Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today.

Track The Fed Yourself…Right Here

So you think you want to be a liquidity analyst? Here’s a list of links to get you started.

H 41 – Weekly Fed Balance Sheet By tracking this over time you can see the growth or shrinkage of the Fed balance sheet. This is virtually in real time, published 1 day after the close of the weekly statement period.

H8 Weekly US Commercial Banking System Balance Sheet There’s a wealth of data here on the condition of a slew of banking system indicators. It’s published 9 days after the close of the weekly statement period, so it’s timely. Again, by tracking over time, you can see the liquidity flows.

Click here to continue…

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Urgent Crash Bulletin After Today’s ECB Announcement

Despite our little mistake with time zone differentials, the ECB did what we warned you it would. It announced a cut in its QE purchases, and a target date for ending them altogether. 

I have been telling you since January when the ECB cut its purchases from €60 billion to €30 billion, about the scuttlebutt that the ECB would end its purchase program in September. Well, they won’t end it in September, but they’ll cut to €15 billion per month in purchases, with a target date of year end for ending those purchases altogether.

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Watch This Tomorrow at 9:30 A.M. – And Then Prepare for A Breakdown

The stock market keeps rallying. Has Rule Number One – Don’t fight the Fed – been repealed?

The answer is no. But there are many sources of liquidity. The Fed is the most important, but there are other contributors. And investor liquidity preferences can and do often shift between classes of assets, like stocks, bonds, and commodities.

There’s no longer sufficient liquidity in the US market system to allow for concurrent bull markets, and there is less and less liquidity all the time.

But there’s still enough for one market to rally at the expense of another. When dealers, and big institutions liquidate bonds, they’ve been buying stocks, and that has kept the pot boiling for a little longer than I thought it would. So stocks have headed for the obligatory test of the highs before turning down for the “big one.”

The Fed isn’t the only central bank in the world of course, and its two big partners in crime, the BoJ and ECB are still printing money. With the Fed pulling money out of the system in increasing amounts, we need to keep an eye on the big money printers in the rest of the world. They may hold the key to when US stocks begin to decline in earnest. Europeans in particular are big investors in US assets. So when the ECB prints money, some of that money instantly finds its way into the US.

There have been rumors for months that the ECB will end its QE purchases soon. They’re expected to announce cuts in their rate of purchases this Thursday – in their press conference following the Governing Council meeting. That will happen at 2:30pm CET, which is 9:30am EST for those of you who are not overseas. The conference will be live streamed right here at this link.

The end of QE in Europe could be enough to turn a flattening liquidity picture in the US to outright shrinkage. The liquidity graph of the combined assets of the Fed, ECB, and BoJ has already turned flat. A turn to the negative would be devastating for financial asset prices.

So if I were you, I would watch, wait, and prepare.

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Stocks Try To Buck Macro Liquidity Turning Flat

Macroliquidity is flattening as the Fed withdraws money from the banking system and extinguishes it. That means that there is less and less money available to absorb new securities issuance, particularly US Treasuries. Bonds have been pummeled. But sellers of bonds used the liquidity generated by US commercial bank and foreign central bank buying to…

The “Trump Tax Cut” Numbers Are Starting to Trickle In – and They’re Not Good…

In the ongoing tradition of “one chart you should see this weekend,” the latest withholding tax data is definitely worth a look right now.

Total withholding tax collections are available to us virtually in real time in the US Treasury’s Daily Treasury Statements, released with just a one day lag, which makes them an excellent analytical resource. However, they are extremely volatile day to day so I rely more on a monthly moving average of the 11 day total collections, comparing that with the prior year.  Smoothing sacrifices a bit of timeliness to get a clearer picture of the trend without losing too much of the edge that the daily data provides. Unfortunately, I have found even the 11 day total data too noisy for meaningful comparison so I’ve had to resort to additional smoothing, which ordinarily I don’t like to do. As a result the smoothed data is a little slow, so I also look at raw data trends to get a better sense of timing.

Withholding tax collections rebounded from a deep trough in April, in the month ended May 31

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Go Short Again At 2800 (Thanks to This Horrifying Story)

You can follow my analysis of the government’s real time tax data on at the beginning of every month in The Wall Street Examiner Pro Trader Federal Revenues Report.  This report is chock full of charts that clearly illustrate the current trends before the economic news hits the headlines.   

The real reason to track tax data isn’t to tell us what the economy is doing. It’s for supporting data for the TBAC’s Treasury supply forecasts upon which we rely so heavily. While Wall Street is busy focusing only on demand for investment paper, it forgets the other half of the Law of Supply and Demand.  We don’t. I cover both the demand and supply side.

The biggest supplier of investment paper to the markets is of course the US Government. So we pay close attention to how much supply it is scheduled to bring to market every month, and relate that to the prices of financial assets-stocks and bonds.

Bloomberg reports: “Trouble is brewing.”

All investments compete with US Government paper for their share of the pool of money available for investment. Investors and dealers must choose between asset classes all the time. Liquidity and investment preferences are constantly shifting. But one thing is constant in the current environment. The Fed is removing money from the system at an increasing pace. The liquidity pool isn’t growing any more, and soon it will start shrinking outright.

So while investors may choose stocks over other asset classes at any given time, such as recent weeks, the more Treasuries that come to market, the more money they will suck out of a stagnant pool. And as the Fed increases its draining operations, and the Fed’s two big cohorts-the ECB and BoJ-cut back on their QE programs, that pool of money will even start to shrink.

The current supply data is horrifying and it won’t get better any time for the foreseeable future.

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