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US Gets A BoJob As Federal Tax Collections Zoom Higher, Treasury Hoards Cash

Fed, BoJ Balance Sheets and US Stocks- Click to enlarge

That’s right. Uncle Kuroda, the head of the Bank of Japan is giving US a BoJob and for today at least, the US stock market was feeling it. Of course, markets top out when everything looks magnificent and they couldn’t look much brighter than they do right now.

This post is an excerpt from today’s weekly Professional Edition post on the Federal Government’s cash flows. Each week these reports show in brief the details of those key flows and explains what they tell us about the US economy in real time, as well as  their impact on Treasury supply and the stock and bond markets. 

The big market mover on Friday was the BoJ’s announcement that it would increase its asset purchase rate from around $70 billion per month in US dollar equivalent terms to around $85 billion or so. Simultaneously Japan’s massive public pension fund said it would buy more stocks and fewer JGBs.  Specifically, the fund will buy approximately $150-160 billion of foreign stocks over an unspecified time. Apparently the BoJ will buy bonds from the pension fund, financing the fund’s effort to acquire more stocks. The BoJ is printing money to buy stocks. We don’t have to guess the impact.

So the Fed is quitting QE? Who cares? Japan is giving us a BoJob. As The Last Ponzi Game Standing in the world, US stocks will attract more than their share of that cash. Treasuries may occasionally catch a bid as well.

Fed, BoJ Balance Sheets and US Stocks- Click to enlarge
Fed, BoJ Balance Sheets and US Stocks- Click to enlarge

 

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