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Will Biden’s Stimulus Be Inflationary?

Most investors believe President Biden’s $1.9 trillion stimulus plan will be inflationary, even though past stimulus plans were not. Former President Trump’s tax cuts, an indirect form of stimulus, were also believed to be inflationary and they were not. The pandemic stimulus turned out not to be inflationary and so far, the December 2020 stimulus … Read more

Macrovoices Notes

The purpose of Quantitative Easing is to strengthen the dollar and lower Treasury yields by purchasing large quantities of government debt and trapping dollars in the financial system. Without lending growth, Quantitative Easing is disinflationary and potentially deflationary, until lending growth is large enough to overcome the negative effects of Quantitative Easing. It is the … Read more

The SLR Won’t Lead to Banks Selling Treasuries

With the Supplementary Leverage Ratio (SLR) rule going back into effect, rumors continue swirling that the banks will eagerly dump their Treasury holdings as the exemption to the rule encouraged them to buy Treasuries when they normally would have. Understanding how the SLR rule works, its intended purpose, and the current ratios are key to … Read more

The SLR was the Common Denominator

On March 31, 2020, the Federal Reserved exempted Treasury securities and deposits at Federal Reserve Banks from the calculation of the Supplementary Leverage Ratio (SLR) rule for holding companies, or banks until the end of this month. Since the exemption went into place, stocks, commodities, and precious metals have rallied, while the dollar and bonds … Read more

G-SIBs, SLR, & Dealers

Saturday evening reports started circulating that some banks, particularly Wells Fargo, were withholding stimulus checks until Wednesday, March 17th. It was later confirmed by the IRS that the effective date of the stimulus payment is the 17th, even though checks were going out this weekend as the Biden Administration promised. What is significant about the … Read more

Jobs, Auctions & the SLR

I thought this week it would be good to review some of the recent economic data and some of the things I am watching this week and the coming weeks. Last week the Nonfarm payroll report for February beat expectations as +379k jobs were created but most of these were in the leisure and hospitality … Read more

What is Going on With Bonds?!?

Earlier this month long-term Treasury bonds were on the cusp of a major breakout which would have sent prices shooting higher into their final leg of the Bull market in bonds that began back in 2016. Treasury Bears, who are betting on higher interest rates and inflation, had other ideas and have been aggressively selling … Read more

It is a Crowded Market

Investors love index funds, yet they have no idea how over-concentrated the major equity indices are in a handful of stocks. When major equity indices are overweight a small number of stocks, it usually signals the end of a Bull market. Today, the major equity indices are more concentrated in a small number of stocks … Read more

The Mechanics of Quantitative Easing

Investors continue to believe monetary policy can raise asset prices and create inflation when there is no evidence to support it can do either. One of the most important aspects of monetary policy is belief. As long as investors believe monetary policy can raise asset prices and create inflation, they will invest accordingly, which in … Read more