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Home / Tag Archives: Budget Deficit

Tag Archives: Budget Deficit

Black Swan Hunting

While the macro boys at GMM are off hunting Black Swans,  I am making money to keep the lights on. – Carol K., GMM, August 11th Yes, Carol K is correct, and we thank her for keeping the lights on at GMM.  We do like hunting Black Swans though if purely defined we wouldn’t know what we are hunting.  You know, the unknown unknowns thingy. By the way, the three ETFs that Carol K. fancied in her August 11th post, Investing In The Economy Of The Future,  are up 9.30 percent, 6.41 percent,...

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Got Gold?

The Fed’s effective nationalization of the financial markets in the past week has spiked gold prices.  It does appear the first phase of the bear market and bursting of  multiple asset bubble is almost complete.  Phase 1, an initial massive deleveraging, brought gold down 15 percent from its recent high before the big spike over the past two days as the Fed announced it will print “whatever it takes.” Gold is now our highest conviction trade and fully expect the 1704 recent high to be...

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U.S. Treasury Borrowing & QE Forever

The U.S. Treasury recently released the December monthly statement, which put us to work crunching the data.  Note the Treasury is on an October-September fiscal year.  We are using calendar years in our analysis. Federal Borrowing From The Public The following chart illustrates the increasing pressure on the private markets given the spike in the U.S. budget deficit, which has almost doubled since 2016 to over $1 trillion in 2019.   It is much easier for the Treasury to float a...

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Monthly Macro Monitor: Doom & Gloom, Good Grief

When I first got in this business oh-so-many years ago, my mentor told me that I shouldn’t waste my time worrying about the things everyone else was worrying about. As I’ve related in these missives before, he called those things “well-worried”. His point was that once everyone was aware of something it was priced into the market and not worth your time. That has proven to be valuable advice over the years and I think still relevant today. We continue to hear, on an...

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President Trump Is Not Your Father’s Conservative

Nobody cares about debt and deficits anymore.  Until they will. Excuse our little diversion as we set the mood music and narrative for our analysis of the current U.S. budget situation. Sovereign Borrowers Have Found A New Revenue Source? The total stock of negative-yielding debt now tops $12.5 trillion dollars, including benchmark sovereign bonds in Germany and France.  If this pace continues, some of these government borrowers — can’t even rule out the U.S. G — are going to be...

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Diagnosing What Ails The Market

My father-in-law died of rectal melanoma, a disease so rare his doctors didn’t even know it existed.  He was diagnosed with having a rectal fissure.   He lived with some discomfort until I called him one night.  Slurring his words, he said he felt “really shitty.” My immediate response was he was having a stroke and called 9-11.  Sad story short, the melanoma, a relatively benign cancer if caught early but spreads through the body like wildfire if not treated, had moved into every...

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Mr. Market’s Biggest Headwind

At the end of September, we posted our analysis of the structural changes taking place in the Treasury market,  The Gathering Storm In The Treasury Market 2.0,  which was very well received and still getting thousands of hits per week. Crowding Out Our analysis focused “crowding out”, mainly, the changing supply and demand dynamics in the Treasury market.  We flagged the sharp increase in new Treasury supply this year and the coming years, and the declining demand, mainly, what was...

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America Thirst: China’s Flows Worrisome – Art Cashin

Just before the close, Art Cashin, one of the best out there, cited the weak Treasury auctions and, ergo, worries China is pulling back on its Treasury purchases as a major factor behind the ugly stock sell-off. Click here for Art Cashin’s comments No Fed Recall, also no FED participation in the auctions this month, and primary dealers took down a disproportionately large share of new issues this week.  The auctions ranged in size, from 12 to 42 percent larger relative to October 2017...

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The Gathering Storm In The Treasury Market

Summary Our analysis provides kind of a Grand Unified Theory (GUT) of what is currently taking place in global financial markets The massive borrowing by the U.S. Treasury is crowding out emerging markets capital flows The structural factors that have kept long-term interest rates low and term premia repressed are fading We expect a measured move in the 10-year Treasury yield to 4.25 to 4.40 percent, much sooner than the market anticipates “Reagan proved deficits don’t matter.” – Dick...

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Running On Empty

We would like to introduce you to Sam and his finances. Currently, Sam does well for himself, earning $100,000 a year. Sam loves the good life, and to maintain it he consistently spends more than he earns. To fund this continual budget shortfall, he borrows money. The graph below shows his rising income (green) and accumulating debts (red) since 1966. Unfortunately, Sam is not a hypothetical person. Sam, as represented in the graph above, is really Uncle Sam. The graph proportionately...

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