The Daily Treasury Statement data for the end of August showed some improvement in total tax collections, including a slight uptick in withholding taxes and an even bigger increase in excise taxes.
The numbers suggest that an early summer slowdown has ended. After the expected downward revisions in June and July jobs data, the August uptick in jobs was not a fluke. And the excise tax data suggests strong retail sales.
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So, not an altogether bad summer – if you happen to be a politician or government taxman. But what about for investors?
Well surprise, surprise, surprise! Good news is bad news, which is what we’ve been talking about here all along.
Good economic news, as presaged by the uptick in tax receipts, will encourage the Fed to keep tightening.
And tighten it shall, in two ways: Most importantly (and most destructively), it will drain more money from the banking system. Secondarily, it will continue to rubber-stamp tightening money markets by raising the federal-funds rate.
And that, as I have been shaking my fist at the sky about for months, is really bearish.
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