US High yield spreads and interest rateComparison of US High yield spreads and interest rate. Spreads predict interest rate changes.
Economy
Warning DrumsJust a short update for today. It is important, so it deserves an idea on its own.
For the first time since 2019, the FED is now officially giving money into the system.
What could this mean for the US economy? Are they sensing weakness or is this just a response to the recent banking crises?
Now let's look at the history of bailouts.
Price made a higher-high, and stayed high for months until the GFC.
Similarly in 2019, without anyone concerned about recession, the FED pivoted and cut rates.
This might be the beginning of more bailouts. Who knows how many more...
There is a big difference however...
Historically, during periods of economic weakness, the money input was higher than the output.
Now, the scale of money going out of the system is astronomical.
So much so, that is literally bull-flagging.
Money supply metrics cannot be ignored.
Record low RSI for money supply.
Beware, these scale of these events is incalculable. The numbers we witness here are massive (RRPONTTLD).
The money supply monster we have created is more powerful than it's creator.
What must be done to fight it? And who will be the first to fall?
Do note that RRPONTTLD is a sum of agreements. The effect of such a dramatic money drain out of the system will take years to show itself. This M2SL drop is just the tip of the money-berg.
Tread lightly, for this is hallowed ground.
-Father Grigori
The Case for UnemploymentUnemployment is tricky. You just cannot announce high unemployment. The political damage is too much to take. But unfortunately, the time comes when unemployment just increases...
Every sane person would want the economy to remain calm for as long as possible. This is not sinister or bad.
After all, it is in the duty of Governments and Central Banks to keep our daily lives as calm and peaceful as possible.
Bad unemployment data is inherently bad. It is worse than bad inflation data. So it is always a tricky situation...
After the inflation chaos, calm has return to the financial world. Volatility and inflation is lower, equities are higher! So all is well!
Not only inflation is lower, but also unemployment! With an ultra-low rate of 3.4%. News just couldn't be better!
Initial claims is also breaking down, signaling better days ahead...
After all, low unemployment is good! Right?
Not so fast fella!
Low unemployment is good for, well, employees! But it is bad for corporations! Finding skilled personnel is incredibly hard. So much so, that most companies underperform. They just can't grow!
I believe that unemployment does not necessarily break the economy. And the economy does not necessarily break the unemployment. It is a mixed bag... Sometimes, businesses benefit from high unemployment. If the antagonists fail, others get their workers, and most importantly, the piece of the pie! Some companies grow while others fail...
Believe it or not, low unemployment is risky. Especially when it is in a 54 year low... It just cannot go lower!
Recent unemployment data is perfect. However, Continuous Jobless Claims (USCJC) may give us a new perspective...
It is at times like these when we see conflicting data. Continuous Claims increase while unemployment rate is decreasing.
At that period, the official unemployment rate was making lower lows!
This is deeply concerning. Especially when it is eerily similar to 2020. Perhaps it is a shift of balance right before a crisis.
Perhaps a period when long-term employees lose their jobs since companies attempt to cut down costs. Instead, they hire less skilled workers with lower wages, perhaps for part-time jobs. This may be the last attempt of companies to stay afloat. It is also the last attempt for families to stay afloat. High food prices necessitate work at all costs, no matter how low...
A crisis may be brewing... A Black Swan one, just like 2020.
The Big Tech bubble is literally hollow, full of derivatives aka weapons of mass destruction.
And the scale and the ramifications of such a crisis are still unknown.
(By inflation pressure I mean the amount of work the FED does to fight inflation. While this chart increases, inflation gets out of hand)
Perhaps all of this is meaningless. Only time will tell what will happen... WW3 commence I guess?
Tread lightly, for this is hallowed ground.
-Father Grigori
interest rates and housing Australia.ECONOMICS:AUMR
A visualization of how house prices react against interest rates rises other than the obvious divergence where rates get cheap and people will spend more.
I haven't made any predictions, there are a lot of moving parts in the system at the moment.
CPI being a big one on everyone lips, affordability, availability, sustainability, buzz words right ha
A lot of people got money really cheap and after the 5 year fixed terms what is the flow on effect, have people stopped excessive spending and in turn the is a down turn in GDP jobs but CPI still climbs.
Will tenants pay for all the rate hikes if the houses are not worth it? will people try and interest only? left with the prospect of selling will prices go too low while we are still in need of more houses to curb demand?
ordinary interest increases appeared to be up to 60% over time and we are looking at a event where we are already 3x that.
I used info from another chart to have more complete data for the interest, I should have done the house prices too. ( If someone knows how to import stuff like this speak up, that was a ball ache)
Surprised tradingviews data was not complete.
datawrapper.dwcdn.net
Have your say. feed back is welcome.
Might do updates if i"m feeling inspired.
Inflation and Business Cycle: What will happen next?Inflation has been rising aggressively since 2021. It accelerated from 2% to hit an all-time high of 9.1% in June 2022. As inflation rose, central banks like the Fed raised interest rates to control inflation . But this effort to control inflation, on one hand made money more expensive for the industries and on the other hand pushed consumers to reduce their spendings.
Many economists had already predicted rising inflation and its impeding worst impact on the global economy and stock markets. Still, there are fears everywhere that bear markets could persist and even a further decline is likely.
Here the basic question arises that must be understood:
WHAT IS INFLATION & WHY DOES IT OCCUR?
In fact, inflation occurs whenever demand for goods and services increases while supply remains constrained.
Growth is everyone's dream...
To capitalize on this aspiration, banks provide cash at low interest rates to support growth, but unfortunately this cash is used by people to buy luxuries like cars, electronics and homes. Cars need fuel and metals, electronics need high R&D spending and skilled human capital, and houses need building materials. Pressure on luxury items leads to price increases.
Technically speaking, when demand accelerates faster than supply, it has a net effect on price. This phenomenon is referred to as the law of demand, which states: "If more people want to buy something, when there is limited supply, the price of that thing will be higher." (The same law of demand applies in the stock market: as demand for stocks increases, their price increases.)
After Covid-19, global demand for goods and services began to normalize (increase). But to boost growth, which had been severely hampered in Covid times, banks made easy loans available at attractive interest rates. The resulting increase in the supply of money in the markets stimulated consumer spending. Ideally, if growth had been at a sustained pace and in the productive sectors, inflation would not have occurred. But that never happens - a phenomenon that creates the business cycle.
A business cycle has phases of expansion and contraction.
We are currently in the contraction phase of the business cycle - inflation is still high, interest rates and yields are unbearable, and industrial performance has declined.
WHAT WOULD HAPPEN NEXT?
- Unbearable prices will force consumers to reduce their spending/demand
- High interest rates and reduced demand will reduce industry revenues and profits
- Equity markets will continue to show poor performance
But good times will come again!
When the market bottoms out in the business cycle, expansion begins. This will be an ideal time to invest in growth and value stocks.
The Ten Fundamental Objectives of the Federal ReserveIntroduction
The Federal Reserve System, often referred to as "the Fed," was established in 1913 in response to a series of banking panics. As the central banking institution of the United States, it plays a crucial role in maintaining the stability and integrity of the nation's monetary and financial systems. This essay explores the ten fundamental objectives of the Federal Reserve, which include maintaining price stability, promoting full employment, and ensuring a stable financial system, among others.
1. Price Stability
The primary objective of the Federal Reserve is to maintain price stability, which refers to a low and stable rate of inflation. By managing inflation, the Fed helps to preserve the purchasing power of money, ensuring that consumers and businesses can make informed decisions regarding spending, saving, and investment.
2. Maximum Sustainable Employment
Another key objective of the Federal Reserve is to promote maximum sustainable employment, also known as full employment. This means providing enough job opportunities for all individuals who are willing and able to work, while minimizing the rate of unemployment. By promoting full employment, the Fed contributes to overall economic growth and well-being.
3. Moderate Long-Term Interest Rates
The Federal Reserve aims to maintain moderate long-term interest rates, which are essential for economic growth and stability. By controlling short-term interest rates, the Fed can indirectly influence long-term rates, thereby encouraging borrowing, investment, and consumption.
4. Financial System Stability
One of the most critical objectives of the Federal Reserve is ensuring the stability of the financial system, which involves monitoring and regulating financial institutions, as well as identifying and addressing potential risks. By maintaining a stable financial system, the Fed helps to prevent crises and protect the economy from shocks.
5. Efficient Payment and Settlement System
The Federal Reserve is responsible for managing the nation's payment and settlement systems, which include check clearing, electronic funds transfers, and automated clearinghouse operations. By providing these services efficiently and securely, the Fed ensures that financial transactions occur smoothly, promoting confidence in the banking system.
6. Consumer Protection
Another important objective of the Federal Reserve is to protect consumers by enforcing federal consumer protection laws and regulations. This includes monitoring financial institutions for compliance, addressing consumer complaints, and providing education and resources to help consumers make informed financial decisions.
7. Supervision and Regulation
The Federal Reserve plays a vital role in supervising and regulating financial institutions to ensure their safety, soundness, and compliance with laws and regulations. This oversight helps to maintain a stable and resilient financial system, while also protecting consumers and investors.
8. Community Development
The Federal Reserve is committed to promoting community development by supporting initiatives that address issues such as affordable housing, small business development, and workforce development. This objective aims to foster economic growth and improve the quality of life in communities across the country.
9. Economic Research and Analysis
The Federal Reserve conducts extensive research and analysis to better understand the U.S. economy, as well as the global economy. This research informs the Fed's monetary policy decisions and helps it to fulfill its other objectives, such as promoting maximum employment and maintaining stable prices.
10. International Financial Cooperation
Finally, the Federal Reserve cooperates with other central banks and international financial institutions to promote global economic stability and financial system resilience. This collaboration allows the Fed to share information, resources, and expertise, ultimately benefiting the U.S. economy.
Conclusion
The Federal Reserve plays a pivotal role in the U.S. economy by pursuing ten fundamental objectives, which range from maintaining price stability to promoting international financial cooperation. By fulfilling these objectives, the Fed ensures the stability and growth of the U.S. economy, while also fostering a resilient and efficient global financial system.
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US Average Home Price (Census Bureau and NAR Data)Looking at two measures of average home price, I've attempted to show one metric for predicting home value increases or decreases, at an average level. I've marked out some major market events. COVID had inflated home values to an unsustainably high level and the market is already correcting for it.
Global price of sugar Price of sugar is in range for quite a while .the range structure could break & retest in upcomings days. As the inflation peaks with high interest rates.the effect of rates will be seen for months.
Federal Reserve Balance Sheet Projected to Exceed $19 TrillionWave structures on these Economic Indexes tend to play out fairly often, such as in the case for Various CPI and Interest Rate Charts which can bee seen in the Related Ideas tab below. With that in mind, I now turn to The Federal Reserve Balance Sheet; and when I look at the Balance Sheet what I see is that since the Inception of this chart, it has traded within an Equidistant Channel that can be easily viewed and plotted in Log scale.
When I look deeper into this I can also see that since around the end of the 2008 GFC when mass bailouts occurred, the RSI on the Balance Sheet has typically stayed Elevated and Above the Bullish Control Zone: meaning any time spent below the level of 70 has typically been followed by insane expansionary rallies, thus huge continuations in the rapid increases of the Balance Sheet.
Additionally, it can also be seen that as of recent times (notably since the mid 2010s) the MACD has become a great indicator in the form of Hidden Bullish Divergences appearing just before huge continuations to the upside; these mid 2010 events align with the blunder that were the taper tantrums in which the fed ultimately capitulated on their monetary tightening stance and decided to expand the Balance Sheet Exponentially Higher and now looking at the chart we can see yet another Hidden Bullish Divergence forming that will be confirmed at the close of the month after the next trading week signaling that another big wave up is about to begin.
Lastly, when zooming all the way out and taking in all the data at once, it can be seen that we are in what looks to be an AB=CD wave structure in which the first expansion was a 400% Expansion and the Current Expansion is on the way to being yet another 400%. We are currently about halfway there and the AB=CD Wave Structure would suggest that the Federal Reserve will more than double it's Balance Sheet by 2026 as the Federal Reserve capitulates yet again in an attempt to save the current fragile economic system.
Inflation dominates financial stability risks for central banksDespite the banking industry turmoil, central banks continued to raise rates last week. This marked moves from the European Central Bank (ECB) by 50Bps, Federal Reserve (Fed) by 25Bps, Bank of England by 25Bps, Swiss National Bank by 50Bps, Norway by 25Bps, the Philippines by 25Bps, and Taiwan by 12.5Bps. Central banks appear determined to show they have the tools in place to nip financial stability issues in the bud and so monetary policy is free to deal with inflation.
The Fed is likely nearly done
The March Federal Open Market Committee (FOMC) turned out to be on the dovish side. This was evident in the written statement in which the FOMC anticipates – “some additional policy firming may be appropriate” from “ongoing increases in the target range will be appropriate”. There was a risk that if the Fed chose not to hike rates, it would raise concerns about further financial system weakness. The reason given was that financial instability was "likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation”.
The Fed has clearly signalled to the markets that it can control financial contagion from spreading by providing large amounts of liquidity. Over the past weeks we have seen a combination of measures to stabilise the market turmoil, including 1) The Fed’s proposal to provide immediate deposit protection and emergency lending 2) the intervention by Swiss Authorities to merge Switzerland’s two biggest banks and 3) the resumption of a dollar swap facility among central banks.
If the banking crisis calms down and the economic data looks anything similar to the January/February reports, another rate hike at the May FOMC meeting should not be ruled out. Conversely, ongoing market dislocations could outweigh the data and push the Fed into pause mode. Currently the implied probability for Fed Funds Futures looks for a rate cut during the summer. That scenario can only materialise if the risks emanating from the banking system continue to deteriorate from a market and/or economic perspective.
Gold offers a potential investment solution
There is no doubt that the investment landscape is fraught with elevated uncertainty and, of course, the volatility that comes with it. Gold is benefitting twofold from its safe haven status alongside the earlier than expected pivot in monetary policy by the Fed. While the Fed does not currently see rate cuts this year, in contrast to market expectations, its projections raise the prospect of rate cuts for 2024 which remains price supportive for gold.
The Commodity Futures Trading Commission (CFTC) has now largely caught up with publishing futures positioning data for gold following the disruption in February due to a ransomware attack on ION Trading. We now know there was a slump in positioning during February, but net longs in gold futures rose back above 154k contracts on 14 March 2023 as the banking crisis was unfolding.
Laying an emphasis on quality stocks
Rising concerns about financial stability tends to cause negative feedback on the real economy. Quality has stood the test of time, displaying the steadiest outperformance over 10-year periods. Dating back to the 1970s, quality has displayed the highest percentage 89% of outperforming periods in comparison to other well-known factors.
The WisdomTree Global Developed Quality Dividend Index (Ticker: WTDDGTR Index) offers investors an exposure to dividend paying stocks in developed markets with a quality tilt. The WisdomTree Global Developed Quality Dividend Index has outperformed the MSCI World Index (Ticker: MXWO Index) by 1.54% over the past five years. The emphasis on quality, by tilting the portfolio exposure to stocks with a high return on equity has played an important role in its outperformance versus the benchmark.
Over the past five years, we also observed the allocation and selection of stocks within the information technology, financial and healthcare sectors contributed meaningfully to the 1.54% outperformance versus the MSCI World Index as highlighted below.
#BOND crisis to fuel monetary expansion The Fed is damned by inflation if they print, damned by bank runs if they dont print. And with recession on the way, history shows we could plumb to new lows if the Fed only prints enough to backstop banks and pensions. Early 2000s and early 1930s were two such cases where the Fed aggressively lowered rates for well over 18 months but markets continued to trend lower anyway. But 2008 ushered in central bank quantitative easing, so with QE at the Fed's disposal, it is more likely the growth of M2 will accelerate which will keep inflation stubbornly high if not higher.
A new factor that wasn't present before is that we have increasing M2 from China and Japan which has been a large driver of the market bounce we've seen in stocks and crypto since the start of the year.
The 2-yr and 10-yr rates are heading lower in a hurry. CME Fed futures currently predicts one more 25 bps hike to a terminal rate of 500-525 then three consecutive drops of 25 bps. Higher inflation would become the standard as the Fed would be forced to accept a higher inflation target well above 2% which Ray Dalio had predicted in one of his published pieces.
Federal Reserve Balance SheetBe careful, uptrend of this symbol (FED balance sheet) isn't a Quantitative easing ...!
Hight risk markets will crash as soon as possible.📉
Comparison Interest rates S&P and inflationComparison Interest rates S&P and inflation shows correlation betweenall ofthem - the s&pseems to go up
US Purchasing PowerHISTORICAL pendulum swings in motion BIGGER than any single #FOMC meeting or event.
Purchasing power DESTRUCTION accelerating into the ABYSS.
#Gold and #Silver protect you against this.
FED Balance Sheet Expansion: Asset Purchases to Continues?In this chart analysis, i'm exploring the potential trajectory of the Federal Reserve's balance sheet, considering the possibility that asset purchases will continue until reaching the $13T-$16T range. Historical events like the 2008 financial crisis and the 2020 pandemic have demonstrated the central bank's willingness to expand its balance sheet to support the economy.
Starting with the 2008 financial crisis, the Fed implemented several rounds of quantitative easing (QE) to inject liquidity into the financial system and stabilize markets. This caused a significant expansion of the balance sheet from around $1T to approximately $4.5T by late 2014.
Fast-forward to the 2020 pandemic, the Fed employed a similar approach, launching aggressive asset purchase programs in response to the unprecedented economic shock. This led to another massive surge in the balance sheet, which currently stands at over $8T.
The chart indicates a steady upward trajectory in the Fed's balance sheet, with the possibility of reaching the $13T-$16T range in the medium to long term. This scenario assumes that the central bank will continue to buy assets in response to economic uncertainties, inflationary pressures, or future crises.
For traders, this ongoing balance sheet expansion may have implications for various asset classes, including equities, bonds, and commodities.
A continuously expanding balance sheet could support risk assets and suppress interest rates in the short term. However, concerns over inflation and potential policy tightening may create headwinds over the long term.
In conclusion, the Fed's balance sheet growth highlights its active role in managing the economy during turbulent times.
Traders should monitor the central bank's policy decisions and anticipate potential market reactions to shifts in the balance sheet trajectory.
Cheers!
Kripti.
BTC/ETH/SHIBA~Market AlgoCompare and Contrast/ Ideas, How can the algo of the market be in comparison with cryptocurrency.
We've been in a recession since 1997Hello friends.
Here is an interesting observation. When you adjust the United States GDP numbers by the United States M2 Money Supply (Supply of dollars), it turns out that it has been dropping substantially since 1997. This means that adjusted for the abuse of the dollar, US GDP has been falling for the past 26 years! It seems logical to make this kind of adjustment since when we have more money, the GDP will obviously rise, but that doesn't mean that there has been actual growth. It turns out most of our economy's growth was really just money printing, and there has not been enough innovation in recent decades to cause some true growth that outpaces the printer. At this time, we would need the GDP to proceed at a breakneck pace of around 10% per year in order for the GDP to simply stay flat with the money printer. We think this won't occur any time soon, and the recession will continue right up until superintelligent AI is developed which will bring about so much innovation that GDP may finally outpace debasement.
FED Printer Hello Friends,
The FED printer has been turned on? Check what happened in the past when we got close to my MA lines.
Most probably we are going to see on the next FOMC meeting,21/22 March 2023, a 0 or 25bps rate hike.
Let's see how this develops.
cheers,
Kripti.
The Fed's Pivot - What to Expect in the Months Ahead In this video, I explain what to expect in the months ahead, following the Fed's pivot back to monetary easing.
Also, I wanted to make several notes:
When I said that it's almost never better to own derivatives than holding an asset outright, I do realize the importance that derivatives can play with leverage and risk management.
When I said that fear is always highest at the +2 standard deviation of the log-linear regression channel, this was confusing because typically fear is highest when price reaches the -2 standard deviation. In this particular ratio chart, fear over the Grayscale Bitcoin Trust was highest when Bitcoin outperformed it enough for the BTC/GBTC ratio to reach the +2 standard deviation.
When I said that the log-linear regression channel is one of the best indicators, I do realize that compared to other statistical methods, this indicator is quite rudimentary. Nonetheless, I find it to be quite useful.
I apologize for the poor audio, this seems to be a matter of how TradingView is uploading my audio. On my end, my audio is very clear.
Important Disclaimer
Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
is the 2y10y signaling the beginning of the end?Chart is self explanatory are we about to go Kaboom?
Fed Balance Sheet priced in GoldProbabilities of another speculative bubble like the 1994-2000 or 2011-2021 are vanishing...
Very close to #gold resuming out performance, and lifting up #silver and friends.
See Fed Balance sheet priced in gold.
The Jobs MarketSee how working age population leveled off ~200M and job openings up top sky rocketed. Boomers retired and died form Covid. It's not gonna recover any time soon. Population is gonna shrink along with tax receipts. Meanwhile spending will only increase. The U.S. Treasury and Federal Reserve have been calling it an "Unsustainable Fiscal Path" since 2018 at least. It's even the title of the Treasury's annual report. www.fiscal.treasury.gov
Only 1.7M claiming unemployment and seeking jobs for 10.8M job openings.... another 4M working gig jobs and day-trading, not interested in the full-time job market. It's a seller's market that will continue to drive wages and inflation up until the market breaks and causes a massive recession/depression. We're not gonna grow an extra 5M-9M qualified, highly experienced workers over the course of a year or 5. Those job openings are gonna close because the businesses are not doing well.
