Posts Tagged ‘Fed’s balance sheet’

In The Year 3000: Predicting The Liability Side Of The Fed’s Balance Sheet

In The Year 3000: Predicting The Liability Side Of The Fed’s Balance Sheet

Courtesy of Tyler Durden

When it comes to the asset side of the Federal Reserve’s balance sheet, there are no secrets: with the winddown of the bulk of the Fed’s emergency liquidity programs by February 1, the majority of the Fed’s current $2.2 trillion in assets will continue being outright-held securities. And even as the emergency programs sunset, the quasi-permanent, QE remnants will be here to stay. What we know for certain is that the current $1.8 trillion in Treasuries and MBS will rise to at least $2.2 trillion, as the balance of QE round 1 is exhausted. Will this purchasing of outright securities end there? Hardly. As the Fed is the only market for MBS, and as the MBS market can not allow a dramatic rise in 30 year mortgage rates, which is precisely what will happen if the buyer of first resort disappears, we fully expect some form of QE to show up and grab the baton where QE 1.0 ends. In fact just today, Fed economist Wayne Passmore, under the aegis of Atlanta Fed president Dennis Lockhart, stated during the annual American Economic Association meeting that GSE ABS should have an outright explicit guarantee by the Federal Reserve. Forget about QE then – this would be an onboarding of over $6 trillion in various assets of dubious worth, which currently exist in the limbo of semi-Fed guaranteed securities, yet which have an implicit guarantee. Of course, should the broader Fed listen to young master Passmore, look for John Williams’ expectation of hyperinflation as soon as 2010 to be very promptly met. The danger of the Fed’s next unpredictable step is so great that it is even causing insomnia for none other than BlackRock big man Larry Fink, who asks rhetorically "Are they going to kill the housing market?" Well Larry, unless the Wall Street lobby hustles, and the Fed isn’t forced to print another cool trillion under the guise of Mutual Assured Destruction, they very well might.

So now that we (don’t) know about the assets, what about that much less discussed topic: the Fed’s liabilities?

As it stands now, and as we have often pointed out, the liabilities of the Federal Reserve are rather straightforward: the major items are currency in circulation (about a $800 billion, and excess…
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Creative Destruction

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Excellent, educational article, courtesy of Mish 

Creative Destruction

creative destructionVan Hoisington and Lacy Hunt have figured out what few others have, that excessive debt and falling asset prices have conspired to render the best efforts of the Fed impotent.

Please consider the Hoisington Second Quarter 2009 Outlook.

One of the more common beliefs about the operation of the U.S. economy is that a massive increase in the Fed’s balance sheet will automatically lead to a quick and substantial rise in inflation. [However] An inflationary surge of this type must work either through the banking system or through non-bank institutions that act like banks which are often called “shadow banks”. The process toward inflation in both cases is a necessary increasing cycle of borrowing and lending. As of today, that private market mechanism has been acting as a brake on the normal functioning of the monetary engine.

For example, total commercial bank loans have declined over the past 1, 3, 6, and 9 month intervals. Also, recent readings on bank credit plus commercial paper have registered record rates of decline. The FDIC has closed a record 52 banks thus far this year, and numerous other banks are on life support. The “shadow banks” are in even worse shape. Over 300 mortgage entities have failed, and Fannie Mae and Freddie Mac are in federal receivership. Foreclosures and delinquencies on mortgages are continuing to rise, indicating that the banks and their non-bank competitors face additional pressures to re-trench, not expand. Thus far in this unusual business cycle, excessive debt and falling asset prices have conspired to render the best efforts of the Fed impotent.

With that, we can safely add Hoisington to the small group of people who understand that Belief In Wizards Is Misguided. Continuing with a discussion from Hoisington:

The Complex Monetary Chain

The link between Fed actions and the economy is far more indirect and complex than the simple conclusion that Federal asset growth equals inflation. The price level and, in fact, real GDP are determined by the intersection of the aggregate demand (AD) and aggregate supply (AS) curves. Or, in economic parlance, for an increase in the Fed’s balance sheet to boost the price level, the following conditions must be met:

1) The money multiplier must be flat


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Phil's Favorites

Is Facebook today's Compuserve? How Libra could hasten its demise

 

Is Facebook today's Compuserve? How Libra could hasten its demise

Will Libra be Facebook’s downfall? (Shutterstock)

Courtesy of Marc-David L. Seidel, University of British Columbia

When Mark Zuckerberg was five years old in 1989, two dominant players in telecommunications made a big announcement.

Compuserve (the first major commercial online service provider) and MCI Mail (one of the first commercial e-mail service providers) introduced commercial e-mail relays to the public internet. These relays connected their centralized networks to the public, outside of their direct con...



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Zero Hedge

Yuan, Stocks Erase Mnuchin Ramp

Courtesy of ZeroHedge. View original post here.

The overnight ramp in yuan and US equity futures - on the back of Mnuchin's comments - has been entirely erased as the algos were taught that tenses matter...

...a deal that WAS 90% done is different from a deal that IS 90% done... ...



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Kimble Charting Solutions

Metals Bulls Praying This Indicator Does Not Peak Here!

Courtesy of Chris Kimble.

Gold has been strong of late as the US Dollar has been weak. This combo has driven the Gold/Dollar ratio to a key price zone and momentum level, that looks to be important to metals bulls.

This chart looks at the Gold/Dollar ratio over the past 6-years. The long-term trend is down, while the trend over the past 3-years is pretty much flat (sideways trading range).

The rally of late has the ratio testing the 2018 highs as well as its 38% Fibonacci retracement l...



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Insider Scoop

Analysts Say Homebuilder Environment Still Looks Good For Lennar

Courtesy of Benzinga.

Lennar Corporation (NYSE: LEN) stock remains attractive in the long term, sell-side analysts said Wednesday after investors sent the share price on a post-earnings roller-coaster ride.

The homebuilder had a strong ...



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ValueWalk

Beyond Meat vs Impossible Burger: Comparing The Vegan Meat Burgers

 

Beyond Meat vs Impossible Burger: Comparing The Vegan Meat Burgers

Courtesy of Vikas Shukla, ValueWalk

Pexels / Pixabay

The trend of vegan food has been gathering momentum in the last few years as people become more health conscious. They have also begun to realize the environmental impact of raising meat for human consumption. According to PETA, it takes an estimated 1...



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Chart School

Formula for when the Great Stock Market Rally ends

Courtesy of Read the Ticker.

When valuations for the boring water company or the boring electric company is trading like your Facebook, Apple, Amazon or Netflix or Google (ie FANG) you know something is wrong.

This is when a seriously over valued market is screaming at you.

Of course the reader must understand in a world where money printing goes super nuts (Zimbabwe style) the stock market may go hyper inflationary and picking a time frame for a top is never a good idea, but we are not there yet. There is no Ben Bernanke helicopter money to the masses yet (ie MMT). 

To see when water company's (and such like) are nearing the crazy FANG like valuations a review of the Dow Jones Utility Index channel shows us how history can repeat. The c...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

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

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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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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