A Fed Rate Discussion

TTo reintegrate our position on what’s ahead, it’s all really very simple:

  • The Election of Trump is a spitting-image of the 1928 election of Herbert Hoover.
  • Tomorrow in our www.peoplenomics.com subscriber newsletter, we will cover parallels between the 2006-2008 real estate bubble and we’ll compare that with the 1920’s Florida Land boom.
  • From Hoover taking the Oath of Office, there were 182 days to the All-Time-Peak as measured by the Dow Jones September 3, 1929.
  • The Hoover-backed Revenue Act of 1929 included a tax reduction.
  • Later, when the Depression had taken hold, Hoover was forced to raise taxes at exactly the wrong time, thus ensuring the Depression would be twice as long and three times as hard compared with leaving rates alone.
  • We compare this with Donald Trump’s pending Tax Cut Plan which is echoes of the 1929 Revenue Act.
  • Concurrently, we have experienced the lowest Velocity of Money at M2 in American history.

Moreover, the Fed’s pending rate moves will most likely drive the stock bubble higher as money is already flowing out of bonds and into common stocks.

While this weekend’s report will have projections of how high the ultimate top could be, we are mindful that in financial analysis, it is easy to pick either TIME or PRICE but not both.

And that gets us to this week’s Federal Reserve H.6 Money Stocks report. This tells us how much money the Fed is sloshing into the system:

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What should jump out at you is that these two reports tell us something about the nature of the power relations in Washington.

The top table says if you look at October through January, we had 7.5% and 6.1% growth rates of M1 and M2.

When we look at the “sliding” timeframe, bottom table, through February 6, we see M1 and M2 growth (annualized) at 3.9% and 5.8% respectively.

Let’s see if we can wrap our heads around how this works:

First: There is a case to be made – based on this data – that the Fed was “goosing money” during the election/pre-election period. Obviously, the easy money flow made it appear that the Obama economy was somehow magically growing.

Whether this is overtly political – of just how running the dual-mandate (high employment, stable economy), or whether it was overtly political can be argued endlessly. We have neither the time, nor inclination, to bother with that discussion because we are in the “It is what it is..” position.

Which is looking more and more like a deliberate bubble that will go off with a huge bust as we work through this year, or next.

Here’s why:

As of 2012, the total valuation of the U.S. Bond Market was about $37 trillion dollars. At the same time, the valuation of the U.S. stock market was around $21 trillion.

You need only to think about the return on investment to understand what happens.

When the prevailing YIELD (amount of interest paid) is going down, the price of a bond is increasing.

Let’s say you bought a bond paying 10% interest when prevailing rates were 10%.

Now imagine prevailing rates drop to 5%. Suddenly that 10% bond is paying twice prevailing rates so its price goes where? UP!

Sadly, the opposite is true.

When prevailing rates go up, the bond price comes down.

That money goes on walk-about looking for something better in the way of returns.

The stock market, becomes the recipient. Bond money flows into stocks.

Result? A mega-bubble like the one we’re in.

But wait! It gets even better!

The Underlying Asset War

You see, not only do we have the dynamic of Bond Money flowing in, but we may have some Real Estate Money flowing, as well.

This dynamic arises because refinancing real estate at extremely low rates, enables big real estate moguls to pull out oodles of cash – which is also walking around looking for something to do.

While it MIGHT be possible to build more shopping malls and such, the reality is that there is a well described war going on between brick and mortar retailers (like those closings announced in 2016 by Macy’s which is working through the system right now) and the online retailers like Amazon.

Given that malls might not be a great investment, would you like to buy some shares in solid American companies like Caterpillar?

This, in a nutshell, is why we could see the market continue to work higher. Much higher.

In the intermediate term, almost assuredly within five years, the market bubble will collapse.

You will simply wake up one morning and the market will be down 3,000 points on the Dow – or more!

But for right now, we are chilled on immediate prospects for collapse. There is a lot of hot air and hot money left to be poured into this bubble, which is what we track over on Peoplenomics.

But it shouldn’t be too long.

When Ure sells a fair-sized asset like an airplane to bolster his trading account, it might mean he’s expecting a series of large moves.

If you inferred that, there’s hope for you – and your net worth – yet.

Media Has Removed Trump from Office

At least some in the NB.E. seem to have.

However, how well the presidential press conference played this week depends very much on your “observer state” going into the event.

If you are staunchly anti-Trump, then we’d suggest your read “Candidate Trump Tries to Salvage Embattled President Trump.”

If, on the other, you favor Trump, the New York Post’s “Sorry media – this press conference played very differently with Trump’s supporters.”

What’s really happened – not to beat this too hard again, but the Old Line Media has been obsoleted by New Media and Social. Pissed at losing “exclusivity” (which becomes ad money) the old line media is furious and bent as hell on taking down Trump.

Trump, on the other hand is working those non-shill channels for all he’s worth. That includes a “campaign rally” in Florida this weekend. Couple in-person appearances with Twitter and suddenly who needs networks?

Especially with the silly-sap kids who know virtually nothing about politics other than what an increasingly liberal college establishment has pumped into either heads.

I realize this will sound harsh, but no one under the minimum age to hold the office of President should be allowed to write about presidential/national politics. The me, me, me generation is clueless as to how grown-up life works.

We will simply sit back now and watch Trump go on the offensive.

The All-Seeing Eyes

While the story about how “AI-Powered Body Cams Give Cops the Power to Google Everything They See…” sounds alarming, apparently they aren’t yet in use in places like, um…Berkeley….

Frankly, I’d be a whole lot less worried about body cams than about the whole globalist War on Cash…and toss in Civil Asset Forfeitures, which regrettably, Donald Trump seems to support.

Again, we are giving Trump some slack as he’s a newbie, but his Forfeiture position, the Sec. Ed. and Ajit Pai for the FCC chairmanship are matters we see as “blown opportunities.”

But I’m sure there’ll be more. But hope springs that he’ll learn from his mistakes. Toning down the tweets would be great, too. Use it for press releases, not so much rants, thank you. (knock knock…anyone home?)

Searching the Shadows

You know, there may be a HUGE Trump coup coming, though, when even the NY Times worries on the front (web) page this morning “As Leaks Multiply, Fears of a ‘Deep State’ in America.”

Oh, you mean like that “un-elected layer of GS-15/16’s and up we’ve been pointing to for years? Well bless my soul…

Off to another cuppa. E-commerce retail data out at 10AM eastern will be worth looking into as we spin down the week. It will be a way to scale where “the front” is in the bricks vs. clicks war.

Other than that, back to research on how the Florida Land Boom of the 1920’s paralleled the Greenspan NoDoc Bubble.

TTFN – CU Tomorrow or Monday…

Comments

A Fed Rate Discussion — 33 Comments

  1. Reading all the reader’s comments ;-( I do sincerely hope folks will not forget to use more CASH instead of, before it’s put out of circulation and with it their valued freedom to express themselves.

  2. The Stock market begins it’s fall in the fall of 2017. Five years later little is left of American equities. George is warning us. George shows great equanimity all things considered.

  3. George, this is a fascinating article about the power of blackmail and allegiances. This whole anti-Russia theme has much deeper tentacles than the average street level citizen understands. What a mess. This is why I support Trump. Im not republican or a democrat. Trump may have a caustic style but i think hes sincere in trying to bring back a more wholesome aspect of American ideals and western culture vs those who oppose it.

    http://www.zerohedge.com/news/2017-02-17/dhs-insider-warns-its-spy-versus-spy

    • That was a fascinating article indeed. It helped me understand the game being played…I didn’t fully understand why we (the US) were poking at Russia and now Iran too. Thought we might be spreading ourselves a bit thin since we are still causing havoc in all these other middle east countries…and I guess we “will” be spreading ourselves thin if they get their way! Sigh.
      Trump has his work cut out for him and as a democrat turned political agnostic, I wish him success. He was being truthful when he said he inherited a mess…and that’s just on the foreign policy side! Throw in the so called ” economic recovery” he was left with as well as trying to clean up the District of Corruption, all the while fighting off the attacks from the corrupt and the mouthpieces (MSM) of the corrupt…wow. All I can say is pray for the President, because literally, if he succeeds our country succeeds.

      • “All I can say is pray for the President, because literally, if he succeeds our country succeeds.”

        Please allow me to digress. The idealist in me wants to believe Trump has our best interest in mind…who knows!
        I don’t mean to imply that we shouldn’t push back. We should always remain diligent to make sure they “ARE” looking out for our interests.
        One of my biggest complaints is that people don’t seem to use critical thinking when it comes to their own party…once “our guy” gets elected we seem to think we can go back to fawning over the latest popular celebrity or checking how many “likes” we’ve garnered on facebook/twitter. Until we start holding all of them accountable I don’t see anything changing.

      • That article has some interesting points to it. Its so difficult to find an article that doesn’t have some bizarre aspect to it, as that did with the porngate references, but let’s face it, the NSA is in place to collect data on all of us to be used at a later date if needed, should we gain some sort of following that is against the established approved narratives. The Occupy Wall Street crowd was tracked for their porn usage, so they could be demonized with it, if needed. My greater interest in that article was all the varied agenda’s of the players it noted, from nation states to some well known hawk politicians that are doing their best to de-legitimize Trump’s presidency. As well as Russia’s role in today’s news being the reason Hillary lost. From what I’ve read about Russia and the Syria connection, it all relates to NATO’s goal of putting nukes near Russia’s border, but that wouldn’t sell well for a reason to have a confrontation with Russia, so the Russia stole the election for Hillary theme becomes the narrative for public consumption. Hillary’s win was so banked on, that when she lost it through the whole military and CIA goals of taking on Russia into a tailspin, hence the continued leaks. Those leaks are dangerous to our democracy as they’re being used to demonize citizens. At some point that NSA info could be used against all of us, as selective release of data can be skewed whatever way suits the cause. I agree about the our guy mentality.

  4. Going down into the rabbit hole a bit. There are myriad reasons why the intelligence services, factions inside each party, and the “deep state” will do everything they can to destroy Trump. (And, caveat, I did not vote for him, or for Hillary.) One, very obvious, is that Trump is trying to play nice with Russia, while the neocons running CONgress (and owned by the banksters) want a cold, or maybe even a hot, war with Russia. Hillary was all in on that and was their choice. Another, there is a global human sex trafficking organization, and pedophilia rings that involve very important people, and this also includes billions in the global economy. Flynn knows about it, and wanted to do something about it. Now, he’s out. The Trump administration has also challenged the Federal Reserve Bank (private) to show transparency, and have indicated they would support an audit. There are factions which ultimately want a one-world government, (evidenced by our central banking systems and global trade agreements) and Trump’s team seems to be fighting against that. There is a lot more that none of us know, and it’s only by doing a lot of research and digging that some of us have gleaned anything at all. But this is a larger battle, I believe, than what we are watching on MSM cable news broadcasts.

    As my friend, Mike Ruppert, once said. I don’t believe in conspiracy theories. I believe in conspiracy facts.

    • All true, and more revelations to come. We are at the end of an age and the truth will come to light.

  5. The problem with making his supporters happy is that that number is already consistently shrinking. Gallup Polls now have his Approval Rating at 38%. Disapproval rating in at 56%.

    Given that only 1/4 of eligible voters in this country put him in office and 3/4 chose not to vote for him, he’s increasingly having to tap dance faster for smaller and smaller crowds.

    You play the market, so you should understand the idea of diminishing returns. All he has done so far is sign a whole lot of non-binding Executive Orders, and started dismantling agencies that the public actually likes. The EPA, for instance. (which people consistently poll as trusting much more than Congress to protect their interests) If you actually think he’ll last the year, you either have an intentional blind spot when it comes to your “team” or your only real intelligence lies with spinning partisan B.S. to people through the inter-tubes.

    • Is that you, Jon? Sure sounds like your twin. ya’ll are eating from the same mainstream crap pool, I see, and coming on this site to try to poison our comment pool.

      • I was right, it was Jon who has not graduated from his left right mind slime. Grow up, Jon, there is enough info on this site and in the comment section to elevate you out of the muck. One day, all hands will be needed on deck.

  6. …A brick… will all ways be… A brick…A click…that’s just wishful thinking…

  7. Jon, are you going to complain for 4 years?

    Wayne, Trump is stupid?

    The more you write this venom, the more you push away any rational arguments for your cause.

    Stop attacking the person (Trumptard) and start attacking the position with thoughtful rebuttals to his performance.

    You are angry and are informing everyone that you are taking your ball and going home.

    Don’t talk anarchy. As the saying goes be careful what you wish for you just might get it.

    I just see hysteria in your writings (like you just broke up with your boyfriend/girlfriend and are lashing out). Give me some depth of facts. Look beyond the obvious. I get the drift on what your “opinions” are. Now give me facts.

    Wow. You sound like you are miserable.

  8. Why use “snide quotes” about the Trump campaign rally in Florida this weekend? The sponsoring entity is the Trump 2020 Campaign Committee. Check it out.

  9. Bless you Wayne for you have seen the light!
    Unlike poor Jon, who may be beyond help and is totally unredeemable! Of COURSE its the old media! Jon has the stench of MSNBC and CNN all over him and all the tomato juice in East Texas won’t rinse it off!

  10. Trump was not my first pick, but he was my only pick between him and the unindicted fraud Hillary. But that doesn’t mean we shouldn’t call Trump out for stupidity he seems to have. I think he wants to do everything he said he would, but I agree with you on the two picks and Flinn. Those weren’t good calls. Because he isn’t, or doesn’t have an ideology this could become an interesting 4 years. Not only does he have to fight the establishment from both parties, he has to fight an entrenched shadow governement that has been lurking quietly for years. If anyone can filter these people out and show the craziness that is tenior in lifetime appointments in our government, Trump is the man that can do it. If he can, he should terminate every person the the federal government that has been there since Clinton and all the Obamacrates. Then start looking at all the Bushies and get those who won’t do what is needed and throw then out as well. If he is going to “drain the swamp”. I think it starts with the bureaucrats!!!!!

    • its Flynn, not Flinn, and he was originally set to bow out early. He’s a true ally of the Donald and he allowed himself to be used to set up the leakers in CIA and the David Ignatius/Washington Post shills.

      Just sit back, n’ learn, m’boy.

  11. Would be nice to see some new Greenbacks and the f reserve told good luck with debt their power has bought. Believe oblama hates America