Besides some fresh econ data for traders to consider, the Threat Board has changed in several important ways in the last 24-hours. But the biggest and least-covered change has come from the Federal Reserve.
Fed: Hiding the Sausage?
The Feder Reserve has made what seems like an innocuous change to financial reporting of its activities. Here’s their change announcement – with my bolding of “thinks to pencil ahead::
“As announced on March 15, 2020, the Board of Governors reduced reserve requirement ratios on net transaction accounts to 0 percent, effective March 26, 2020. This action eliminated reserve requirements for all depository institutions. As a result, many of the release items on the Board’s Statistical Release H.3, “Aggregate Reserves of Depository Institutions and the Monetary Base,” are zero. Consequently, the Board has decided to consolidate the remaining relevant items from the H.3 statistical release onto Statistical Release H.6, “Money Stock Measures.”
? The H.3 release items that will be consolidated onto the H.6 statistical release include the monetary base and nonborrowed reserves and their components. The components to be moved are (1) “Currency in circulation” and “Total balances maintained” for the monetary base and (2) “Total reserves” and “Total borrowings from the Federal Reserve” for nonborrowed reserves.
? The last H.3 statistical release will be published on September 17, 2020. The first H.6 statistical release containing the monetary base and nonborrowed reserves will be published on September 24, 2020. On this same release, columns labeled “Traveler’s checks” will be removed from the H.6 statistical release.
There are a lot of items here that give us deep concerns. But the very first is in the opening line of the announcement where it reads “This action eliminated reserve requirements for all depository institutions….”
While I’ve only been “covering news” since 1969, it’s possible I missed something. As I remember it, reserve requirements were there to assure that in a crisis, systemic liquidity would be maintained by the institutions, not solely born by government. Which means taxpayers.
What, Me? Worry?
I am naturally suspicious of any Fed reporting change. This is because we recall the huge affront to sane investors when former Fed chief Alan Greenspace “hid the sausage” and axed the M3 Money report.
You can still find approximations on a few remaining honest financial websites – like John William’s grand ShadowStats.com site – where an M3(b) reconstructed is tracked. However, Greenspan’s “hiding of M3” served the crooked purpose of hiding a broader monetary measure that might have illuminated in advance of the Housing Bubble Collapse; earlier than events worked out.
We invite readers today to ponder the meaning of “This action eliminated reserve requirements for all depository institutions….” In our mind, its a foreshadowing of crises to come. See William’s discussion of M3 over here.
To our way of thinking, the recent price-action of gold and other “value placeholders” is not so much due to “market demand” as a financial manipulation as many aspects of the current economy have already moved into lah-lah land.
It’s further evidence of what we have been warning you about for months: America’s post-collapse hyperinflation to come. Now more easily accomplished since there are no reserves, anymore. Unless you count the tax-chattel (you and me) who may be taxed into socialism by the inflation along the same crooked path followed by Venezuela and Zimbabwe. “Free Lunchers” seek power to exploit and follow (ostensibly) “legal means” to achieve their ends. But, you knew that, right?
Looking for Some Gush: Biden’s “Bites”
Soundbites are wonderful things. You can use well-worn jingoism so the narcissistic socialist media dweebs can do what they do best: Project their fantasies into reality. No details means “no lies” in socialist media. Triumph and gush in the aftermath of the American Shallowness Festival on TV:
The NY Times joins the effusiveness fest opining “With the Speech of His Life, Joe Biden Becomes the Man for This Moment.”
Imagine! An entire week and no mention of Burisma or the Biden family coziness with China. New brooms do in fact, sweep clean. And under the carpet.
Another Trump Boner
Meantime, DNYUZ explains how “How (Steve) Bannon and His Indicted Business Partners Cashed In on Trump.” Raising money to build a border wall and taking an out-sized slice for themselves, infers the indictment. Issued, we think notably, by a court in a democrafty stronghold.
What to watch for? Our money would be on a series of payback indictments from the John Durham grand jury. Of course, these would be protested as “political” and against “Justice Department policy.” Yet policy is not law. And there are situations, though rarely, when “Laws are meant to be broken.”
Still, the echoes and knock-on from the Bannon encounter with Trump underscores what we’ve said for months. Basically Trump needs a workable H.R. department, more interested in competence than looks. And he needs to lock-up his keyboard.
The most important man in America right now is William Barr, as we read things.
Dow Futures -115: Reading Ahead
We would draw your attention to an inverse relationship between the strength of the US Dollar and the direction of the domestic markets. Early this morning was a classic example: The U.S. dollar was up a bit (See FinViz chart here.)
If you’d like to become a financial Einstein in short order, notice how the dollar spiked high as the US market crashed in March. And now, with the Bucks international purchasing power down, it simply takes many more paper dollars to “buy the indices.”
But the key point is that IF the dollar should begin to trend back to historical levels – as it might with the Biden Gush Rush, that could let a lot of air out of the US market. It would take fewer FRNs to buy the Dow, for example. It’s one of those grand valuation paradoxes. Strong dollars holds down domestic stock prices – and visa versa.
One caution: The relationship is not Absolute (or Finlandia).
Hurricanes and Hysteresis
Dynamics of human behavior are slow to change. Part of the reason is hysteresis (systemic delays) as information propagates.
A dandy example today as the National Hurricane Information Center is tracking two storms that will slam into the US early next week. The first storm (link) will mash western Florida (and the panhandle) on present track. Second one (link) will come ashore around Houston and we’re figuring a half foot or rain in our planning at the ranch.
The hysteresis? Well, we’re just up the road from Houston and the weather-serving sites are still not discounting the odds of a landed hurricane or TS here for next week. Instead, all picnics and pizza weather in a press-time Sunday through Thursday view ahead:
As a “news and information consumer” this is really useful stuff. And it likely exists because the large-scale computational meteorology models take a lot of processor clicks to change there look-ahead’s. How much time? We’ll watch and maybe (if I can remember…) follow up next week.
Houston Flooding to Come – Again?
One of our favorite readers down in Houston has been giving us an eyes on the ground view of what Houstonians worry could be ahead:
“It seems Houston may likely be in a TS (soon to become a hurricane) path, so this weekend will likely be spent prepping for it; folks in Florida Panhandle will be doing the same. Patio furniture will go into the garage, will top off petrol for the car. Have tons of batteries, non-perishable food, gallons of water, etc. If this storm hits Houston directly it will mark the 3rd hurricane at my house: Ike (2008); Harvey (2017); and a TS, Imelda (2019).
Yet my biggest concern is for those CoVid-19 patients in hospitals throughout our metro area. What happens to them when the power fails (after Ike I had no power for 2 weeks)? Will the authorities try to evacuate the most critically ill to other cities like San Antonio or Austin? Workers aboard oil rigs will be evacuated to terra firma; refineries will be secured which means a quick uptick in $$ at the pumps. Grocery shelves will be empty again like they were a few months ago. Meanwhile, I’m still ill, and can’t even get the testing done. By the time we’re all blown to kingdom come it won’t really matter.
So… it’s time to stop the whining, roll up my sleeves and hobble into the unfathomable morass of prepping for another fiasco.”
We will load up earlier than later, here at the ranch, too. Write is down: Use hysteresis to your own advantage. News distribution is not instant – allowing the aware reader a head start in many areas.
The upside is the forecast gives me an excuse to buy some ball park franks and hotdog buns. Elaine finds ’em disgusting, but like those cheezies and sodas, there’s something reassuring about junk food in junk weather. Yes, hot dogs and chips is weather prepping food. Chip bags float, you know. More than can be said for “healthy” frozen dinners.
Hot Times Out West
Huge fire season is still unfolding out west. Getting lots of play in stories like the one about “Thousands of homes threatened by massive California wildfires; more than 60,000 flee; 2 more deaths reported.”
G2 is still busy as the CV-19 “technical consultant” up on a big fire in eastern Washington (Tonasket). Summer fire season won’t really end until some decent rainfalls arrive in California and up the coast.
With that…more on Peoplenomics tomorrow – our Around the Ranch episode here Sunday and an update then on the weather outlooks from the storms.
S&P futures down 4-10 th’s of a percent. Europe down about one…windage your trades accordingly.
Stay safe…head down…and write when you get rich. Got mustard and beer, and the chainsaw ready, too?