‘Headline Risk’ In Real-Time

I just received a note from a colleague with the following message: “Looks like your call for caution via the election results in LA is voided.”

Here’s what I wrote back…

“Can you explain what economic measures caused the ‘markets’ to reassess the possible implications that overshadow China’s poo-pooing any resolution to trade negotiations?”

His response: “No, was there?”

My response: “Trump Says Discussed “Negative Rates” In Unscheduled Monday Meeting With Chair Powell”

“Soon as the headline hit – the ‘market’ rocketed off the lows from a weakening open to new, never before seen in human history highs. Again!

Welcome to ‘Headline risk’ in real-time. The issue now is if it gets ‘poo-pooed’ as I say, by anyone at the Fed – things can change on a dime. Literally.

Just contemplate where we are right now, this time in history: Negative Rates in the U.S. are now not only a ‘discussed’ issue at the highest levels in the United States, but worse (depending on your viewpoint) propels ‘markets’ even higher.

You still think we’re not in a central bank infused bubble? If you do…

I still have that ocean-front property available in KY you can have super cheap.”

© 2019 Mark St.Cyr

Louisiana May Bode Ominous Results For Markets and Trade

In Louisiana there was a very high stakes governor race that concluded with the incumbent Democrat prevailing. The issue I’m going to bring to light has nothing to do with any “Left vs Right” argument or ideology. What I want to argue are the implications that this latest gubernatorial election has in respect to the capital markets, along with any possible trade dealings going forward. In other words: Baton Rouge may have just tilted the presumed world off its current axis.

Again, to be clear, this has nothing to do with what side of the aisle one stands, whether or not one likes the current president etc., etc. What I am speaking directly to are possible implications and consequences that now need to be calculated, for those possible consequences directly impact everything. And by that I mean just that: everything.

As we sit here today the major indexes of the U.S. stock market are residing at levels never before seen in the history of said markets. It all sounds fantastic until one delves a bit deeper into the details (which the mainstream business/financial media will not).

Everyday it seems hard to evade another talking head or buzzer-banger tout how well the markets are performing. “We’re up some 20% for the year!” is just one.

Is it correct?

Factually, yes. However, that’s because, at around this same time last year, the markets were spiraling toward the abyss shaving off some 20% from that years prior high.

How did the markets arrest and subsequently reverse from such a swift plunge? Hint: The Federal Reserve signaled, then implemented, a complete and utter reversal of all prior proclamations. i.e., They went from raising rates, to cutting rates. From shrinking their balance sheet to, once again, growing it. The result?

Using the S&P 500™ as the example, the markets currently stand only 180 points higher than they were in October of last year. That’s a bit under 6% (e.g. 3120 vs 2940). Hardly does this equate for the sheer sycophantic palpitations expressed by nearly every next-in-rotation fund-manger paraded across the financial/business press. But it is, what it is.

The issue that all the above relates to, is that it’s needed as a backdrop to help understand just where we are and where things might be heading in the business economy going forward. Because what got us here, (i.e., as in stock market highs) may not be able to keep it there. For Louisiana truly changes the dynamic for both interpretation, as well as positioning. Here’s why:

The Louisiana gubernatorial race was made out to be some form of signal marker for the national election due in Nov. 2020. Both sides of the aisle vociferously argued to both their constituents, as well as the general public as a whole, that their side needed this win to “set the tone” (as well as ramp up expectations) going into 2020. Even the President threw all his political weight into it trying to make it more of a “national” race of implications.

The problem is, it did just that. And now the results are going to be positioned for where they may matter a whole lot more than just in “The South.” i.e., The global stock markets. For this now has global implications.

Currently two of the three front-runners of the Democratic Party (Warren, Sanders) are both arguing and articulating how they will bring about communism and socialism to the United States. As crazy (or terrifying for those still sane) as that may sound, what’s even more nuts about such an absurdity, is they are being received with standing ovations and calls to action from a growing number of followers. Meaning: if one of them wins – then what? Hint: Money and stock markets will show it, well in advance.

Louisiana may push that move into the now.

Again, regardless of whether or not this recent election solidifies the prospect for one party or the other is not relevant to what’s at hand. This is about what has to be calculated and positioned for, now.

The present summation when looking at the latest results are that the Democrats are still able to win mighty contested (and funded) high office. They now have two in a very public “win” column. This solidifies the much anticipated pre-signaling for money and markets. i.e., That the President is vulnerable, very vulnerable – and that means a candidate running on “Free everything to everybody via taxing the rich into oblivion!” now has a more than 50/50 shot at winning.

Louisiana just made that calculation far more important.

Does this mean the President is doomed? Far from it, and that’s not what I’m arguing here.

The Louisiana election may be just what these type of races always are: local. And the President could go on and win in a Reaganesque styled landslide. But (and it’s a very big but) that’s not how money (especially stock market money and wealth) and businesses work. They have to plan on the possibility of the now. And that “now” is the possibility of a Warren or Sanders presidency.

To repeat, it’s now moved from a possibility calculation – to a plausibility one. And that single move and calculation has implications for everything. Again, emphasis on everything.

One of the current myths still held closely by much of the general public is that “long term investors” is a term that signifies “long” as something dealing in years if not a decade or more.

Buying for the “long term” or “investing” once meant meant one bought and held for years. That is no longer the case, for today most indexes are nothing more than trading vehicles rife with speculation where the term “long” now equates to weeks or months. And no, that is not an overstatement. Four months is now the “long term” average. The reason? Rhymes with “Central Banks.”

Currently the entirety of the “markets” (yes, it’s now so bad that markets needs to be in quotes) are nothing but one big front-running exercise powered by central bank largess. Without it? Hint: Pull out your year-end statement of your 401K or IRA balance ending 2018 for clues.

The reason this is important for context, is that the latest 180 point surge into “black-sky” territory is that term “central bank largess.” Because over the last couple of months the Federal Reserve has pumped over a quarter of $Trillion (e.g., $250,000,000,000,000.00 plus) in repo-operations and what they will not call “QE4” (even though it is).

Remember: it was just this time last year this same central bank was arguing why rate increases were a good thing, along with why reducing their balance sheet would be the equivalent of “watching paint dry” so much so that the term “on autopilot” was used as a descriptor for the process. All the while reminding everyone that there wasn’t the possibility of another financial crisis “in our lifetimes.” Even though it’s been Crisis-R-U.S. ever since.

Again, if you think that’s hyperbole? May I ask you to reread the paragraph above containing all those zeroes.

So now that there’s two very distinct representations (LA and KY governorship outcomes) for the plausibility of a socialist and/or communist bent winning the presidential election (whether it’s far fetched or not). Money and markets will begin to move toward the channels that it believes offers the best protection.

The issue with that is what that “protection” may mean, as in, out of the markets and straight into cash.

If this happens (and the faster it does, the worse it bodes) the markets could see itself in a sudden panic mode, where all that “fast-money” suddenly runs for the exits.

The other issue is that the Fed has already thrown more money at once into the markets than at any time. Yes, even during the entirety of the Financial Crisis.

Again: currently over $250 Billion in as little as two months. And they still don’t know if this will be enough. It all started at $60 Billion and was told/sold as “nothing to see here, please move along.” Now it’s $60B a month, every month. a $75B one or two day insurance marker, has become a daily “at least” $125B made available every night or the repo-market collapses, and it’s already proved to be not enough being oversubscribed to the tune of $137B.

Why do I say “still don’t know?” Because the end of year tax selling; repositioning; profit taking et cetera, et cetera still has to prove itself out. That happens at any time from now till end of year. And the issue here is the Fed is already “All in” as they say. What happens if that has to now go to “11!” or higher? Hint: November 2018 could become the front and center representation for Christmas past.

Does this mean the above is a certainty? Of course not, no one knows. However, with that said…

The Louisiana outcome changed two very critical calculations going forward. The first:

How does the markets react to the newly revealed political calculus?

Yet the other may have even far greater impending ramifications for the immediate future. And that is:

How does China see it?

Because if they (China) now calculate the winning edge is to no longer negotiate and a more winning position is to just sit back and wait it out for the possibility of a more friendly administration. The implications for a global upheaval of supply lines are not only huge, but quite possibly, immediately so.

Both of these scenarios have to calculated and positioned for now and going forward. The idea that money and markets will wait and see until Nov. of 2020 if wishful thinking at best.

Louisiana just solidified that imperative. And that has implications for all of us. Like them or not.

© 2019 Mark St.Cyr

The Rich Are Discovering ‘Torches & Pitchforks’ Insurance Premiums Have Outpaced Their Stock Gains

You would be hard pressed to avoid a headline implying the 1% are getting richer by the day. Everyday the “markets” bounce higher – the headlines are more frequent.

However, another headline has suddenly been making its way around the social circles and that is “The Rich ain’t paying their fair-share!”

In days of yore (circa 2007) the latter was barely even a whisper. Why? Because during the subsequent build up everyone (a relative term) seemed to be getting “rich” at the same time. The Dot-com bubble had come and gone basically squashing most early start-ups and techno instant millionaires.

Yet, for those that did not partake in that tech-bubble (which was the vast majority) they were mightily rewarded with their own millionaire-making, cash dispensing ATM called: a house. This led to what we now refer to as “The Real Estate Boom.” You know, the one that also resulted in the bust of 2008/09, but that’s for another article.

As the Dot-Com debacle imploded, what it showed writ large, was that the only reason why many of these once “brainchild of business ideas” were allowed to ascend to the once coveted arena known as “going public” was for their ability to obfuscate rather than prove they had a business model that worked, producing products or ideas that others would pay for to begin with. And, were producing net, repeat, net profits that paid the bills. The public markets (aka “Capital Markets”) were merely the next and necessary step to add true scale.

That’s what transpired then, and particularly, today.

What we are now experiencing has been the idea manifested during the Dot-Com crisis on steroids, where “businesses” (yes, quotes required) have been nothing more than a idea to hype, backed by accounting, lending, regulatory and reporting standards so blatantly reduced the term “lax” would imply burdensome.

Then, these same “businesses” would access the public markets and swindle as much ill-gotten loot before the authorities figured it all out. That is – if they would/could at all. Emphasis on the latter, if what we’re watching currently holds.

The difference today from the prior, is that we had that “Boom” in the middle of what is known as the “Home-ATM.”

This, in-part, reduced the glaring stares usually associated with stock market booms and busts. The reason? Everyone was looking in their own mirrors knowing (though many didn’t want to admit it) that they pretty much did the same thing in-kind. i.e., They could be held to the same rank and rancor as those on Wall Street. Remember, NINJA Loans?

But a funny thing happened on the way to “clearing market pricing and overvaluations” in 2009. That “thing” was called “quantitative easing” (QE) aka money printing, where suddenly the “Rich” were not only made whole, but ascended to their highly coveted realm of “Dirty Stinkin’ Rich!”

This was not lost on many. Again, emphasis on, many.

Not only has the vast majority of those that never partook in any of these “minting millionaires” excursions noticed. So too has that other “majority” that lost their houses and more during the early days of what we now call “The Great Financial Crisis” (GFC). The issue?

Many of these same banks, bankers and Wall Street tycoons have now become not just insanely rich, but some were not afraid to tell you so. e.g., Jamie Dimon’s ” That’s why I’m richer than you” comment in 2013 as just one example.

People notice things like this, but that’s not all who notice: politicians do also.

This is where things are beginning to really heat up. Why? Because many of these most recent “eat the rich” stylized chanting are coming from the very same party or politicians many of these now “insanely rich club” have supported, whether implicitly or explicitly.

Remember when “Ol’ Uncle Warren” (Warren Buffett) used to be on CNBC™ seemingly daily and profess just how little he paid in taxes? Remember how he used to proclaim the reference that his secretary paid more?

Remember when he would explain why Berkshire Hathaway™ was simultaneously not paying $1 Billion in back taxes? OK that was a trick question, but the IRS was not joking and I believe is still an ongoing dispute. But again, have you noticed he hasn’t been doing that anymore? Why?

Hint: Bernie Sanders, Elizabeth Warren and whole host of participating “comrades” just itching to make their vision come true. i.e., Don’t worry, we’ll make the idea of not paying enough just that, a wonderful long past idea. Because you’ll pay and pay dearly. Trust them, for if elected, they”ll “help you” in not only getting your mind right, but your bank balances also. Voluntarily or not.

Ray Dalio has been on what I deem a non-stop media blitz, plowing over people in ways that would make Jerome Bettis envious to get in front of any microphone, camera or keyboard to profess how “the system” or capitalism is broken, not working or the world has “gone mad.” Hint: Look in a mirror Ray. Just sayin’.

You even had the holder of one of the most coveted office positions known to Wall Street, Lloyd Blankfein former CEO of Goldman Sachs™ sheepishly admit in an interview with Poppy Harlow that he doesn’t want to pay more taxes, but (and it’s a very big but) would – if – the trade off was that people would spare his gates from the presence of “torches and rakes.”

The unmistakable undertone of all this and more? Their once “dogs in the fight” are now beginning to turn and are looking to bite not just the hands, but a whole lot more of those that used to feed them. The reasoning is simple:

There are now far more (and growing) onlookers watching piles and piles of “steaks” being amassed behind those once seemingly un-penetrable gates, while they’re constantly being told the ever rising, increasing crumbs chaffed off the “markets” into their 401K’s or IRA’s should be looked upon as manna from heaven. i.e., A few Grand for you, a few BILLION for them. And if you have savings or bonds? Be happy it’s not negative, yet.

As much as the above begins to illustrate just how things are beginning to morph to the displeasure of many in the “richer than you club.” Nowhere was it more evident than that which was addressed to another of this once: Look I’m with you ‘comrades,’ just don’t come after me, remember I’m actively paying my fair share of insurance premiums: Bill Gates.

(Note: I know I’m being harsh here, and I believe Gates deserves every penny of his wealth. What I’m speaking to is his over-the-top obsession to show “Hey I’m more charitable than anyone! So you need to be more like me!!” stance across the public stages and airways.)

It would appear Mr. Gates and his all too public gifting away his $Billions, along with another all too public (all my opinion) convincing and elaborating Mr. Buffett to do the same, seems to not quite be enough for the current front-runners in the presidential election.

It appears that Mr. Gates is more than happy to pay $20 Billion in taxes, but $100 Billion as proposed via Ms. Warren? That’s an amount even a willing Billionaire finds a bit too much.

But that’s when the interesting point to all this truly becomes fascinating. Why?

Because just like all communistic or socialistic ideas become once they seem to be on the upswing, the once gently proposing or insinuating of such ideas no longer seems so gentle in that proposing or insinuating – they’ve now become fashionable and down right practical (i.e., meaning they may have the backing via votes to just do it.) by those once doing the proposing and insinuating.

Don’t think so? Fair enough, then may I turn your attention to the reply given to Mr. Gates via Ms. Warren that should run chills down the spine of every person that still believes in the Constitution and the type of government it is suppose to uphold. Ready? To wit:

I’m always happy to meet with people, even if we have different views. @BillGates, if we get the chance, I’d love to explain exactly how much you’d pay under my wealth tax. (I promise it’s not $100 billion.)

Twitter™ statement by Elisabeth Warren

All you need to do is reread the above and replace “@ Bill Gates” with “comrade” and not only does the implied price that’s it’s going to be much more than $20, but the last line in parenthesis takes on a whole new meaning. Why?

Because over the last decade many of the richest among us have openly prostrated themselves across the media stating how and why if only they were forced to pay more, they would.

This was once the wink-and-nod (as in demanded) insurance premium dolled out to help ensure protection from any civil unrest. That has all now changed as made evident to Mr. Gates via Ms. Warren.

However, this is not an isolated insinuation, in my humble opinion. For it would appear the entirety of her party (at least those of front runner status) have not only echoed those words, but are now echoing one who said it best years ago. To wit:

“I am altering the deal. Pray I don’t alter it any further.”

~Darth Vader

Looks like those once affordable premiums have definitely moved into premium inflation mode, yes?

© 2019 Mark St.Cyr


(For those who say I just don’t get it… get this)

The day I wrote the following headline I was accosted by the Silicon Valley Aficionado set and its willing accomplices within the sycophantic mainstream business/financial media for “not having any clue.” To wit:

“Uber’s IPO: ‘It’s Different This Time’s’ Thelma and Louise Moment”

Of course, this was just one in a long stretch of warnings I’ve been calling out about the entirety of the IPO market (and Uber™ in particular) well before anyone.

Below is the ever unfolding result, again, to wit:

(Chart Source)

For those that don’t understand the “Thelma and Louise” reference, it’s the final scene of the movie of the same name. Below is that scene.

(Screenshot via YouTube™ clip)

At the rate this once pre-IPO whispered $120 BILLION (don’t laugh, that’s true) marvel of business prowess finally resolves itself. It might make the above movie scene appear trivial, because after all, the above was only a movie. The chart shows what’s happening in the real world to possible Pension Funds, 401K’s, workers living on noodles that were hoping to cash out “bigly” with stock options and bag-holders everywhere that were probably told/sold…

“You need to get in on this ‘growth’ opportunity. You know, to protect your retirement from inflation!”

But then again…

What do I know.

© 2019 Mark St.Cyr

Footnote: These “FTWSIJDGIGT” articles came into being when many of the topics I had opined on over the years were being openly criticized for “having no clue.” Yet, over the years, these insights came back around showing maybe I knew a little bit more than some were giving me credit for. It was my way of tongue-in-cheek as to not use the old “I told you so” analogy. I’m saying this purely for the benefit of those who may be new, or reading here for the first time. I never wanted or want to seem like I’m doing the “Nah, nah, nah, nah, nah” type of response to my detractors. I’d rather let the chips fall -good or bad- and let readers decide the credibility of either side. Occasionally however, there are and have been times they do need to be pointed out, which is why these now have taken on a life of their own. (i.e., something of significance per se that may have a direct impact on one’s business etc., etc.) And readers, colleagues, and others have requested their continuance.

Back To Perspective When Printing $Billions

Back in 2013 and 2014 I penned a few articles pertaining to not just the fallacy of quantitative easing (QE), but what all this money printing really represented when looking at it through the hypothetical perspective of tangible assets that could have been produced, and its impact on GDP.

In other words: if it hadn’t been used for the sole purpose of inflating stock markets.

When I looked back over these two articles what struck me is just how little both the arguments, for or against, have changed. The difference this time, for perspective, is we have two very concrete results for those arguments to look at and compare. Here are those arguments. First:

The proponent arguments put forth via the entirety of the mainstream/business financial media, their next-in-rotation fund-manger cabal and their so-called “smart crowd” of think-tank aficionados to proclaim any and all Fed actions were proper and constructive. Year, after year, after year.


Those with a complete opposing argument from people like myself and others. I.e., We have also argued year, after year, after year none of them has a clue. They were all simply winging-it and slinging-it, hoping it sticks, any of it. Period.

However, now with the benefit of time past, we can now compare and see which side actually did “have a clue.” Hint: It’s not the former.

One of the items that struck me when reviewing these articles was just how openly hostile the media was becoming to anyone proposing anything other than a “Bull market” thesis. I use the term “becoming,” because back then they still allowed a variety of opposing viewpoints (though that number was dramatically diminished). But they very visibly turned these into an all out version of what I coined as “ambush the guest” segments.

CNBC™ appeared increasingly hostile and blatant in this manner, to the point where they just no-longer either invited these guests back, the guests just wouldn’t return, or were told “tone down” any-and-all calls for caution. This happened (my conjecture) to people like Bill Fleckenstein, Peter Schiff, David Stockman, Jeffrey Gundlach and a host of others, where I’ve made mention of it many times.

Now it appears they’ve just decided it was best to no-longer have any opposing viewpoints, because if you listen or watch today (those of very diminished few that still do) it’s Bulls-R-Us with its champion buzzer-king leading the bandwagon, 24/7.

Here’s a sample from my afore mentioned article. To wit:

You can’t turn on a financial news program without being bombarded by panelists as well as the hosts ready-at-the-draw to pounce on anyone with an opposing view as to the “effectiveness” of the Federal Reserve’s quantitative easing program (QE).

Once again this played out just the other day on CNBC™ where this time it was Peter Schiff who found himself in the cross hairs of today’s version of “ambush the guest.”

You can agree or disagree with anyone’s viewpoint and I even encourage people to question mine if they see fit. However, you don’t have to be a rocket scientist to watch many of these anchors to witness for yourself what now has turned into all the appearances of – an ambush.

And the recurring foil used to defend their attack? (paraphrasing but it’s the gist) “You’ve been wrong about monetary policy for if you were invested in this market, you would be making money. And those who have listened to you have missed out. So won’t you now admit you were wrong?!”

Schiff wasn’t the first nor will he be the last and can defend his own calls and does so. But no one on these shows cares. And this is clearly visible for all to see in these exchanges.

You hear calls of “Admit it!, Admit it!” over and over again as someone is trying to clarify a position. Clarify in the real sense of the word. Not obfuscate it as the hosts or other “guests” are trying to imply by shouting over them.

It’s now gone from amusing to watch, to down right pitiful. Many times I’m left watching these hosts channeling that old quote, “Do you have no shame?”

“Putting The Fallacy of QE Into Perspective” Oct. 29, 2014

So now here we are – five years later – and what has transpired? Hint: Rhymes with a complete and utter debacle and disaster of monetary policy and theory.

The “Keystone Cops” look more in control of their intervention and outcomes than the Fed. The only difference: one was a comedic cinematic event. This (current monetary policy) is an ever-increasing, ever-unfolding real time, real life consequential travesty.

We now have not just the Fed, but the entirety of those I highlighted prior signalling that they agree with the notion of the Fed buying Treasuries, once again, is not QE. That would be comedy genius for complexity and delivery if it wasn’t so blatantly tragic and devoid of any truth. i.e., Calling water “oil” doesn’t make it so. But don’t tell them that, for they’re convinced it can. But I digress.

The Fed is now buying $60 Billion dollars worth of treasuries every month. And – they are making available “at least” $120 Billion in overnight repo operations. And – they have cut interest rates three times this year. And – this is all transpiring in the same a year when they were supposed to be cutting them, reducing their balance sheet by $50 Billion per month and all of it we were told was supposed to work like “watching paint dry” in the background on “autopilot.”

And they told us we were the ones that “just don’t get monetary policy.” Hint: I don’t think the Fed does either. Just sayin’.

However, the reason why I was looking back over these articles was due to the downright casualness this same crowd argues this latest “NotQE4” of $60 Billion is being tossed around. For as I tried to make clear back then, it appears even $Trillions is now considered chump-change.

It’s completely unhinged and devoid of reality, because no one appears able to conceive of just how much money we’re talking here. Which is why I was looking back, because I did just that, back then. And I feel it needs to be done once again.

Using just the latest round of “NotQE4” at $60 Billion per month, that is supposed to last (at the moment, look for it to go longer and possibly even increase) till the second quarter of 2020. That’s close enough to use $500 Billion for example purposes. Here are those examples:

At a run rate of $60 Billion a month you could purchase:

  • 5 – B2 Stealth Bombers
  • 2 – Ford Class (this is the newest) Aircraft Carriers
  • 3 – Ohio Class (aka “Boomers”) Submarines
  • 20 – F22 Raptor aircraft
  • 20 – F35 Lightning aircraft
  • 150 – M1 Abrams (latest generation) Battle Tanks
  • $8 Billion left over to purchase the fuel and ammunition needed to outfit.

The above only represents what the Fed is now injecting into the “markets” via their latest “NotQE4” program. What does this represent by Q2 of next year? Well here you go, using nine months at a run rate $60 Billion each (e.g. $540 Billion). But remember, that number is conservative when you add all the other injections (such as the now $120 Billion for repo alone) the Fed has now embarked on. To wit:

In nine months you would have purchased:

  • 45 – B2’s (currently we only have just over 20 and the program was halted for fears of cost. I know, crazy, huh.)
  • 18 – Ford Class Aircraft Carries (current inventory of all new and old commissioned: 20)
  • 27 – Ohio Class Submarines (current inventory: 18)
  • 180 – F22 Raptor aircraft (current inventory: 186)
  • 180 – F35 Lightening aircraft (current inventory: 171)
  • 1350 – M1 Abrams Battle tanks (current inventory: 5000 approx)
  • $45 Billion left over to purchase the fuel and ammunition needed to outfit.

Now there are a few things that need to be pointed out that also help with not just the perspective argument, but also, why there would be no way possible the above could ever come to fruition without outright demands not just from the citizenry, but also, no other nation would allow it. Why? Easy…

One of those “things” are: If money was no longer a constraint – then every single country on the planet would do the same. Every. Single. One.

But making the equivalent in “cash” to the above, available for the banks and Wall Street?

Not only does nobody question it – but this is now taught in the hallowed halls of academia and beyond as “prudent monetary policy.” And speaking of “academia.”

It doesn’t take a rocket scientist to understand why the likes of today’s socialist/communist inspired politicians, academics, students et al. aren’t going to relent on their arguments for something similar in-kind “for the people!”

This is why the perversion of monetary theory known as MMT is gaining a more sympathetic ear among the populace. Just look at the above for clues. Because you know – they are!

If you think the above is a testament to the latest folly of central bankers? It gets worse, far worse, when you remember that’s what they are doing now, as in, right now.

Here’s what it looks like in hindsight when viewed through the prism of what they’ve already spent. If you’re not already sitting down, I suggest maybe this may be a good time. To wit:

Using the Fed’s balance sheet from the start of QE that figure would be about $3.5 Trillion for example purposes, (i.e., they had a balance of about $1 Trillion prior.) So using that amount here’s that total represented by the examples I used above. Ready?

  • 405 – B2’s (current inventory: 20 approx.)
  • 162 – Ford Class Aircraft Carries (current inventory of all new and old commissioned: 20)
  • 243 – Ohio Class Submarines (current inventory: 18)
  • 1620 – F22 Raptor aircraft (current inventory: 186)
  • 1620 – F35 Lightening aircraft (current inventory: 171)
  • 12,150 – M1 Abrams Battle tanks (current inventory: 5000 approx)
  • $405 Billion left over to purchase the fuel and ammunition needed to outfit.

Now let me make this clear, I am not proposing that any of the above should be done or argued for. That’s not the purpose why I’m making this case. What I am trying to do is bring real life examples that everyone understands for their complexity, size and more to help put the perspective of just what the Fed (and all central bankers) have done.

Imagine the amount of GDP and more. The trade workers, factories, suppliers and more needed to produce them. The list goes on, and on, and on and on.

But, as I stated prior: you would never be allowed to do it. Nor should. Period.

No country would stand back and allow it. They would match and build to meet every one produced. Because if the idea was adopted that “money” was no longer a hindrance? Think about it.

Another issue is no U.S. congress would ever approve such a thing, again, and they shouldn’t. (See my original B-2 example for clues)

And yet, this is precisely the equivalent that has been lauded over going into banks and Wall Street. Is it any wonder why people are getting rightly ticked off? After all:

Wall Street is getting wealthier by the minute via central bank largess, and the populace are still being told by the Fed et al. their lousy T-shirt won’t be coming anytime soon, because…

They make those in China, and that’s out of their hands.

© 2019 Mark St.Cyr

Welcome To The Melt-Up

I was asked for my thoughts on today’s latest “market” surge higher. My response was: Think Guns & Roses “Welcome to the jungle” opening line. And instead of “jungle,” insert melt-up – and there you have it. Because what we are now witnessing is the “we’ve got fun & games” aspect of it. Here’s why:

The Fed decision was Wednesday and the demanded (dare you refuse) rate cut was delivered. Next: you had end of month positioning yesterday and a new month positioning today, all coinciding with a jobs report that was, for all intents and purposes, “spectacular” if you’re a Bull. Why?

Because the market was positioned (all conjecture) for a dismal one based on the auto strike. And: all the revisions were to the upside, so the momentum could not be better. However…

The reason why I’m making this statement and including a chart to provide as a backdrop for my hesitation of any “all clear” signalling, is because the signals I’m watching via my technical eye seem to be setting up in a far to picture perfect pattern of something else. That “something” concedes caution. Let me explain…

As you can see on the chart blow, it is of the S&P 500™ as of this writing, before the cash close on Friday. The reason why I want to use it is because the final workings to fill it in are still being laid out by the markets. I like it when this happens, because it allows for everyone to see if the assumptions are playing out according to the patterns – not what I “think.”

As I’ve noted, too many times to count: when the “machines” start leaving trails like there’s nothing but machines making the moves? That’s a time to pay attention, and this appears to be one of those times, because the resolution is very consequential. Repeat: very!

So here’s said chart. To wit:

(Chart Source)

We should know over the next few trading days soon enough.

Fun and games indeed.

© 2019 Mark St.Cyr

The Fed’s Epic Miscalculation: New Market Highs

Some of you reading the above are now pondering why such could be seen as a “miscalculation” when it’s been pretty obvious since the 2008 Financial Crisis they’ve appeared to make that their primary role. This is where the question reveals the answer, as in: “appears” denotes correlation – hand-in-hand synchronized movements confirm causation.

This distinction with a difference should not be taken lightly, especially for the Fed itself. In other words: The so-called “invisible hand” is no longer. And once “the hand” is seen by all, that “hand” now owns everything it touches: good, bad or indifferent.

This is the absolute worst case scenario (my conjecture) that the Fed is now in. Why?

It’s now blatantly obvious to the general populace.

Can you say “Uh-oh?”

The Federal Reserve and all its participants have always tried to stay aloof from any criticism, or expectations coming from the general public. After-all, they are not elected, so why should they. That’s for the politicians that appoint them.

What this has allowed, and has never been more obvious since the recent election, is for Fed officials to willfully show outright disdain to those very same politicians.

Jerome Powell’s many 2018 interviews showed this in spades. These were some of the most tone-deaf displays of political indifference, or outright public disdain for a sitting president. The kicker in the ordeal was, this was also the very same president that appointed him to his current position only months prior.

Saying that his many non-answer answers bordered on petty would be kind. They were far worse in my humble opinion. But to this, they inadvertently have helped lay the premise for miscalculation that will now be amplified – all by his own upcoming words and actions.

The issue ever since the 2008 market debacle has been just how, when, and by how much the Federal Reserve should or should not have intervened. The answer to question will be debated for decades to come, much like that of the Great Depression.

There are those (which include myself) that can rationally argue or accept the premise that the Fed intervening when it looked as if the world was ending in 2008/09 was an acceptable action. What we do not condone (which everyone from Wall Street to the Media now demands) are the actions taken at and since then Chair Ben Bernanke’s now infamous 2010 Jackson Hole speech, where it’s basically been one form or another of QE: to infinity and beyond!

Every-time the markets went into hangover-mode from another stimulus action, the Fed, in one form or another, signaled more “dope” in the form of QE, rate cuts, _______(fill in your moniker of choice) was either on the way, or at the ready should the markets show signs of being “dope sick.” i.e., “Dr. Fed” was always standing by with another injection, but they would dispense it as they saw fit. i.e., Think Michael Jackson’s doctor and routine.

This worked for nearly a decade, but then it all began falling apart. In other words: the patient was demanding that if you wanted another performance hit? You’d better be ready with another “hit” for the performer. And any “no” was not going to be taken lightly – and they weren’t.

During the 2018 year the Fed proposed they knew precisely what they were doing and began their now ill-fated attempt at weening the markets off stimulus. Every-time the Fed administered their reversal measures (balance sheet reduction, rate hikes, etc.) the markets swooned till finally, in December, they were entering outright shock-and-seizure mode.

That is, till the now “Call from Cabo” appeared and calmed them as a precursor till this once confident to the point of arrogance “autopilot” Fed could come to the airwaves and make in no uncertain terms: that it was all a mistake, and a big one. And would go on to reverse every single monetary position in a matter of months.

Every. Single. One. The result?

These same “markets” that at one time were just used as a corollary type indicator to Fed policy are now the absolute stick measurement of it.

Fed officials can no-longer use terms or verbiage such as “We don’t take or use market gyrations as some indicator or other indicative measurement for setting monetary policy.” That presumption is now firmly discarded into the wastebasket of history. Not because the Fed wants it there, but because the public has now placed it there – and that’s where the Fed miscalculated.

The issue for the Fed has been in assuming (and you know what happens when you do that) the the general populace doesn’t understand monetary policy. The issue here is, whether they do or don’t no longer matters. What they do know now via the Fed’s own visible-hand is that a Fed policy of easy money means their 401Ks don’t go down. If they do? The first information they’ll now look for is what did the Fed just do, or just as important, didn’t do. Everything else is now meaningless.

How important of a distinction is this, and just how much has the Fed’s world now changed? Here’s a hint…

This past week former CEO of Goldman Sachs™ Lloyd Blanfein’s reply to host Poppy Harlow’s question speaks volumes and was not just striking, but foreboding. To wit:

Poppy Harlow: Do you want to pay more taxes, Mr. Blankfein, and should you?

Do I want to pay more taxes? No, I’d like to pay no more taxes, but I’d like to live in a civilized world where people aren’t coming with torches and rakes trying to, you know, kill each other. I sure as heck would be willing to pay more tax if I could buy a — you know, a happier and less polarized society for sure.

LLoyd Blankfein – at CITIZEN by CNN Conference

So now the question to be asked and answered comes from you dear reader, and it is this…

Exactly how do you think the general populace is now going to react when the markets go down, their pension or 401k value goes down along with it – and the direct cause (whether rightly or wrongly) they can/will now point to is the Federal Reserve?

Oh, and let’s add one more, shall we? Just for chuckles.

And the one that will point it all out, with the biggest of bully-pulpit’s, is the very same person that the entirety of the Fed has publicly dissed over, and over, and over again?

“But wait…” as they say on TV. There’s more!

Not only is it an election year, but worse, far worse in my estimation, everything the president said they should be doing, they’ve done. And the results? Hint: All time highs.

Now, if the Fed for any reason tries to pull at its next meeting something the market takes as “too cute by half?” It can all far apart. All of it.

And guess who will get the blame and the reaction to it? Hint: See Blankfien quote above for possible clues.

This is a situation the Fed never thought it would be in. That was their first mistake…

This upcoming meeting decision may conclude to be their last. Because if the Fed thinks the aura of independence will come back once someone else assumes the presidency? May I remind Mr. Powell and company of this little exchange between Mr. Schumer and Mr. Bernanke.

“Get back to work!”

This will now be the clarion call of not just politicians, but by those very people that make elitists blood run cold. i.e., Those with pitchforks and rakes.

© 2019 Mark St.Cyr

For Those Wondering What I’m Thinking

I was asked for my thoughts on this recent “market” move with some indexes reaching new life-time highs and a few others coming within a hares breath. Here’s my reply for those that may want to know.

“One of the most damning ideas to capitalism over the last decade can be seen in real-time as corporate leaders who used to argue competing against such things as GSE’s (government sponsored entities) was something totally anathema to free-markets and would rail against these entities with calls they need to be curtailed, if not outright banned.

That idea is all but dead-and-buried. Because today, we now have a “new and improved” version known as FSE’s (Fed sponsored equities). This newest perversion is something that is currently hailed as a “brilliant use of monetary policy.” What adds insult-to-injury? It is now replete with its own band, bandwagon and cheering section made up of those very same corporate leaders whom prior railed against such a notion. It’s not only appalling, it should be seen as downright disgusting to any true self-identifying capitalist.”

-Mark St.Cyr October, 2019

Here’s something else I know…

I more than likely wasted my own breath, because they’ll never print it.

© 2019 Mark St.Cyr

Proving A Point

I was asked (more like subtly accused) by a colleague if claiming on today’s show the notion of “I was talking about this way before…” wasn’t a bit on the “excessive boasting side,” insinuating that I myself was trying to front-run something that really no one else could have known prior.

The reasoning given was “I mean, really, who could have seen this coming months ago?” To which I forcefully answered: WTF are you trying to insinuate?

Let’s just say, at that moment, suddenly I then seemed to be the one “front-running” the questioning. But I digress.

Why? Simple – it ticked me off, and this person should know better. It irked me to the point I went back to see precisely when and if I did it pertaining to exactly this circumstance.

What’s the circumstance? Hint: The Fed’s now panic interjection and growth of the Repo markets, needing to not only raise the original amount from $75 Billion available overnight of just weeks ago and temporary. But then to over $100 Billion and “permanent,” to where last night when they raised the amount available again, this time to “at least” $120 Billion, it was oversubscribed needing $134 Billion to made available.

So, to answer the question: am I front-running this story? Here’s my response and I’ll let you decide, because in the end that’s all that truly matters. To wit:

From my article January 2, 2019 “Something to be aware of…” Yes – January.

Suddenly there seems to be some very unsettling actions taking place in what is known as the “General Collateral Repo Rate Market.” This market is one segment every business needs to both know and understand, whether you’re a solo-practitioner or, CEO of a global concern. The reasoning is this is where businesses of all types secure funding for their operational transactions.
This market is very liquid, or at least has been, when it comes to the transaction processes. However, in the final days of 2018 on Friday the market suddenly spiked in a one day record move, bringing the overnight rate to its highest since 2001.
However, this move was being explained away by many as a “one day, year end, balancing the book” type phenom. Then, it did it again as in – today.
That’s not something that is suppose to happen unless there’s something wrong. What that “wrong” may be is anyone’s guess. And guessing much of the “experts” are doing just that, for, again, this was only suppose to be a one-off-thing possible on the last day of the trading year.

From the same article, again, to wit:

The reason why I make this point is that there are some key identifiers that should not be taken lightly in the above and could hold (again, could) significant underlying clues, which are: These have been traded and accepted as – all worth the same in response to one from the other. i.e., all the “apples” in any given basket were assumed unbruised and insect free.
However, now with there being no longer any implied “Fed Put” or other central bank insurance and a “market” that has touched bear market status in mere weeks of all time highs, it may just be the so-called “banks” or “middle-men” no-longer trust what’s in these tranches without first knowing precisely what are in them, along with precisely what they may – or may no longer be worth at first blush.
Does it mean I’m right? I have no clue yet, in that light, I’ll only point to the last time I made such an observation was when I argued that when a company sends product across the oceans with the absence of a letter of credit, it wasn’t something to demonstrate how secure vendors feel in shipping their products and getting paid as so many argued, but rather, might be a sign of desperation.

Last time I warned on something like this, as I state in that article, the entire shipping container business sunk just months later. Today?

It appears to be the entirety of the Repo market. You know, the thing that keeps everything, and I do mean everything afloat.

The constant theme seems to always be curiously the same: no one ever seems to be able to see things like this coming ahead of time.

Seems I don’t have that problem, but then again…

What do I know.

© 2019 Mark St. Cyr