I’ve been featuring this chart lately as a canary in the coal mine for what’s really going on in the banking system. The Fed has published it in its weekly H8 banking data for oh, the past 30 years or so. It doesn’t like what it sees, or what it tells the rest of us about the state of the bulk of bank portfolios.
The vast majority of those portfolios are invested in Treasury bonds and MBS which are NOT marked to market. They’re carried at cost, in the world of bank balance sheet make believe. That looks like this.
This chart is the fantasy. The first chart is the reality. When the forced selling begins, the reality will rear its ugly head.
So the reality is bad, very bad. And the Fed doesn’t like us to see things that are very bad. So what does it do? It stops publishing those things. This notice was included on the weekly H8 release on the weekly aggregate balance sheet of the US commercial banking system on Thursday evening:
The following line item changes have been made on the release: The two Memoranda items covering net unrealized gains (losses) on available-for-sale securities have been discontinued: previous line item 42, Net unrealized gains (losses) on available-for-sale securities; and previous line item 43, Net unrealized gains (losses) on available-for-sale securities, U.S. Treasury and agency securities, MBS.
So there you have it. The Fed doesn’t want us to see the bad news, so it just stops showing it to us.
Meanwhile, Europe is closed today, so not much doing in the ES S&P futures. We’ll have to wait for the US pre market opening at 8 AM ET to get a better idea of what’s coming today. As the first NY traders get to their desks, the futures look bottomy on the basis of the 3 and 5 day cycles we watch here. That’s as it should be with the liquidity floodgates opening wide over the next 4 weeks.
To get anything going on the upside, I’d say that they need to clear 4395 by lunchtime. If they pull back instead, I’d look for sport at 4350-55.
Meanwhile:
- The Dow, Macro Liquidity, and the Fate of Russian Generals April 18, 2022
- Swing Trade Chart Pick Screens Flip to Buy Side April 18, 2022
- Stocks Are Not Breaking Bad April 16, 2022
- Gold’s Last Chance Before Summer Vacation April 15, 2022
- Primary Dealers Still Long and Wrong, But A Gift Rally Looms! April 11, 2022
- Why March Withholding Taxes Showing Red Hot Economy Is Bearish April 3, 2022
- Fragile and Dangerous Semi Blind Spot March 28, 2022
If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.
