The Fed balance sheet

US equity indexes closed broadly higher, sp +18pts at 2430. The two leaders - Trans/R2K, settled higher by 1.2% and 1.9% respectively. VIX settled -5.0% at 9.89. Near term outlook offers 2440/50 by mid June. More broadly, the 2500s are now within range by end July.


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Summary

June began on a broadly bullish note, with new historic highs for the Nasdaq comp' and the sp'500.

Market volatility remains very subdued, with the VIX again falling into the 9s. The teens look out of range until just before the FOMC of June 14th.
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This morning, an official from Print Central was talking with CNBC's Liesman

Fed official Powell said a few things, most notable was his belief that the fed balance sheet won't fall below $2.5trn.

How do I respond to that? A simple 'lol' ? Or how about a 'no shit, sherlock' ?

Seriously, the fed will be lucky to see the balance sheet fall under $4trn before the next (overdue) cyclical recession. On a stretch, I could just about see $3.5trn, but that would surely take 18-24mths, and effectively assume no recession until 2019.

There are a few sporadic minor economic tremors (housing and vehicle sales), and I find it difficult to see the train remaining on the tracks for much more than another year.


Did everyone already forget?

I don't have the link, but Yellen made it clear some months ago, with even a 'normal recession', the Fed might initiate QE of another $2trn or so. Just reflect on that for a little. Even if you assume the Fed can cut the balance sheet to $3trn, the Fed's balance sheet will resume upward to 5/6trn, shortly after the next recession.

A final thought... at some point, will the Fed's balance sheet exceed that of the national debt of the US?

As ever.. extra charts in AH @ https://twitter.com/permabear_uk

Goodnight from London
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Another month endeth

US equity indexes ended the month on a fractionally mixed note, sp -1pt at 2411 (intra low 2403). The two leaders - Trans/R2K, settled u/c and -0.1% respectively. VIX settled +0.3% at 10.41. Near term outlook offers the sp'2420/30s by mid June, when the fed will raise rates.


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Summary

... and May comes to a close.

Today saw some moderate equity swings, with an early low of sp'2403 - fully filling the minor gap of 2409/04, with a rather choppy latter day recovery.

It was unquestionably a month for the equity bulls, with new historic highs in the Nasdaq comp' and sp'500. Most other world markets also saw significant gains, but I'll cover that this weekend.

Market volatility remains broadly subdued, even the low teens look out of range, unless the market trades back under 2400, but that is now first big support, and will very likely hold into mid June.
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Dr Doom, aka Faber, was on the lunch time show on clown finance TV...

He did seem to have an issue with Nvidia. I can understand that some would call it a bubble, but then, you could have called it a bubble when it broke resistance of the $36s in spring 2016, and that is now a bizarrely long way down.

I like Faber, he is always entertaining, and much like myself... he isn't actually that bearish! The guy is heavy long equities, via select stocks within the EU and emerging markets.
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May was a bullishly green month.

As ever.. extra charts in AH @ https://twitter.com/permabear_uk

Goodnight from London
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A shadow after 25 years

US equity indexes closed moderately weak, sp -2pts at 2412. The two leaders - Trans/R2K, settled lower by -0.1% and -0.8% respectively. VIX settled +5.8% at 10.38. Near term outlook offers a minor down wave to 2404. Broadly, the 2500s appear a valid target for September.


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Summary

It was a subdued day for the market after a return from the long weekend. A little wave to sp'2404 seems probable within a day or two.. before renewed upside to the 2420/30s by mid June.

Market volatility remains very low, the low teens look out of range this week, unless some daily closes <sp'2400, and that simply looks unlikely.
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A long time ago... in a place, not so far away

Spring 1990, I was a mere 16yrs of age, and 'Twin Peaks' first aired in the UK on BBC2. It was a truly influential show, garnering massive attention. The pilot received a monstrous US viewership of 34.6 million, with around 8 million in the UK. After considerable 'network' meddling, Gulf War (part 1), and Lynch being ground out of his own show, viewers rapidly walked away.

The second season wrapped in June 1991, with episode 29 'Beyond Life and Death'.

Laura told Dale that she would see him again in 25 years. At the time I had many thoughts, not least 'will I even be alive in 2016?' Would I be married, children, or living within some kind of post 2012 apocalypse?

Across the next quarter century, life took me in many directions that I had not expected, although I realise many might say that.

When David Lynch announced that there would be a season three of Twin Peaks, it was one of the few times when I once again felt that the universe had some surprises left within it.

Dale Copper and Laura Palmer, Twin Peaks, 2017., Showtime.

Seeing Kyle MacLachlan with Sheryl Lee again, was beyond amazing. Most people can't cope with 'surrealism' though, and the new series was always going to be for an extremely niche audience.

As the credits rolled to last week's opening pair of episodes - to the most beautiful 'Shadow', I actually started to wonder if I do have a future worth fighting for. Maybe.

The final pair of episodes for season 3 are scheduled for early September. Twin Peaks was an unfinished project for Lynch, and I think its likely that he will have conclusively wrapped up the story. I don't expect a fourth season, nor another 25 year wait!
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Chromatics - Shadow



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The distrails are not what they seem?

Goodnight from London
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