It feels as though a crisis of confidence is brewing. What will happen when the Bank of England stops buying long bonds? Can the U.K. run its version of QE while inflation is climbing? How high will the Dollar climb? How low will earnings and economies fall?Will Credit Suisse fail? Will the Fed pivot? (I … Continue reading Crisis Of Confidence & The Fed Put
Tag: Federal Reserve
Expect global yields to march higher for the foreseeable future. The Fed would need to pause its rate hikes to stop yields from climbing. The Fed will continue to raise the Fed Funds rate, thereby pushing yields higher along the yield curve. We are in the midst of a global recession that is likely to … Continue reading Global Yields Will March Higher
During the week ended September 28th, the Fed reduced its Treasury security holdings by approximately $2.1 billion and reduced its Government Agency security holdings by approximately $16.7 billion. Recall the Fed stated that it would reduce its Treasury holdings by up to $60 billion and reduce its Government Agency holdings by up to $35 billion … Continue reading QT Lite
Credit Markets (Yes): A liquidity crisis would cause the Fed to pivot. If the credit markets seized up the Fed would intervene. Market intervention is after all the Fed's operating model (as is the case for all central banks). Consumers and investors would have to lose confidence in the U.S. Economy to the point where … Continue reading What Would Cause The Fed To Pivot?
A rate hike is what's next for the U.K. The hike will come before the bank's November meeting. The U.K. has an abundance of economic problems yet deflation is not one of them. The Bank of England put forth a weak rate increase last week. The Bank of England would tell you the reason for … Continue reading What’s Next For The U.K.?
The Bank of England stepped into the bond market, agreeing to purchase Government long bonds until October 14th. The BoE plans to restart its Government bond sale program on October 31st (the central bank plans to sell GBP 80 billion of bonds each year as part of its tightening process). How did the U.K. find … Continue reading The U.K., The U.S., Inflation & Real Yields
All Central Banks wish to control the money supply. The Federal Reserve is no different. To date Bitcoin and Ethereum alone are off approximately $1.4 Trillion from their collective peak (this type of inflation is not captured in CPI statistics nor in the velocity of money - which helps explain why velocity did not accelerate … Continue reading Regulating Crypto
The Fed was to have achieved a $95 billion per month Balance Sheet reduction run rate by September ($60 billion of Treasury securities and $35 billion of mortgage-backed securities). The culling of $60 billion in Treasuries per month is going to be difficult to execute. The Treasury market lacks liquidity as evidenced by the sharp … Continue reading $95 Billion Per Month In QT Is A High Bar
The Fed wants a deep recession. There is no getting the CPI back to 2% without crashing the Bubble Economy that it created. The Fed was faced with a choice: a decade of 1970's style stagflation or a deep recession. The Fed wisely chose the latter. The Fed has had to move faster than it … Continue reading The Fed Intends To Cripple The Economy
Could the NASDAQ re-test the COVID lows of March 2020 when it sat around 6,900? Yes. That would require a prolonged recession (which we expect) AND The Fed not restarting its ultra-dovish monetary policy of Quantitative Easing combined with a near zero Fed Funds Rate. Who knows how the Fed will behave in 2H 2023 … Continue reading The NASDAQ Could Re-Test COVID Lows & The Rise of High Yield