You probably think that banking data is boring stuff. And it is, mostly. Except for one thing.
Hidden in that data are secrets about the amount of money available to drive stock and bond prices.
If you know where to look, that information can be extremely useful to you for making money in the stock and bond markets. Even more importantly today, it can help you to keep what you’ve made. I’ve been tracking this data for my readers for years. I know where to look, and I give that critical information to you in these pages whenever it’s relevant.
For instance, every week, the Fed issues a report on the total balance sheet of the US commercial banking system. It comes out just 9 days after the date covered by the statement. Not only does that make it timely, it’s chock full of useful information hidden among the hundreds of line items.
I ferret out those hidden gems for you.
These gems don’t give us exact market timing, but they do help show us the context for the current market trends, and whether they’re likely to continue or not.
The Fed’s Bloodletting Is Bad News
The Fed’s banking data has been telling us that the money trends are turning bearish for the markets as the Fed goes about pulling money out of the markets under its program of balance sheet “normalization.” I call it bloodletting. The Fed is bloodletting the beast of QE. That beast drove the last gasp of a massive, decades-long bubble in bonds. It also drove a great, if somewhat shorter bubble in stocks.
As a result of the bloodletting, rallies in stocks and bonds are not sustainable. The data tells us that over time the bear will take a bigger bite out of the markets. It’s simple. The law of supply and demand rules. As the growth rate of money falls and eventually turns negative there isn’t enough money to absorb all of the bond issuance gushing out of the US Treasury. Supply is catching up with demand, and it will soon overwhelm it.