Fed Ends QE, Total Assets Drop. Liquidity Injection Ends

The Big Shift: Fed shifts to propping up consumption rather than asset prices.

By Wolf Richter for WOLF STREET.

There have been endless announcements by the Fed that they will add this and that to their asset-purchase programs. The media jumped all over these announcements, how the Fed is going to get into the junk bond market and ETFs with hundreds of billions of dollars. Each time, all kinds of hoopla broke out in the markets with stocks soaring and junk-bond ETFs soaring, and everything soaring – despite the worst economy in memory, despite 30 million people on unemployment insurance, and despite shocking earnings reports heading our way.

The Fed has set up an alphabet soup with 10 of these programs so far – and it has been buying some of the assets it said it would buy, but it also has been shedding alphabet-soup assets it had bought in March and April, while whittling down its purchase programs of Treasuries and MBS for the past two months. And repos unwound, and dollar liquidity swaps unwound, and now total assets on the Fed’s balance sheet for the week ended June 17, released this afternoon, actually shrank by $74 billion:

This $74 billion decline in total assets during the week was powered by a plunge in repo balances and foreign central bank liquidity swaps, while some alphabet-soup programs also unwound. And the junk-bond and ETF buying program stalled.

And there is a big shift happening: The Fed has started lending to entities, including states and banks, under programs that channel funds into spending by states, municipalities, and businesses, rather than into the financial markets. These types of programs are propping up consumption – not asset prices. That’s a new thing. I don’t think the hyper-inflated markets, which have soared only because the Fed poured $3 trillion into them, are ready for this shift.

The $74 billion in total assets that the Fed shed during the week brought the Fed’s total assets down to a still breath-taking $7.095 trillion. You can see from the curve that this isn’t an accident, but part of a plan to front-load QE and then back off – rather than let it drag on for years:

Repo balances dropped by $74 billion.

The Fed is still offering theoretically huge amounts of repos every day, but it has tweaked the offering terms, so that there is now almost no appetite for them, and what’s left on the balance sheet are older term repos that unwind and are gone. On today’s balance sheet, the repo balances dropped by $88 billion from the prior week to $79 billion, the lowest since September 18:

Central bank liquidity-swap balances dropped by $92 billion.

The Fed’s “dollar liquidity swap lines” with other central banks had been roughly flat for seven weeks, after the $400 billion surge in early April. But this week some swaps matured and were unwound, and the balance dropped by $92 billion to $352 billion. Of that drop, $75 billion came from the swap line with the ECB, $9 billion from the Bank of Japan, and $7 billion from the Bank of England (country data via the New York Fed):

With these swaps, the Fed lends newly created dollars to other central banks and takes their domestic currency as collateral. When the swap matures, the Fed gets its dollars back, and the foreign central bank gets its currency back.

Fed doesn’t wanna buy junk bonds and ETFs anymore. Ballyhooed Alphabet-Soup of SPVs declines by $1.7 billion.

This is where much of the media hype has focused on, following the endless announcements by the Fed. The Fed says that these bailout schemes are authorized under Section 13 paragraph 3 of the Federal Reserve Act, as amended by the Dodd-Frank Act. And Powell calls these creatures “thirteen-three facilities.”

Under the program, the Fed creates a Special Purpose Vehicle (SPV) as an LLC. The Treasury pads it with taxpayer equity capital. The Fed lends to the SPV with a leverage ratio of 10 to 1. Then it’s off to the races, with the SPV buying up the entire world, or so it would seem, according to the media.

The number of SPVs keeps growing. There are 10 active ones on today’s balance sheet. But in dollar terms, by the Fed standards, they’re small. After an initial burst in early April of $130 billion spread among the first three SPVs, there came a lull, and the overall balance declined. New SPVs were added, but as the balance of the first three SPVs declined, the overall balance also declined until mid-May.

Starting in late May, the new SPVs added enough so that overall balances began rising, and reached $196 billion by June 10. But this week, the overall balance ticked down by $1.6 billion:

Only two SPVs grew this week, and only by tiny amounts: The Corporate Credit Facility (CCF, yellow, buys corporate bonds in the secondary market) ticked up by $1.5 billion in the week to $38.9 billion. The Paycheck Protection Program Liquidity Facility (PPPLF, red, buys government-guaranteed forgivable PPP loans from banks) edged up by $600 million to $57.6 billion.

All other SPVs declined in the week. The new kid on the block this week is the revived and reviled TALF, which is not yet part of my chart because it has a small negative balance, a sign that it is not fully operational just yet.

If the markets were hoping that the Fed would buy up half of the junk-bond market and pile willy-nilly into ETFs, well, it isn’t happening.

There are now three SPVs that route funds into consumption rather than asset purchases: The Paycheck Protection Program Liquidity Facility ($57 billion), the Main Street Lending Program ($32 billion), and the Municipal Liquidity Facility ($16 billion). This is not QE but more like paying businesses and municipalities, and ultimately workers/consumers, to consume. This money is circulating in the economy rather than inflating asset prices.

Treasury balances rise by $26 billion

The Fed added $26 billion of Treasury securities during the week, bringing the total to $4.17 trillion. Over the past four weeks, the balance increased in a range between $9 billion in $26 billion, about the same range before the outbreak of bailout mania:

This progression of the Treasury purchases, from front-loading to tapering, is visible in the flattening curve of total Treasuries on the Fed’s balance sheet:

MBS balances rise by $83 billion.

The Fed has cut its purchases of government-backed mortgage-backed securities (“Agency MBS”) after the initial burst. But its MBS trades take one to three months to settle, and the Fed books them after they settle, which creates an erratic pattern. So what we’re seeing today are settled trades from some time ago.

The balance of MBS rose by $83 billion to $1.92 trillion. This includes Agency Commercial Mortgage Backed Securities that the Fed started buying as part of its bailout program. But the balance of these CMBS has remained flat over the past three weeks at $9.1 billion.

For the stock market, a new phase has started. It now has to figure out how to stand on its own swollen and inflated legs in the worst economy in a lifetime, with the worst corporate earnings reports coming its way, while stock prices are ludicrously inflated. So good luck.

No “V-shaped recovery back to normal.” Read… Update on the WTF Collapse of Demand for Gasoline, Jet Fuel, and Diesel

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  148 comments for “Fed Ends QE, Total Assets Drop. Liquidity Injection Ends

  1. SnotFroth
    Jun 18, 2020 at 10:48 pm

    In Fed we trust.

    If they keep feeding money to consumers they may finally get the long sought inflation we (allegedly) need.

    • Helmut Beintner
      Jun 19, 2020 at 7:09 am

      Fear And Greed, the most human denominator.

      • MiTurn
        Jun 19, 2020 at 9:19 am

        HB, you are absolutely correct. And this is what drives the markets (oh, and FED policy too, it seems).

    • rhodium
      Jun 19, 2020 at 9:27 am

      Only if inventories run out and a few workers refuse to come back and help partially automated systems fill orders. Otherwise it’ll just be helping businesses more quickly pay off the debt that they incurred. The dollar’s value is still high and commodities are incredibly cheap. We will need a lot more money to produce consumer price inflation. Unless you can argue that productive capacity will also drop as well, then we shouldn’t even necessarily see stagflation. Homothetic consumption preferences are a lie, and as long as massive income inequality is perpetrated, inflation will still only be primarily in assets.

    • Jun 19, 2020 at 11:08 am

      Just so everyone knows… and so that everyone gets to make fun of me and hail me as a moron every day the market goes up, I shorted the SPY this morning. I will post an article about it in a few hours.

      I do NOT recommend shorting the market. It’s nuts to short this market. I hate shorting. I’m only sharing this so everyone can have some harmless and legal fun at my expense 🤣

      • Reality
        Jun 19, 2020 at 11:25 am

        I love you, Wolf. Honesty is always the greatest currency. I hope you make a fortune.

      • Serge
        Jun 19, 2020 at 12:26 pm

        Nothing like a man that puts his money where his mouth is….
        While you could still be wrong this gives more weight and seriousness to the analysis.
        Thanks for the opinion piece

        All my respects..

      • Implicit
        Jun 19, 2020 at 2:29 pm

        I’m with you bro, and not just figuratively. Also RE, and own the vix, gold and silver. Your timing is better. No leverage. Best of luck!

      • gary
        Jun 19, 2020 at 2:51 pm

        “but part of a plan to front-load QE and then back off – rather than let it drag on for years”

        How about, front-load QE and keep front-loading for years LOL.

      • Jon
        Jun 19, 2020 at 3:25 pm

        Love your honesty.
        It takes a lot of guts to make a move like this and make it public.
        I am tempted to do the same based on your previous track record :-) but damn the FED ..

      • Ed
        Jun 19, 2020 at 6:48 pm

        I think this is a good call, but I don’t have the courage.

      • MCH
        Jun 19, 2020 at 11:11 pm

        Wolf, you provide far too much fodder for amusement.

        Random Reader 1 (time; today):
        OMG, Wolf, thanks for the great advice. I’ve going short on the market right now.

        Random Reader 1 (time; three weeks from now):
        Godd****it Wolf, I listened to your crazy advice, shorted on margin, and I lost everything, my house, my car, my five legged dog Rodney, I hate you… I hate you…

        Wolf: Sighs… this is not an advice column…. and why would anyone short on margin?

      • Rob Godfrey
        Jun 20, 2020 at 3:19 am

        “Fed is shifting its lending and asset purchases away from propping up financial markets toward propping up consumption” Good move Wolf Richter, when Wall Street fully digest this, they are very likely going to throw a “MPGB tantrum” (Money Printer Go Burrr) for taking away their “Vodka Jello Shots”. With “over 30 million people” having lost their jobs and remain unemployed, I think the FED now fully realise that MPGB for Wall Street will not solve this problem.

      • Jun 22, 2020 at 2:38 am

        sfcs

    • Mira
      Jun 20, 2020 at 8:06 am

      Today I bailed up the Coles delivery guy who graciously delivered my groceries .. “Hi, how’s it going?”
      Everyone has a story to tell ..
      He was manager at the Rod Laver Arena up until the pandemic pantomime hit.
      He has seen them all .. the rock stars our teen scream after .. the creme de la creme of the tennis super stars.
      He now delivers grocery shopping & is grateful to have the opportunity.
      Imagine how many millions are not being turned over in Australia.
      Vital blood flow for the health & well being of Australia’s economy.
      Australia is haemorrhaging from every orifice.
      For how much longer can this go on.
      Is there any comeback from the abyss ??
      And if so, how many years will it take ??
      How are you folk doing ??

  2. Memento mori
    Jun 18, 2020 at 10:49 pm

    Let me see if I understand this.
    Corporations issue debt to buy back their stock and prop up their price to fatten their stock options.
    Fed creates a spv with losses backed by the taxpayers to buy the junk debt those corporations issued to fatten their stock options.
    And Wolf wants to believe that the Fed will leave the stock market alone.
    Wake me up when Dow dips 5% and see how your theory holds up to the reality.
    Fed is a corrupt institution and needs to be severely restrained or abolished.

    • Billybob
      Jun 18, 2020 at 11:02 pm

      Guillotines!

      • Phoenix_Ikki
        Jun 19, 2020 at 12:16 am

        Interesting, now that the FED is trying to sneak out the backdoor while the market is blind drink with Hopium..I wonder how long before they discovered the tap is slowly being turn off before market throw those good old tantrum again. When that happens, you think the FED will come crawling back with their bazooka? I am betting it will.

        Guess papa Jerome has learn a trick or two from our dear leader…jawbone then sneak out the backdoor and claim victory

        • polecat
          Jun 19, 2020 at 9:16 am

          He’s Behind the $Green$ Door don’cha know.

          Such blatant obscenity .. and, with regard to the Fed, I know it when I see it!

        • Cas127
          Jun 19, 2020 at 9:46 am

          What *is* Behind the Green Door at the Fed?

          Ultimately, nothing.

        • DawnsEarlyLight
          Jun 19, 2020 at 5:02 pm

          Still plenty of MBS/CMBS to keep them busy! 🤩

        • sunny129
          Jun 19, 2020 at 5:55 pm

          Warning to those wanting to go SHORT!

          Bank of America’s CIO Michael Hartnett writing in his latest Flows and Liquidity report titled “Only bull to short is credit…and Fed won’t let you”, Hartnett proposes that according to the Fed, it is still too early for Big Short: “Fed is “all-in” and will remain in that stance until US unemployment rate falls to acceptable level i.e. <5% (or claims <400k)."

          Hartnett also warns that Fed rhetoric has been bigger than wallet thus far, which means Powell can easily crush shorts. Here's why – the Fed's facilities are operating at just a fraction of potential, the Fed has spent just $173bn out of its potential $495bn in firepower (and it can always add more).
          zh

        • Jun 19, 2020 at 8:04 pm

          “Fed is “all-in”

          Nope. Hartnett needs to look at the Fed’s balance sheet and what the Fed is doing. Maybe you should email him my article :-]

          And if he is aware of what the Fed is doing, he is talking his agenda.

        • sunny129
          Jun 19, 2020 at 9:23 pm

          Wolf,

          i just brought that (Hartnett) comment in zh to your attention.

          It is a bit ‘above my education level’ to critique either of you!
          Time will tell, going forward. Hard to comprehend what’s going on in this surreal mkt of my life time!

        • sunny129
          Jun 20, 2020 at 12:53 pm

          Wolf

          You may think Fed is done with buying the assets, for now.

          I think Fed cannot abandon the Corp Credit mkt , HY mkt or the Junk bond mkt. Once they start cratering (like Repo mkt) it will start it SPV emergency measures!

          Credit mkt is the foundation upon which the Equity mky is built, world wide! When there is loss of liquidity or liquidity squeeze, things will unravel!

          This EQUITY mkt is built and nourished by (insane) credit infusion from the very beginning since ’09. Without some kind of support or new credit infusion, the Equity bubble will lose it’s hot air, fast.

          Again TIME will tell!

    • timbers
      Jun 18, 2020 at 11:46 pm

      I totally get your point.

      At this point, it would be more efficient for the Fed to just buy stocks directly to achieve its Prime Directive of Making The Stocks Go Higher and promoting income inequality.

      Because the way the Fed it’s doing this now, is indirectly channel the funds into stocks using multiple middle men who charge huge parasitical fees, while all the while claiming (dishonestly) it is NOT buying stocks. Except it IS buying stocks because it is providing the funds to exorbitant fee charging Wall Street to do exactly that. Give me a break. Buying stocks to make the stocks go up is the total purpose of everything the Fed does.

      If instead the Fed bought stocks directly, it would cut on exorbitant, parasitical middle man called Wall Street and the Finance Industry…and save us all a whole lot of $$$$.

      While not agree with him on many things, always respected Ron Paul for his consistent advocacy for Peace and against war. Abolishing the Fed is an additional issue I’ve grown to agree with him.

      • WES
        Jun 19, 2020 at 12:02 am

        Timbers:

        One thing we now know about the Fed.

        It can not ever again, raise interest rates going forward, due the US government’s huge growing “need” for zero cost debt.

        Everything else is now second fiddle, including the banks that own the Fed.

        • Apple
          Jun 19, 2020 at 12:42 am

          Can negative interest rates be far away?

        • Jun 19, 2020 at 3:36 am

          Debt will be zero soon and we can start the process all over – they arn’t that far from doing so

        • Cas127
          Jun 19, 2020 at 9:57 am

          Agreed.

          It is vastly under reported that the G’s accumulated debt is so vast (and really has been for a long time) that the Fed can never/will never be allowed to raise interest rates to any significant extent.

          The surge in annual interest rate payments (due to that enormous existing debt) would immediately cause the deficit to soar even beyond its long absurd levels.

          We can all stop talking about the death of the dollar – DC policies murdered it a long time ago…each new round of Fed dilution is just desecrating the corpse over and over.

          So the US has a “currency” that will never again yield an appreciable interest rate.

          In a world with a universe of alternatives, not controlled by generation after generation of miserable, posturing political failures.

    • Crush the Peasants!
      Jun 19, 2020 at 5:12 am

      I do not disagree with your sentiment, but if the Fed creates money out of thin air, how are taxpayers on the hook to repay it?

      • hidflect
        Jun 19, 2020 at 3:26 pm

        The Fed is a consortium of private banks. Taxpayers have to pay them back.

        • Crush the Peasants!
          Jun 19, 2020 at 4:07 pm

          Are you claiming that the Fed takes out loans to create money out of thin air? Curious to understand how the taxpayer is on the hook.

  3. GotCollateral
    Jun 18, 2020 at 10:53 pm

    Well as the bonds underlying the ETFs/SPV holdings go into default its natural for the value of it on Jeromes balance sheet to decline :P

    Those investors still got non-zero value from the trash by dumping on Jerome.

  4. Tony
    Jun 18, 2020 at 11:15 pm

    They could just be devaluing the dollar on purpose. Like Wolf said, that chart going from 4 trillion to 7 trillion seems like a precursor for something planned for the future unless I’m misunderstanding that statement.

    • roddy6667
      Jun 18, 2020 at 11:49 pm

      One way to deal with all the debt is to pay it back with increasingly worthless dollars. To the average (ignorant) Joe, it looks better than defaulting on debt.

      • Wisoot
        Jun 19, 2020 at 12:44 am

        Paying back debt – not. Cobwebbed long ago. Who does that? Individuals and business can bankrupt. Countries and banks print and keystroke money on demand. They wait for the masses to wake and make direct demands. Meanwhile they continue feathering their mansions cars plastic surgery. Legal, law enforcement, money supply, media message, weather, governments, countries. Round hats have it all. You on the other hand have your family unit, your land, your soul. The latter have meaning. The former are constructs empty of meaning corrupted by ugly greed.

      • Cas127
        Jun 19, 2020 at 10:09 am

        That is the whole story.

        And somehow America’s magnificent, “independent” press has spent less time covering the 20 yr halving of long term interest rates paid to savers (and the complete zeroing out of interest paid to shorter term savers) than it might spend covering “new cat fart” “news” in any one yr.

        Then, when the inevitable exodus from the dollar occurs (stripping DC even of its pathological power to defraud) all the media meat puppets will be “shocked, shocked” and condemn the “criminals” who refuse to use their excrement as currency.

  5. andy
    Jun 18, 2020 at 11:40 pm

    Without Fed’s liquidity gold prices going to crash right thru the floor.
    Silver too.

    • Frederick
      Jun 19, 2020 at 5:15 pm

      I very much doubt that More likely the markets will crash big and there will be a gold and silver rush I’m banking on it

  6. Fred Flintstone
    Jun 18, 2020 at 11:41 pm

    Planned economies do not work. The only reason the fed has kept us out of the abyss is that other central banks have continued the farce of treating a currency with the worst trade posture in the world as if this was 1920 and we were enjoying a huge surplus. When the farce ends, and it will, every action taken by the fed in recent times will only cause more pain and agony for the patient. The fed is a corrupt, political arm of the government dedicated to retaining the current leadership in place. No matter how incompetent and corrupt they may be. I suspect five year plans will follow. For those who don’t remember 5 year plans……see Joe Stalin in the 50’s.

    • WES
      Jun 19, 2020 at 12:28 am

      Fred:

      Don’t worry I saw the results of multiple 5 year’s plans in Russia in 1983!

      I even tried to save the communists from themselves but obviously I failed badly!

      They were still using churn drills in their mines, to drill blasting holes in rocks, something we abandoned after WW2!

      A churn drill is like holding a steel cold chisel in your hand and rotating it slightly after hitting it each time with a sledged hammer! The constant hammering action quickly destroys the churn drill not to mention the drill bit!

      • VintageVNvet
        Jun 19, 2020 at 9:02 am

        Those are called ”star drills” in most of USA Wes.
        I used them a ton in the 1960-1970 period before I could afford to buy a hammer drill.
        It was hard work, but with the use of a ”drilling hammer” designed to use with one hand while holding the drill with the other had, I could drill a 1/2 inch hole through an eight inch foundation stem wall in about 15 minutes.
        I still have the 1/2 and 3/4 versions in my ”clutch.”

        • Lisa_Hooker
          Jun 19, 2020 at 11:47 am

          I still use my star drills occasionally, never enough holes to justify a hammer drill. Still have the punches for setting Ackermans too.

    • Apple
      Jun 19, 2020 at 12:44 am

      Of course unplanned economies also do not work.

      So where does that leave us?

      • No Expert
        Jun 19, 2020 at 2:32 am

        Economies do not work

      • Happy1
        Jun 19, 2020 at 7:59 am

        Yeah, they only lead to prosperity, right?

  7. WES
    Jun 18, 2020 at 11:53 pm

    Mr. Stock Market is not going to like this one bit.

    Time for 5%, or 10%, or 15%, or 20% “whatever it takes” swan dives to regain the Fed’s attention.

    Notice that no money is going to people, just governments!

    This will not boost main Street consumption!

    Corruption, yes!

    • sierra7
      Jun 19, 2020 at 3:34 pm

      Wes:
      “Notice that no money is going to people, just governments!”
      How can you say that!
      Lots of money has been given to the people, working people, small businesses…etc…..billions on billions!
      The Payroll Protection Plan (PPP) and the extended +$600 the unemployed…..and other emergency programs!
      Anti-gov prejudice is not going to help us get out of the present predicament.
      New ideas on how to allocate money might.
      A blossoming of the “Commons” may.

    • Paulz2
      Jun 19, 2020 at 7:11 pm

      The senate has a 1T$ infrastructure bill they want to push through soon. This might hold up the economy and bring down unemployment to some degree.
      Well Wolf hope it is a small wager and you might get saved by a second cov19 wave.

      You have not updated the default rate in the used car leasing market and how would it hit major banks that backed those smaller banks that made those failing loans.

  8. Joe in LA
    Jun 18, 2020 at 11:57 pm

    “For the stock market, a new phase has started.”

    Wouldn’t it be wise to actually witness some market declines before making that conclusion? I was short on Monday, thought I was seeing a decline — and then Powell jumped in and got the market going back up.

    At this point, if Powell really let the market fall even 20%, the Don’t Fight the Fed crowd would join the long-abused savers in wanting his head.

    • Tony in Aus
      Jun 19, 2020 at 1:36 am

      Very good point. Powell absolutely times his announcements to shift the day’s trade. He’ll no doubt announce the PMCCF is ready at 2pm on a down day.

    • Nat
      Jun 19, 2020 at 5:56 am

      Even if it goes up the statement is still valid because it is now going up for different reasons then before (before = direct asset purchases, now = however assets are getting indirectly purchased as money circulates).

      The stock market going further up in responce may be stupid and irational, but then it is still a new and different stupid reason then before, so still a new phase even if the results look superficially the same.

    • David Young
      Jun 19, 2020 at 10:03 am

      One thing that I’ve learned is that you can count on the Fed to move the goal posts at will and usually to your detriment unless you are a devoted equities investor. You were short? That’s a guaranteed way to have Jerome step in and slap you down.

      (disclosure: I’m a frustrated and bruised “saver”)

  9. DeerInHeadlights
    Jun 19, 2020 at 12:46 am

    I’ll have to go with the rabble here on this one Wolf. Everything we’ve seen so far is that they let only let the market fall so far before coming in and doing their magic. I don’t think mild-mannered criticisms directed at them are going to change things their behavior. Unless of course Powell’s in with the Dems on this to tank the economy and get the Orange Man kicked out…

    • Zantetsu
      Jun 19, 2020 at 10:44 am

      So you believe that the stock market is the economy?

      • DeerInHeadlights
        Jun 19, 2020 at 3:25 pm

        I think I made that elementary error of equating the stock market with the economy, didn’t I? I hang my head in shame…

  10. MCH
    Jun 19, 2020 at 12:51 am

    Hmmm, this Wolf-o-lution makes the Fed looks decent, keep harping on this one, the Fed is sending money direct to the consumers. All hail the Fed.

    APPROVED.

  11. Rinaldo
    Jun 19, 2020 at 12:57 am

    The SM has not to figure out anything. The FEDs bond buying does not increase M2, but since the TGA (treasury general account) moved from Primary Dealers to the FED, Treasury spending actually DOES increase M2. I assume the Treasury will be sitting on 1.5 trillion or so. Trump will make sure this money is spent before the election.

  12. Jun 19, 2020 at 3:42 am

    I wonder how bank leverage plays into all this since banks create most of the money when loans are made????

    It’s also odd inflation isn’t much higher with soo much free money being handed out (thanks Fed!!!). Foreign imports (i.e. Chinese slave labor) is saving this country right now

  13. Dan
    Jun 19, 2020 at 3:45 am

    Wolf: just watch what happens to the Fed’s crony bailout balance sheet once the stock market comes under renewed pressure.

    Translation: look for an even much more bloated Fed balance sheet. This won’t likely take too long. Just think of your own words on the bubble stock market (even you get this):

    For the stock market, a new phase has started. It now has to figure out how to stand on its own swollen and inflated legs in the worst economy in a lifetime, with the worst corporate earnings reports coming its way, while stock prices are ludicrously inflated. So good luck.

    You read it here first!

  14. Cruel_World
    Jun 19, 2020 at 5:37 am

    I agree with the comment, about this signalling only the “Loss in Value”. As opposed to seeing it as the Federal Reserve not buying.

    The Federal Reserve will only not be buying if the other tentacles need them to, to force through draconian dictatorship Bill Epstein type legislation.

  15. breamrod
    Jun 19, 2020 at 6:04 am

    any little hiccup in the stock market and the fed will come running! One can’t help but wonder on how long this will work until the free market says enough of this and declines anyway. I know I know there’s no free market anymore or at least thats what everyone says but that’s why I know it’s lurking out there somewhere just waiting waiting!

  16. Old-School
    Jun 19, 2020 at 6:26 am

    I said it when the 10 year was 2%, the yield on the 10 year and the sp500 value do not go together. One of them must correct. The sp500 at this level implies a negative one percent 10 year treasury which isn’t going to happen. My guess is 10 year yield gets pushed even lower and sp500 goes under 2000.

    • cb
      Jun 19, 2020 at 8:10 am

      Old-School said: “The sp500 at this level implies a negative one percent 10 year treasury”
      ____________________________________
      How have you determined that? What is the math?

      • Old-School
        Jun 19, 2020 at 4:42 pm

        Dividend discount model. Plug in sp500 = 3100, sp500 dividends $59, dividend growth = nominal gdp = 4% gives result of discount rate of 1.9%. With the 10 year treasury at 0.7% historically you need a risk premium of about 3% larger than 10 year yield or 3.7% at current rate or the 10 year is 1.8% too high to justify someone paying $3100 for a $59 dividend from sp500.

        In a way it makes sense in that the Fed has convinced the market that stocks aren’t as risky as in the past, because they have rescued shareholders a few times temporarily suppressing the risk premium.

        You can solve it the other way and say the 10 year is at the right price and I think that gives you sp500 worth about $1800 which to me makes more sense.

    • Jun 19, 2020 at 1:11 pm

      There is talk of Yield Curve Control, or unlimited buying. If Powell backed off QE it’s just the hitter dropping his hands before he lays into that slow curve ball. (Smart?) money is flowing into this market. Fed is going to (further) denigrate the dollars spending power, while using their proxies to keep bonds from getting to market, hold the dollar up, BOOST THE FINANCIALS, and push money into stocks. Everything they have been doing and more. We don’t know who will be Treasury Sec next January, but one Fed head is the same as another.

  17. Dave
    Jun 19, 2020 at 6:33 am

    The Feds job is to make MONEY for the people that Own and Control the Fed. Plain and simple. It doesn’t matter what their stated goal is. Its all about the money. If Jerome doesn’t do a good job, next chairman up!

    BTW: Wolf said, “I don’t think the hyper-inflated markets, which have soared only because the Fed poured $3 trillion into them, are ready for this shift.”

    1) Sure it is, the market is forward looking! (sarc)

    2) J Powells handlers have been made whole and have had time to take the other side of the trade. We made money going up, now we’ll make money going down. This is a free market, stocks don’t go up forever. (sarc)

    3) it doesn’t matter if what they do is illegal. When’s the last time a Fed Cairman has gone to jail? Exactly, never.

    • Old-School
      Jun 19, 2020 at 4:52 pm

      The purpose of the Fed is to ensure Congress can spend more of the countries wealth than they otherwise could.

  18. David Hall
    Jun 19, 2020 at 7:08 am

    A little while ago I read about a planned Fed $250 billion in corporate bond purchases.

    There are rumors of an impending eviction crisis.

  19. Paulo
    Jun 19, 2020 at 7:10 am

    So many acronyms, so little value, running out of time.

    MESS

    My Expectations Still Stalled

    How much cheaper and more effective it would have been to simply share the wealth a bit more back in 2008-9 by fixing up a decent healthcare system/plan and distributing some cash to the masses with taxation clawbacks for those who want to earn more in our changing workplace. This would have provided stability, opportunity for individual sabbaticals for retraining thus keeping up with rapid change, and maybe time for individuals to smell the roses instead of manipulated FED bullshit.

    Instead, the healthcare nightmare of US is fast devolving into a health crisis of pandemic proportions, where even testing is a new bill for many. State unemployment systems/programs are all over the map from generous to non existent with people running out of money and hope. Finally, folks are being forced into the economy to work at whatever possible in this dangerous time simply to keep from rolling under and losing everything.

    But the DOW is high and the Banks are fat and sassy. So what if someone dies cutting hair or selling barbecue. And professional sports are an essential service. Riiiiiighhhht.

    MESS.

    • Island teal
      Jun 19, 2020 at 7:51 am

      Well said…..thank you😊😊

    • Stephen
      Jun 19, 2020 at 7:55 am

      I agree!! No real political leadership from either party. Reminds me of the beginning of WWI, when all the countries of Europe is some type of drunken stupor agreed to a completely senseless war that would destroy the continent and kill tens of millions of people.

      Very sad state of affairs as America sleep walks into revolution. It did not have to be this way.

    • RD Blakeslee
      Jun 19, 2020 at 11:09 am

      Re the U.S. health care system’s decline: It was announced in the local media that we now have telemedicine in WV and participating doctors will now get paid to treat patients online through a conferencing program like Skype. No worries about the record of stolen online medical records the last few years, security problems with online cameras in the home, lack of diagnostic “hands on” procedures like blood testing and imaging (Xrays etc.)

      “Sally forth” into the “Brave New World”?

      Nope. Stay home and hope you don’t get sick.

      • Lisa_Hooker
        Jun 19, 2020 at 12:22 pm

        No worries RB. Soon we will have Dr. Bob a computer generated avatar to whom you will relate your symptoms and receive a table-lookup diagnosis. The medical-industrial-government complex will eliminate the Dr. in the middle.

        • BuySome
          Jun 19, 2020 at 1:12 pm

          Odd…I popped the coins in but the doctor in the nu jukebox keeps directing me toward answers from someone called “the blue fairy”. I’m beggining to suspect his intelligence is just as artificial as that last guy in the white coat.

    • kitten lopez
      Jun 19, 2020 at 11:15 am

      i’m learning that “premonitions” and “intuition” are just more distraction for me because instead of feeling confident and focused like i used to get before one of my long “plays,” i am horrified how every “fix” out there is further removed from the actual problem.

      how did they shoot bonus marchers and find them camped out at the capitol an embarrassment but we tuck our homeless in tents proudly and officially outside city hall like it’s a sweet thing when there are paid empty hotel rooms for them?

      and if i were london breed’s adversary, i wouldn’t even have to photoshop the “metaphor”; i’d send a drone to capture aerial footage for my future campaign commercials about how they gutted the city and killed off small business.

      i’m a colored girl and i love to see a sister in power but skin color’s not my GOD and i can’t abide.

      NOTHING MAKES SENSE.

      Paolo i see all this is an epic existential battle for world domination between people who live here on the planet and actually do things–either because they want to or HAVE to— and people who perpetually have their heads up their asses and order in take out and swipe for adventure and consumption in the magic phone world. the cosmically funniest most horrific part is you can’t cartoonize any of this because daily reality is unfurling more untethered and absurd than anything i’ve ever made up or poked at in the middle of the street writhing with maggots…

      …or read in Boorstein’s THE IMAGE about how technology would remake us in its own image (we train ourselves to cater to numbers likes thumbs ups and swiping for love in a mask world is making us monsters with no stamina to go against anything even remotely “uncomfortable” in a world hell bent on nothing but ..COMFORT predictability death).

      this all feels like a Global Fear of Death. like how rich people suddenly get really fussy and afraid of germs and need new pillowcases each night to keep their pores clear of themselves and wash out their own greasy sweaty hungry ghost nightmares.

      i don’t know about you all, but all the corporate backing of the black lives thing is creepier than when corporations took over gay pride.

      sorry Paolo… i’m taking over your thoughts but i’m just saying YEAH YOU AND I ARE SO DIFFERENT BUT SO ALIKE ON THE WHAT THE FUCKNESS OF EVERYTHING, MY BROTHER.

      i’m even more clueless than i was before even though i saw a lot coming. but it’s meaningless. i had NO idea masks would become political like “freaks” and “greasers” in high school…

      really? we’re STILL here in high school?… we’re protesting obscure statues and street names when the elite are getting aroused behind closed doors about what they’re about to do to us?

      and we’re having tantrums over symbols STILL….?????

      at least in high school i used to get off sitting on the washing machine during the spin cycle after removing the shim under an uneven corner. i’ve got some imagination.

      and yet every new day i think, “i could’ve never made this up.” sci fi seems so adorable next to the power of the human MIND to endlessly obsessively and excitedly fork up new b.s. mountains atop the old b.s. hills and say “fuck yeah!” like Richard Dreyfuss in “Close Encounters of the Third Kind.”

      no one’s gonna fight back. they CAN’T. even feminism and George Floyd uprisings and tossed statues while all this happens (as reported consistently and solidly by Wolfstreet when NYtimes et al are having tantrums about being offended… we’re FUCKED you all… SO FUCKED… )

      sorry, after days of “i’ve so got this…” i’m once again given to Munch screams of horror at any time. that’s what the masks are FOR. stifling the SCREAMS.

      last week one of the young girls working at trader joe’s said to me, “when we first had to wear these, i hated ’em and was always pulling at it off my face…”

      she fondled the fabric of her mask adorably like a soft security blanket and she said, “…NOW I LOOOOVE IT! i feel all safe and warm in here. i never wanna take it off.”

      i had to ask her twice to repeat herself because i couldn’t hear a word she said. Feminism fought for THIS!

      more leave me alone fuck you i’m not here…

      like a HOODIE. that’s what James said they’re like. new fuck you hoodies.

      and you can NEVER tell if someone’s looking at you and smiling at you. it’s cold outside and we’re in the middle of a heatwave.

      you and me like free form jazz, lately, Paolo.

      off to trader joe’s with the new edict from King Newsom that we must now wear them while sleeping and re-breathe in our own mold and stale trapped breath.

      this is living????

      i’m gonna dance for Juneteenth too. if you see me at 24th/potrero later honk hello.

      x

      • Lisa_Hooker
        Jun 19, 2020 at 12:29 pm

        You go girl. You’re on a roll.

        • kitten lopez
          Jun 21, 2020 at 7:24 pm

          Thanks, Queen. yeah, you’ve no idea… i AM on a role… i’m losing what friends and acquaintances i have left as if i were exfoliating my LIFE.

          (smile)

          so be it…

          x

      • FluffyGato
        Jun 19, 2020 at 7:33 pm

        Excellent piece, Kitten. A masterpiece for those who have been paying attention.

        • kitten lopez
          Jun 21, 2020 at 7:25 pm

          oooh “masterpiece” is a huuuuge word. thanks, Fluffiest Gato EVER!
          x

  20. joe2
    Jun 19, 2020 at 8:09 am

    Interesting. Good summary of the SPVs which others just dance around. It remains to be seen if the Fed abandons it’s third mandate of pumping stocks. So far today stocks have not gotten this memo.
    Something to keep an eye on. Maybe I can use the term “stock market” soon.

    • Lisa_Hooker
      Jun 20, 2020 at 8:07 am

      The old stock market has become the stock store. You must go in and buy. Haggling over price is not allowed.

  21. Augusto
    Jun 19, 2020 at 8:11 am

    It is amazing how the “Savings and Investment” has been thrown out the window for “Consumption and Debt”, as both a way to live and now economic philosophy. Anyone who is a saver is stripped of their wealth while spenders, especially on assets, are enriched. And this from a time when people want to reduce carbon-energy consumption, or so they say. That this consumption is for things they really don’t want or need, just a combination of instant gratification on a personal level and a “go along get along” attitude on useless government spending. A better now rather than a better future, or a better now and the future will take care of us.

    • Jonathan
      Jun 19, 2020 at 10:33 am

      High saving rates are demonized by “economists” for a simple reason: It’s much harder for these financial parasites to enslave a fiscally responsible populace with debt.

    • Zantetsu
      Jun 19, 2020 at 10:51 am

      I don’t understand what you are saying. The assets that are increasing in value are intangible assets, partial ownership of companies called “stocks”, or private ownership of companies. Also homes.

      It’s not like people are buying vaccuum cleaners and TVs and iPhones to get rich off of asset appreciation.

    • RD Blakeslee
      Jun 19, 2020 at 11:13 am

      “Anyone who is a saver is stripped of their wealth … ”

      Not necessarily true for those who save hard assets instead of fiat cash.

    • Lisa_Hooker
      Jun 19, 2020 at 1:49 pm

      Luke 12:19
      Then I will say to myself, “You have plenty of good things laid up for many years. Take it easy. Eat, drink, and be merry!”‘

      Or, maybe not.

    • sierra7
      Jun 19, 2020 at 4:12 pm

      Augusto:
      The capitalists have really outdone themselves now.
      Globalizing labor and consumption has led them into a blind alley.
      They cannot shovel enough money fast enough into a globalized economy to recompense them for the high profits made in the past decades.
      They are now facing the possibility that (due partly to this present health crisis) they will be mired in much less profit atmosphere than before.
      The only way to enjoy what they did in the past is/was to come up with new schemes of debt for the masses.
      And that, means the end to their high profit schemes.
      Eventually global business will realize that they have to restructure in order to survive….more so than the general populations.
      “Hi-Tech” is not going to save us……..
      “Hi-Debt” for the masses will not save them or us.
      There is a tsunami of economic destruction “out there” in the middle of the global financial ocean that for now is still unrecognizable; soon it will show itself and then it will devour most economies like the gobbling of Fukushima Power Plant in that incredible disaster!
      I was born in the Great Depression and have seen many a shyster economy pass my way.
      I have lots of respect for those who still believe in “savings” and not so much for those who will embrace the hard commodities….
      As the old banker tome:
      “You can’t put a slice of gold in a sandwich”!
      When the muckity-mucks believe that that’s when the masses will come for their heads.
      Stay safe out there!

  22. historicus
    Jun 19, 2020 at 8:20 am

    Wolf…..
    What is going on at the Discount Window?
    .25% is the posted rate…
    there used to be a penalty fee on top of that, but seems to have been removed as has the “transparency” of who is doing what with the Discount Window.
    If .25% with no penalty and no revealing of who is dipping into the money….that’s as close to free money as one could expect. It could explain why there no longer are REPO accommodations …maybe the hedge funds and REITS are using the DW…
    your thoughts

    • Jun 19, 2020 at 10:33 am

      Only banks can borrow at the discount window. T-bill yields are in the 0.15% range. The federal funds rate is 0.09%. Banks can borrow from other banks at 0.09% unsecured in the federal funds market. So the 0.25% doesn’t look that attractive.

      Also, the problem with the repo market wasn’t that banks were borrowing from it. It was that banks were NOT LENDING to it. The big forced borrowers were mortgage-REITs and hedge funds.

      • MCH
        Jun 19, 2020 at 2:24 pm

        heh, you know the solution to that is more legislation.

        It is interesting that they let the genie out of the bottle by killing off Glass Stegall, but they can’t seem to put it back in. I’m just waiting for someone to push for full reinstatement. It’ll create a whole bunch of new entities.

        That’ll really roil the financial markets, can you imagine splitting Marcus away from Goldman.

        • Trent
          Jun 19, 2020 at 3:45 pm

          Remember when Trump said he was going to do that in 2016 primary? What a hoot

        • Ed
          Jun 19, 2020 at 6:55 pm

          People have been arguing for full reinstatement of Glass Stegall ever since they got rid of it for Citi.

          They are arguing for it today. Frankly, it seems like a very good idea, one small step in getting the taxpayer off the hook for the next investment banking crisis.

      • historicus
        Jun 20, 2020 at 6:03 am

        And who is restricted to REPO market?
        Was it not the banks being provided money (liquidity) to cover their customer issues, ie hedge funds and REITs?
        The hedge funds and REITs were not directly involved in REPOs were they?

  23. QQQBall
    Jun 19, 2020 at 9:19 am

    I think the fact that the SPVs are levered 10 to 1 should be highlighted. Debt and leverage is the problem. Now, more debt and greater leverage will solve the problem? I wonder how much the Fed really has outstanding all over the world? Its taking more and more debt and greater leverage to try to keep the system stable. Ahh for the good old days of 2008 when the national debt was supposedly $8B. Step back, the national debt has gone parabolic. $4T in 2+ centuries and now at least $4T this year? A 41.7B decline? Pfffff.

    • Old-School
      Jun 19, 2020 at 5:34 pm

      In some ways the Fed mandate of 2% inflation and full employment may screw things up. Seems like the only way to achieve these goals since 2000 is with extreme measures that actually destroy real capital formation and productivity gains. If the hurdle rates for projects is near zero you are going to do a lot of stupid stuff and keep digging yourself a deeper hole of debt.

  24. Duane
    Jun 19, 2020 at 9:26 am

    Boy, the headline “Total assets drop, liquidity injection ends” sounds kind of hawkish but as anyone knows the Fed is anything but hawkish. The liquidity has been added. Markets rose. More liquidity will be added if markets fall.

  25. DR DOOM
    Jun 19, 2020 at 9:31 am

    The Fed will destroy THEIR fiat dollars value to prevent deflation. The Federal Reserve Note was designed to be abandoned by the US Treasury and revert to Constitutional Money. The Reserve Note ain’t in the Constitution pure and simple. Accept it at your own risk should be written on every one of them.Bankers Assets and Wall Streets constant feeding off of the tax supported feedback loop of Fiat inflation ,ergo , rising property values supporting local and state bond offerings cannot survive devaluation. Inflated Insurance is another Scheme intertwined in this constant Fed plumping of assets. The importance of the SPV’s lie in the fact that they are even allowed to exist without being challenged by Congress . The “tiny” amounts in the SPVs are irrelevant. The SPV’s are the last line of defense to prevent deflation.Deflation would force Wall Street to create something with economic value other than inflating its capital markets for parasitic feeding.Another salient view would be that Congress is saying to the Fed . Do what you want and save our bacon or you are history.

  26. David Young
    Jun 19, 2020 at 9:42 am

    I can only conclude that the rich families and similar that to a significant degree OWN the Fed’s member banks are very heavily invested in equities. How could these entities NOT manipulate Fed policy to maintain their wealth and recovery losses after “accidents” like what happened in March? ((To what extent they can quickly get in and out of the market, and potentially are instigators of volatility is completely opaque to me.)) As giant pension funds and the like (401k’s) are also heavily in equities, keeping them in the green is certainly another credible motivation for manipulating markets back to all-time-highs. Now that the important folks have been “made whole”, I suppose Fed needs to back off or lose all credibility.

    What would happen if the market crashed and stayed down for a protracted period of time? We have not been allowed to find out! How does political revolt even happen in this country, and what good would it do? I can only imagine a period of fruitless anger and chaos.

    Question for Wolf: If the Fed recklessly killed the Dollar (hyperinflation), would equities reliably serve as a Hard Asset? Could that be what we have been seeing?

    • Jun 19, 2020 at 11:06 am

      I don’t see a significant chance of hyperinflation. Inflation yes, but not hyperinflation. That said, the shares of a good company in an industry that can weather hyperinflation could be a decent bet long term in case of hyperinflation.

      • Jun 19, 2020 at 1:55 pm

        Yes but in this context hyperinflation might be 5% on the 10yr. Real interest rates are already negative. The source of hyperinflation is another concern, if somehow that inflation settles in the service sector, (though hard to imagine how after the virus) Oil prices are back up near normal, and wages and compensation stuck, and if labor was tight before, it is still tight in more fundamental ways, while workers seek to avoid infection. The debt monetization monster is going to feed into the currency. Gold might already be $2000 if the firmness of the dollar was not in play.

        • Lisa_Hooker
          Jun 20, 2020 at 8:27 am

          I’ve always wondered what will happen to the price of gold should the dollar collapse and gold becomes a buyers market as holders are forced to liquidate for living expenses. It certainly will not be an orderly market.

      • RagnarD
        Jun 19, 2020 at 10:36 pm

        I don’t see a significant chance of it tmrw, either. But I also see zero chance of them getting out of the hole that we / they are in. I mean, the austerity path, we’re not taking that option, that’s pretty clear.

        So, eventually it breaks, no? People call “bullshit”,
        Gold takes off, and they have fold their hand. All this “money” has to be covered by hard stuff at some point.

        Whether we hyperinflate there, I don’t know. But, to cover all the printing, gold has to escalate, a lot.

        I’ve not come close to hearing a convincing argument otherwise in 15 years.

  27. historicus
    Jun 19, 2020 at 9:58 am

    DEBT is the key …
    and corporate debt issuance is at all time highs…
    government debt issuance is at all time highs…
    and interest rates are at all time lows…

    THIS can NOT last….

  28. Double D
    Jun 19, 2020 at 10:00 am

    What a lot of people don’t understand is it isn’t necessarily the stock market but the Energy market that drives the world. It’s why they’ve propped up oil from $12/barrel to now around $40. Based on what? The same level of fake data as the rest of the stuff fed to the masses. Worldwide demand has cratered and you can’t believe anything that comes out of the propaganda machine.

    One thing is certain. The stock market cannot stand on its own swollen & inflated legs for very long without another trip to the massage parlor.

    • sunny129
      Jun 19, 2020 at 6:10 pm

      FYI

      FED is the mkt. Without there is NO credit or the Equity mkts! Mr.Powell admitted openly on ’60 min’ on CBS, that he can produce UNLIMITED digital $ to infinity! He dares you to SHORT the mkt!

      Annual deficit in trillions( 1 or 2?+}
      National debt at 26 T will go to 30 T by the end of year!
      Has any one out there complaining? NONE!

  29. nick kelly
    Jun 19, 2020 at 10:20 am

    I don’t understand much of this stuff but I think Powell is beginning to feel some heat from those pushing back against ‘QE infinity’

    Maybe he’s been reading WS under the blankets at night.
    He said he (the Fed) wasn’t going to be like an elephant buying everything and then added ‘or preventing price discovery’
    I think a lot of people agree that only the Fed was preventing price discovery BEFORE the virus hit.

    Anyway the words ‘preventing price discovery’ seems like newish Fed-speak and should be added to the Fed-o-meter.

    • sunny129
      Jun 19, 2020 at 6:13 pm

      Has any one out there complaining, about increasing deficit and National debt in Trillions by the month, this year?
      No one is concerned about QEs, either, NONE!

  30. Norma Lacy
    Jun 19, 2020 at 10:57 am

    Question: (hopefully not a stupid one) When central bank dollar swaps mature, the dollars come back to the Fed. Then what happens?
    They disappear? Thank you all for a great site.

  31. RagnarD
    Jun 19, 2020 at 10:58 am

    I’m Just wondering what’s gonna be the tipping point for gold?

    Who will be the one to “say “nice things about gold” that will be the straw that breaks the camels back? you already have many of the top fun managers such as Dalio saying 2020s going to be a gold decade.

    But what happens if Buffett with his pile of cash, —- how does buffet feel sitting on $80 billion cash, when he sees the Fed printing money out the wazoo? do you think he’s not wishing he had some gold?

    What happens when the Buffett says nice things about gold, and his lemmings lemming into the tiny, tiny gold pond?

    I’ve been waiting about a decade to find out.

    • nick kelly
      Jun 19, 2020 at 11:21 am

      Or the Fed could pull a real surprise and do a massive purchase itself. It could use its funny money to prop up the funny money.
      Can it accumulate on the sly without driving up the price, then after the buying, announce it?

      • RagnarD
        Jun 19, 2020 at 11:35 am

        Yeah, I heard that the other day.

        My reply: from whom?

        The Russians or the Chinese?

        I’m 10,000 offer for my first oz, $20,000 for the second, etc, etc.

        • nick kelly
          Jun 19, 2020 at 1:42 pm

          There is a narrative out there that Russia has a massive hoard of gold. They encourage this with frequent announcements that they are dumping US $ in favor of gold. Perhaps this is to bolster the ruble (which is not a convertible currency) by trying to raise doubts about the dollar. If so it hasn’t worked.

          Germany, France and even Italy have bigger AU reserves. The US has the largest at over 8K tons or 4 times Russia’s stash of 1900 tons.
          Quite a surprising stat is the incredible amount of gold held by private Germans, also over 8K tons.

        • RagnarD
          Jun 19, 2020 at 4:59 pm

          Well as I understand it the statS show that Russia has been accumulating a lot in recent years, and China no doubt has been accumulating a lot, but behind the scenes, because they mine it intracountry but don’t report it, so their numbers are likely much higher than what is officially listed.

          as far as I understand it.

          Yeah, that’s an impressive number for Germany, even more amazing to me is is the amount held in individual Indians. It’ll get pretty crazy if gold goes way up and you have these relatively poor Indians should becoming wealthy

    • RD Blakeslee
      Jun 19, 2020 at 11:31 am

      Reuters yesterday said BIG investors’ gurus are saying something relatively new: “Buy more Gold”. (Citation awaiting moderation)

      Tipping point? I doubt it. To corrupt the Cable Guy’s admonition: “You can’t fix (greed)”

    • sunny129
      Jun 19, 2020 at 6:22 pm

      Price of Gold ( at least paper ones GLD) is actively suppressed by the Govt+vested parties using futures at Gold exchange for decades.

      We ALL know that purchasing power of ALL FIAT currencies including almighty US $ is getting reduced, year after year but price of GOLD is not allowed to go above $1800, so far! How come!?

      It is being artificially manipulated unless some one else will come out with a rational answer.

      REAL Inflation is already here in housing, healthcare and education. There is already creeping in fresh food

      • RagnarD
        Jun 19, 2020 at 10:46 pm

        I agree to an extent. I meanz, I tell people when gold goes up it’ll be all over. the fact that gold is not up a lot, just means the game is still being played.

        But the fact that you can go to Blanchard, Kitco, or any of these other sites and buy all the physical gold you want, wouldn’t you think that at this point no one would be willing to sell you physical gold at these prices?

        I’m not selling Mine for $1750, but I don’t know why they are.

        Btw, for a good time,
        Search for“ Kitco Gold currency charts” on Google and then click the 10 year or the five-year term on the graphs

        The game is already on in almost every other currency.

        • sunny129
          Jun 20, 2020 at 12:16 pm

          For me GOLD is NOT a religion. Just a trade like OIL.

          I have some ETFs (not GLD))on gold and miners. But also trade options on both directions. Unless gold ( paper kind or physical) converted to dollars, you cannot spend it for the real goods or food. price of gold set by paper kind at the exchange.

          it is part of UNCORRELATED assets in my portfolio along with OIL and RE ( especially income producing type)

          Every one talks about DIVERSIFICATION but very few about UNCORRELATED assets! Been in the mkt since ’82 (retired over 20 yrs ago!)

  32. MonkeyBusiness
    Jun 19, 2020 at 11:53 am

    So it’s time to short the market soon?

  33. Jun 19, 2020 at 1:34 pm

    Central banks are printing so much money,
    houses are unaffordable to all but those who
    managed to ” get in on the ground floor ”
    of this (universal) Ponzi scheme.

    When kids have no future, they riot.

  34. Jun 19, 2020 at 1:44 pm

    Fed knew this whole thing was a letter to Santa, (and the consumer programs show they are being good – or Santa Congress puts coal in your stocking.) Now this YCC stuff comes up, it just depends on how much panic they can muster. Who has control after the election, and does it really matter? They have put so much money into the system the stock market can probably continue higher for years without any additional stimulus.

  35. BuySome
    Jun 19, 2020 at 2:23 pm

    It would seem standing on it’s own inflated legs in the worst economy ever would no longer be the question. One economy seems to have died, and another one seems to lack much real body to it (how many tech companies are paddling a canoe to nowhereland). No direction from above…all ruled by the purchasing of overgrown children isolated in boxes living in their own generated comic book store e-world full of super hereos fighting politically incorrect villains and never again running the risk of opening a door to the possibility that a viral generated Zombieland might be a reality. How many of those pumped stocks are actually fully vested in this future?

  36. Jun 19, 2020 at 3:22 pm

    Buffett is sitting on 137 billion $ in cash;
    not gold, not stocks, cash.

    Due to central-bank printing, semi-deflation (commodities),
    and the rush to “safe” assets,
    real estate, stocks and gold are overvalued.

  37. DR DOOM
    Jun 19, 2020 at 4:05 pm

    As long as we can sell our debt to get stuff we don’t make we will muddle along. Of course this implies we must keep Reserve Currency Status .We as a nation are trained ,conditioned and feel deserving of getting an endless supply of cheap stuff.

  38. Lynn
    Jun 19, 2020 at 5:47 pm

    @Wolf , I understand about 80 % of this article. I read financial stuff to try and get a gauge on housing prices as I’d like to buy a fixer on a shoestring.

    Did the REITs or corporate investors that buy massive amounts of properties get a kick down or are they being gradually (?) cut off from bailout money? Might we see a lowering of prices? Say in higher cost areas?

    It’s good to know not only for myself. A decrease in housing costs might also be a decrease in homeless as rents go down.

    • Jun 19, 2020 at 8:01 pm

      Lynn,

      I’m not ready to link the Fed’s balance sheet to changes in home prices. Mortgage rates are a critical component, as are many other factors, locally. Mortgage rates track the 10-year Treasury yield more or less, with some spread, and the 10-year yield is really low.

      • Lynn
        Jun 19, 2020 at 8:16 pm

        Thanks Wolf. Although, lower rates still would only help big investors. That could be another handout. I don’t think the banks are going to loan money to most individuals at lower than they are already, even if the Feds rate goes down. If they do I think their points would go up to compensate.

        Do you know if the big property buying REITs got a lot in handouts? Last time they got a license to kill in addition to cheap loans. Here in Ca no bank would sell a foreclosure to anyone who wanted to live in it unless it was an all cash sale. And they would not loan to most individuals, in practice.

  39. Jun 19, 2020 at 6:08 pm

    Hi Wolf, thanks for a great site, great analysis, and many valuable insights. ISTM although the alphabet soup of SPVs are mostly inactive so far, I would put that to planning ahead by the big money (eg BlackRock). These SPVs are slush funds for cronies to protect each other when turmoil hits with the realization that we’ve entered massive deflation (unemployment, demand destruction, nobody lends or spends out of counterparty fear). Big pain to come and a charmed circle for insiders who will end up with even more control as they pluck off competitors at bargain prices or watch them writhe and die. Thx again!

    • sunny129
      Jun 19, 2020 at 6:53 pm

      watch:
      BlackRock Corporate High Yield Fund, Inc. (HYT) div 9.2%
      NAV From $6.64 to 10.25 since March 23rd.

      Ride with BLK who manages money for US Govt/Fed. There are also other BLK Etfs on bonds. An Open secret

  40. Old-School
    Jun 19, 2020 at 6:14 pm

    I have read enough on Buffet that I don’t think he will buy gold. He likes relatively safe long term equity investments that meet his current hurdle rate of maybe 8%.

    He will sit on cash knowing there is an opportunity cost each year, but in the past this has worked out because the returns available in recessions are the highest.

    I think he has an excellent understanding of the current fiat system and generally believes the Fed does a good job of keeping the system operating at near peak potential.

    I think he believes fiat is a tail wind for stocks and a head wind to fixed income.

    • sunny129
      Jun 19, 2020 at 6:45 pm

      All fiats including the US $ are losing purchasing power each year. How do you prevent it?

      When stocks overvalued by 2.5 to 3.0 by historical records, preservation of capital is vital. Going to CASH is that choice. I am 50% cash. Rest is in diversified-uncorrelated assets including some fraction against the mkt. Been in the mkt since ’82.

      It is NOT how much one made in bull mkt but how much one didn’t lose, on the ensuing Bear. BULL & BEAR are the two faces of same coin. One follows the other as recorded in 200 yrs of mky history. This one is no different.

      • BuySome
        Jun 19, 2020 at 8:33 pm

        And maybe not ignore, “Expect the unexpected”? Maybe after months of daily pressure Captain Powell suddenly suffers a severe health episode one Monday morning and in the ten minutes it takes to get his replacement all suited up with the megaphone the entire zepplin suddenly goes up in flames. Too much seems to be riding on one personality to be caught not holding some strong rope so you’re not jumping out windows under Jersey skies…even if it only lasts long enough to get out.

        • sunny129
          Jun 19, 2020 at 9:08 pm

          That’s the reason there are my portfolio has inverse ETFs, Bear MFunds and some puts like in case Earth Quack of 7 or more in CA!?
          Can sleep like a baby. No problems ( been in the mkt since ’82)

  41. sunny129
    Jun 19, 2020 at 6:34 pm

    I think Fed cannot abandon the Corp Credit mkt , HY mkt or the Junk bond mkt. Once they start cratering (like Repo mkt) it will start it SPV emergency measures!

    Credit mkt is the foundation upon which the Equity mky is built, world wide! When there is loss of liquidity or liquidity squeeze, things will unravel!

    This EQUITY mkt is built and nourished by (insane) credit infusion from the very beginning since ’09. Without some kind of support or new credit infusion, the Equity bubble will lose it’s hot air, fast.

  42. Jun 20, 2020 at 7:29 am

    More consumer related initiatives now?
    Consumers invest in the stock market too.
    minus $74B? that’s a big number. Corporations hire, local govts. waste the money on dart throwing projects.

    • sunny129
      Jun 20, 2020 at 12:24 pm

      Consumers invest in the stock market too’

      Very insignificant # compared to top 10%.

      Top 1% have nearly 50% of Wall st wealth.
      Top 0.1% have more than bottom 80%
      Top 10 % have nearly 90% of Wall St wealth.
      Bottom 90% less than 7%.

      Besides bottom 60-80% live from one pay check to next. Nearly 50% don’t have $400 in savings. Less than 40% have retirement funds, and many NOT enough. The middle class has maintained their life style by borrowing more & more since 2000.Evidently up to their neck in debt.

      Without DEBT, there has been NO organic growth of productive economy for over 20 yrs! Just Financialization with credit infusion. No earnings necessary. Buy-Back will do – for nearly 50% rise in S&P since ’09!

  43. David H
    Jun 21, 2020 at 10:48 am

    Wolf – what about all of the money that has been generated by debt creation and is sitting in the Treasury waiting to be spent ? There’s like $1.41 trillion and all it needs is instruction from Congress? Shorting might make money in the next few months if we hit a bit of volatility however once it reaches the economy won’t we simply see another leg up?

  44. Grey
    Jun 22, 2020 at 12:02 pm

    The Fed may be easing up on purchases, but do we know that they won’t suddenly ramp it up again without notice? They’re at $7 trillion, but there’s talk of $10+ trillion being the goal. I agree, many red flags about this market, but re going short, danger is Fed will blow that up in day’s notice — no? (unless you believe the Fed is done for some time….)

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