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…
Deposit growth has turned very slow. Watch out for the next outright decline in deposits. There’s a high correlation between European deposit levels and US stock prices. That’s because European institutions are big players on Wall Street.
By the end of the year the Fed will have withdrawn $450 billion from the banking system. The annual bloodletting will then plateau at $600 billion per year until the balance sheet reaches a tight reserve position. But loan demand is increasing. Here’s why that’s bad news.
The macro liquidity picture shows you why this rally should be sold.
The Fed is on course with its balance sheet shrinkage program that is designed to eventually “normalize” this size of its asset base at a tight reserve position. As expected, the effects are showing up in the markets. Here’s why it will get worse.
The effects of the Fed’s draining operations have begun to be expressed in the market and we are still in the early stages of the program. Here are the charts and explanations that show what is happening and what to look for in the months to come.
European bank assets and deposits surged in January. At first glance the massive increase was inexplicable. And it should not have happened at all because the ECB just made a huge cut in its QE purchases. Digging into the various line items of the European banking system balance sheet, it became clear what had happened.…
Total liquidity will turn flat and eventually turn negative later this year as the Fed pulls money out of the system. Here’s why it should lead to rapid deflation of the stock market bubble.
The Fed has begun to accelerate its balance sheet shrinkage, precisely following the schedule it published last September. Not surprisingly, the effects are beginning to show up in the markets.. Only the timing was in question, but my technical work took care of that, and it got us heavily short by the time the slide…
Any decline in European liquidity will have a negative impact on Wall Street, the US Treasury market, and US stocks. There’s every indication that liquidity in the European system has not improved as a result of NIRP and QE, and that it will only get worse as the ECB cuts asset purchases.