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If You Thought You Smelled a Bull Movement, Just Wait – Professional Edition

The TBAC cut the amount of expected Treasury supply for the balance of the fourth quarter in recognition of the improvement in revenues that has already occurred and is likely to continue for the balance of the quarter. We began to note this improvement based on our daily tracking of Federal tax receipts soon after the Fed instituted QL1.5. Trickle down works! Make the Wall Street bankers even richer and their spending will trickle down to the greeters at Walmart. Unfortunately the side effects of QE2 are likely to be fatal for the economy.

Meanwhile, now that Ben has tripled the amount of QE to over $100 billion a month from $32 billion this month under QL1.5, I would expect additional economic strengthening and even higher tax receipts. It certainly won’t be triple the recent rate of improvement because the rapid inflation of the cost side of the profit equation will exert an increasing drag on profits and retard any impetus for new hiring. But for the next month or two we should see further strength in government tax revenues, probably resulting in even greater reductions of Treasury supply than the TBAC forecast. That will exacerbate the impact of QE2 on the stock, bond, and commodity markets. If you thought this week was bullish, wait until they actually start pumping after next Wednesday, the day the Fed announces its purchase target amount for the next month.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? 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. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 


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