by Lee Adler
Today, I want to show you a very intriguing little piece of information. The Treasury knows that I'm watching their machinations, and they don't like it one bit.
If you'll recall, the TBAC (Treasury Borrowing Advisory Committee) is the shadowy "power behind the throne" that advises the Treasury on debt issuance. The Treasury very rarely deviates from their recommendations.
by Lee Adler
Today, I bring you a juicy piece of foreign intel from my weekly analysis at The Wall Street Examiner Pro Trader. While this is intriguing information, it's not dangerous. Yet.
But once the chart I'm about to show you drops below 440, it will have an immediate impact on your portfolio.
Let's start with a broader look at the atrocious foreign central bank behavior that has been contributing to the dangerous excesses that have built up in the U.S. stock market.
by Lee Adler
Federal tax collections data gives us a leg up on the market because it tells us what to expect when the lagging economic data indicators are released later. That puts us ahead of the crowd, which is waiting for biased Wall Street pundits to interpret already stale, manipulated data when it's finally released. Meanwhile we already know what the facts are.
Tax data has told us whether the lagging economic indicators are promoting a false narrative. Thanks to statistically massaged data and deliberate or unknowing misinterpretation by the talking heads, that can go on for months. But we know the facts.
More importantly perhaps, the tax data has told us what the Fed will be seeing when it gets the lagging economic data. That helped us to know whether incoming economic data will keep the Fed on track or not.
Now, however, the picture has gotten fuzzy. The big tax cuts enacted into law at the end of 2017 have begun to impact tax collections. That makes it virtually impossible to analyze year-to-year changes on a like-versus-like basis. It will be several months, and perhaps the whole year, before we can make these year-to-year comparisons in a way that reflects the actual trend of the U.S. economy.
In other words, Trump's tax cuts are hiding the "big picture" right now when it comes to market predictions.
by Lee Adler
Ultimately, all financial roads lead to Wall Street. The big investment banks and trading firms known as primary dealers all play in one worldwide money pool. When the ECB prints money, it's not just available to Europe, it is also instantly available to Wall Street. This isn't Vegas. What happens in Europe doesn't stay in Europe. That's why it's important to keep track of the performance of the European banking system.
Any decline in European liquidity will have a negative impact on Wall Street, the U.S. Treasury market, and U.S. stocks.
And any European skullduggery is likely to make 2018's bear market much worse.
Unfortunately, that's precisely what's going on now.
by Lee Adler
The Fed has begun to accelerate its balance sheet shrinkage according to the schedule it set forth last September. Not surprisingly, the effects are beginning to be felt in the markets, just as I had warned. Only the timing was in question, but my technical work took care of that, and it got us heavily short by the time the slide began on Jan. 29, reaching 90% short on Feb. 3.
This balance sheet shrinkage program, which the Fed calls "normalization," actually removes money from the banking system and financial markets. It is the opposite of quantitative easing (QE), so we may as well call it quantitative tightening (QT).
The rate of withdrawal doubled in January and will go up by $10 billion per month every quarter until it hits $50 billion per month in October. If $20 billion a month in QT can cause the kind of damage we saw over the past two weeks, what would $50 billion do?
by Lee Adler
This past weekend was bookended by two gargantuan sell-offs: A 666-point drop in the Dow on Friday (spooky!), followed by 1,175 on Monday, the biggest one-day drop in the index's history.
I won't say "I told you so," but if you took my advice and converted 60% to 70% of your assets to cash by the end of January, you should be breathing a sigh of relief right now.
As the week grinds on, we're seeing a bit of recovery, but I should warn you – don't be too sanguine.
Officially it takes two quarters in a row of falling GDP for the NBER to call a recession. By the time that second GDP report comes out, a recession will have already been under way for seven to nine months. The Fed probably will not reverse its quantitative tightening program, which actually sucks money out of the financial market ecosystem, until at least then. With no economic slowdown even in sight, it is virtually certain that tightening money will be with us at least throughout virtually all of 2018.
That's plenty of time for tight monetary policy, which the Fed euphemistically calls "normalization," to cause considerable damage to stock prices. Apparently that damage has begun this month.
by Lee Adler
Today, I'm doing something a bit unusual.
Instead of our usual LAMPP update, I'd like to take a different tack… and show you a historical picture lesson that should scare the stuffing out of you.
Recently I've been thinking about the similarities between the current stock market environment and a few of the bubbles that I have experienced in a lifetime of following markets. While those similarities are scary, they prove nothing. Just because two different periods in different markets look alike doesn't mean that their denouements will be the same.
By the same token, to ignore the similarities and the warnings they represent would be foolhardy. So today I am showing you the pictures of several modern bubbles, starting with a recent and disturbing one in gold.
Maybe that's not enough to scare the bejabbers out of us, nor perhaps should it be, because there may still be time to watch and take action deliberately. If you have been following my recommendation to gradually liquidate your stock holdings and raise cash over the past four months, and the current three months if you started late, then you're in good shape to ride out the storm that I expect.
But the message in these charts is that maybe there isn't as much time as we think.
by Lee Adler
I've gone into detail elsewhere about the Fed's "silent partners," the primary dealers – big banks that have special status to act as intermediaries in the market where the U.S. government sells debt to raise funding for government activities. This is the government securities market, commonly known as the Treasury market.
The primary dealers are the conduits through which the Fed executes monetary policy. They're very loyal friends to the Fed and the U.S. Treasury, and they talk to them all day long.
Well, no good deed goes unpunished…
Right now, the primary dealers are in big trouble (thanks to a dastardly move on the part of the Fed).
And that means you (specifically, your portfolio) are in trouble too.
by Lee Adler
It should come as no surprise to you that I have a secret "jet fuel indicator."
Or that it tells you something crucial about how to invest right now.
Or that it has everything to do with tax data. (You didn't really think you'd get away with this, surely.)
The U.S. Treasury publishes the Daily Treasury Statement every day virtually in real time, with just a one-day lag, and follows up a couple of weeks later with the slightly more detailed Monthly Treasury Statement. The daily and monthly tax data is useful in that it tells us what to expect when the lagging economic data indicators are released later.
Unlike economic data, tax data isn't statistically massaged. Tax data gives us actual numbers on how the U.S. economy is performing in real time. It tells us whether the statistically manipulated and late-arriving economic indicators are promoting a false narrative.
But I also look at the data from the U.S. Energy Information Administration on Gasoline Demand and Jet Fuel Demand for another near real time indicator of how the U.S. economy is faring right now.
That helps us with our trade timing. But the information is mostly useful in telling us what the Fed will be seeing when it gets the data. It helps us to know whether incoming economic data will keep the Fed on track or not.
by Lee Adler
Today Lee's taking a break from doom-and-gloom liquidity analysis to bring you some truly fascinating questions from a group of the smartest people he knows, the Sure Money and Money Morning commentariat.
He's starting things off with queries about pot stocks and gold.
