum:

Money Supply:  Based on our previous research on the effects of swings in M2 non-seasonally adjusted money supply (M2) on the stock market, we were a bit surprised in July 09 by the resiliency of the rally, which continued in the face of such a dramatic contraction in M2.  The dismal Durable Goods report from last Friday confirms that the capital goods sector is still under significant pressure as a result of a lack of money in the general economy.  With banks not lending to normal businesses and consumer credit contracting equally as violently, what is the basis for this rally and from where does the never-ending flow of equities juice flow? 

Bank Non-Borrowed Excess Reserves:  The Fed statistic that most closely correlates with the 2009 equities run-up appears to be bank non-borrowed excess reserves (bank NBER), which


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Zero Hedge

Buyback Blackout Period Begins Just As Bears Capitulate

Courtesy of ZeroHedge. View original post here.

Last week, one of the most confounding features of the post-Christmas rally was resolved, when following a 4 month boycott, bearish investors finally threw in the towel and after pulling money from equity funds for 13 weeks, bought a whopping $27.3Bn of US stock funds and ETFs in the week ending on March 13th. This was the second largest inflow on record, behind $38.30bn from March of last year, and contrasts with a mix of small inflows and outflows earlier this year, including a $5.83bn outflow in...



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Phil's Favorites

Brexit may usher in point of no return for UK tech start-up scene

 

Brexit may usher in point of no return for UK tech start-up scene

Other European cities have been quick to sense opportunities from Brexit. Charles Hawley/Twitter

Courtesy of Martin De Saulles, University of Brighton

Sifting through the noise to really understand what impact Brexit and all the uncertainty that it brings is having on the UK’s technology start-up scene, it’s possible to see a picture emerging. It is one that should cause serious concern for anyone with an interest in keeping the UK at the centre of Europe’s technology sector.

In The Sun Also ...



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Chart School

Weekly Market Recap Mar 17, 2019

Courtesy of Blain.

A very good week for market bulls as the prior week’s selling was all reversed.  Last week we asked how many times can we rally on the same Federal Reserve juice.  It seems indefinitely.  Jerome Powell went on ’60 Minutes’ and talked dovish – that sparked a big rally Monday and it continued all week.  The only down day all week was Thursday when the progress on the U.S. – China trade deal seemed to hit a delay.

A meeting between President Donald Trump and Chinese President Xi Jinping will be delayed until at least April, Bloomberg News reported, indicating that a bilateral trade deal will n...



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Kimble Charting Solutions

Germany Breakout Bullish For Stocks In The States!

Courtesy of Chris Kimble.

An important message to stocks in the states will come from Germany in the next few weeks!

This chart looks at the DAX index from Germany over the past 10-years. For the majority of the past 6-years, the DAX has remained inside of rising channel (1). The 2018 decline saw the DAX hit support where a 1-year counter-trend rally started.

Over the past year, the DAX has created a new falling channel (2). It is now testing the top of this falling channel and the lows of last February at (3).

For most of last year, the DAX created a bearish divergence with the...



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ValueWalk

Pension Flows Add 5 More Years To Credit Boom/Bust Cycle

By Michelle Jones. Originally published at ValueWalk.

The pension crisis has been capturing headlines for years, but there’s another layer to the pension issue that’s starting to draw attention to itself. Public pension funds have shown an increasing appetite for credit and related holdings, the latest round of pension flows demonstrates that this trend continues One analyst believes pensions are largely to blame for the extremes of the boom/ bust cycles we’ve seen over the last year or so. He now suggests that the equity bull market could last another five years—thanks to the extremes driven by pension funds.

...

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Insider Scoop

Needham: Facebook No Longer A Buy Amid A 'Negative Network Effect'

Courtesy of Benzinga.

The bullish case for Facebook, Inc. (NASDAQ: FB)'s stock has come to an end, according to Needham.

The Analyst

Needham's Laura Martin downgraded Facebook from Buy to Hold with no price target.

The Thesis

Needham's multi-year bullish stance on Facebook's stock can no longer be justified for three key reasons, Martin said in a research report. These include:

  1. A negative potent...


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Biotech

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Reminder: We are available to chat with Members, comments are found below each post.

 

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Assorted cannabis bud strains. Roxana Gonzalez/Shutterstock.com

Courtesy of James David Adams, University of Southern California

Medical marijuana is legal in 33 states as of November 2018. Yet the federal government still insists marijuana has no legal u...



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Digital Currencies

Facebook's cryptocurrency: a financial expert breaks it down

 

Facebook's cryptocurrency: a financial expert breaks it down

Grejak/Shutterstock

Courtesy of Alistair Milne, Loughborough University

Facebook is reportedly preparing to launch its own version of Bitcoin, for use in its messaging applications, WhatsApp, Messenger and Instagram. Could this “Facecoin” be the long-awaited breakthrough by a global technology giant into the lucrative market for retail financial services? Or will...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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