The Treasury’s numbers for June were as bad as expected. Early July numbers look good, but it’s a trick. Here’s how we know, and what that means for the markets.
The Treasury’s numbers are in for June and they’re not good. First things first. The BLS jobs data is just BS.
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Common sense says that as case numbers increase, tax collections would fall and vice versa, REGARDLESS of whether governments imposed lockdowns. So my expectation was that as governors across the country lifted restrictions, case numbers would rise, and tax collections would fall.
Well here we are.
This data tells us exactly what the big picture is right now, while Wall Street economists are still scratching their asses and trying to figure out what the government statistician manipulated data will be and will mean. And the first report from that government data is still 13 days away.
The Monthly Treasury Statement for May confirms that the economy rebounded during the month, but more recent data through last week suggests that the rebound has already expired. Signs of renewed weakness come when the numbers are still far from a full recovery. The economy is beginning to weaken again, starting from weakness.
That’s relevant because it means that the Federal government will need to continue to issue massive amounts of debt. It may not be quite as much as in March and April, but it will still be at least double past peak levels.
We also know that the Fed has sharply cut the amount of that debt that it is directly absorbing or financing.
Here’s what this means for your investing strategy.
To the degree that it’s true, the idea that the US economy is recovering is a catastrophic notion for the financial markets. Surprisingly, the withholding tax data supports the idea that a small number of jobs did come back in May. The problem is that the bond market reacted as if a big recovery is…
In normal times, the Federal Government has a revenue windfall in April, and runs a large surplus for the month. Revenues are typically at least 140% of outlays. Even more in good years.
Revenues covered just 24% of outlays in April. We borrowed 76 cents of every dollar the Federal Government spent last month.
We knew this was coming. The questions now are how long it can last, when it will start to recover, and whether it might get worse.
The Federal deficit hit $1 trillion in April. That’s a cool 1,500% increase year to year. That’s for one month. Here are the current horrible numbers, along with the immediate outlook, and what it means for stocks and bonds.
We expected the worst, and we’ve gotten it. But that does not mean that things will get better. The revenue trends had been strong. Now they’re awful, and spending is unimaginable. How can this be sustained? In this report, I’ll show you the data, and discuss how to handle what’s to come.
Federal tax collections are collapsing but the US Treasury now has $827 billion in cash in its bank account at the Fed. This is double the previous highest level ever. This money has all come via debt sales over the past week. The Fed funded every single dollar of that expansion through its purchases of…