Economics

A forum for discussing macroeconomics
Post Reply
User avatar
nanningbob
Trader
Posts: 4560
Joined: Sun Dec 04, 2011 1:23 pm

Economics

Post by nanningbob »

Ok get ready for the next push for dollar depreciation. After a nice run there was a correction you can see on the monthly charts. The next run trigger will be the repeal or partial repeal of Dodd-Frank. Now I support making corrections to this document. It was an over reaction to the last economic crash. I’d love to see a repeal of the sections that went too far with Forex restrictions for USA citizens. Also when we bought our house we spent an hour and half signing paperwork that was a requirement of Dodd-Frank. So it needs fixing.

However if they get too carried away and open the doors for cheap money to flood the market again there are going to be serious problems. Letting banks and mortgage companies give away loans like candy for children, well we saw what happened the last time. So follow the news and when you hear they are making major changes to Dodd-Frank get ready for another run on dollar depreciation.

One warning: I don’t know what tariffs will do to the market if USA gets into tariff wars. It will be a new experience for me. So watch those currency strength charts for your clues. That’s the CSS thread.
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
User avatar
nanningbob
Trader
Posts: 4560
Joined: Sun Dec 04, 2011 1:23 pm

Economics

Post by nanningbob »

Most of you know of USA tax cuts especially for Corporations. It was sold to the USA public as needed to make American companies more competitive, give them investment money to grow, and give raises to workers. Instead almost all of it went to stock buybacks and dividend payouts. However the USA stock market has gone sideways with a slight decline. What does that mean?? Shouldn’t stocks go up with the buying of all that stock?? Well no if at the same time people are dumping stocks slowly and getting out, cashing in their profits and finding other ways to protect their capital investment. If I am right and you have IRAs or 401Ks, your investments are at risk because at some point the buy backs will stop and then there will only be more sellers than buyers. As this plays out, the markets will deteriorate with certain people having already reduced/eliminated their exposure and the super rich already having bailed out of the markets in large measure. They will sit on their cash and will only step back in after the bloodbath. Then with the market correction complete they will reenter and follow the markets back up again. I just find it interesting that hundreds of billions of dollars in record buying of stock buyback has not caused the markets to go up. That means USA tax dollars are being used for certain knowledgeable people to sell off at the same time. Are you one of those selling off or are you waiting to get creamed later when the buying with tax money is all done. Your tax dollars hard at work.

Just my opinion, whatever that’s worth.
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
User avatar
nanningbob
Trader
Posts: 4560
Joined: Sun Dec 04, 2011 1:23 pm

Economics

Post by nanningbob »

For those of you who are traders, this is called a triple top on the Dow Jones stock market. It is a reversal signal with 2 significant drop points. One is the 24,000 area. This is called a support area. Price broke support last December and quickly bounced back up to form the 22,000 line as the next area of support. This is a warning area.

In trading circles this forms your M. It means the big traders have started to close some of their positions in the market and know it will be soon to get out. If price goes below 24000 or first support
most good traders will be selling. If price goes below 22000 or bottom of the M you’ll see a wholesale sell off as the its too late to sell people will panic. These are the ones that have been told to buy and hold. They then find out they have a bunch of losing positions and their profits have disappeared. They will be trying to get out but there are very few who will be buying. You measure the high at 27000 and subtract the low 22000 and you get 5000. You subtract the 5000 from 22,000 and you get your next major price support area.

Knowledgeable traders know the next support or buy area will be around 15-17000. That will be called a bear market. A major correction. This does happen from time to time. It happened back in 2007/09 as a deficit/debt fueled economy crashed. Borrowing money only makes things look good for only a short period of time.

If price goes below 15-17000 you will have a depression. Where price goes from there will be determined whether America can borrow enough money to stop it. 1929 they didn’t, 2009 we did. We still haven’t stopped borrowing money from the last crash. The evidence is there if you open your eyes and see.
You do not have the required permissions to view the files attached to this post.
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
User avatar
Gertje
Trader
Posts: 1936
Joined: Mon Dec 12, 2011 1:17 pm
Location: Middle of the Netherlands

Economics

Post by Gertje »

nanningbob » Fri May 31, 2019 2:34 pm wrote:For those of you who are traders, this is called a triple top on the Dow Jones stock market. It is a reversal signal with 2 significant drop points. One is the 24,000 area. This is called a support area. Price broke support last December and quickly bounced back up to form the 22,000 line as the next area of support. This is a warning area.

In trading circles this forms your M. It means the big traders have started to close some of their positions in the market and know it will be soon to get out. If price goes below 24000 or first support
most good traders will be selling. If price goes below 22000 or bottom of the M you’ll see a wholesale sell off as the its too late to sell people will panic. These are the ones that have been told to buy and hold. They then find out they have a bunch of losing positions and their profits have disappeared. They will be trying to get out but there are very few who will be buying. You measure the high at 27000 and subtract the low 22000 and you get 5000. You subtract the 5000 from 22,000 and you get your next major price support area.

Knowledgeable traders know the next support or buy area will be around 15-17000. That will be called a bear market. A major correction. This does happen from time to time. It happened back in 2007/09 as a deficit/debt fueled economy crashed. Borrowing money only makes things look good for only a short period of time.

If price goes below 15-17000 you will have a depression. Where price goes from there will be determined whether America can borrow enough money to stop it. 1929 they didn’t, 2009 we did. We still haven’t stopped borrowing money from the last crash. The evidence is there if you open your eyes and see.
Thank you Bob for this insight.
Do you trade the DOW yourself?
I just stick to Forex, it's more then enough. :mrgreen:
User avatar
nanningbob
Trader
Posts: 4560
Joined: Sun Dec 04, 2011 1:23 pm

Economics

Post by nanningbob »

I closed all my IRAs and annuities and used it to pay off my business and almost have enough to pay off my house. I plan on going through this recession debt free like last time. My only regret is I didn’t get back in early enough into the markets. I won’t make that mistake again.
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
User avatar
MurphyMan
Trader
Posts: 345
Joined: Tue Nov 15, 2011 2:35 pm
Location: Southern Illinois, USA

Economics

Post by MurphyMan »

Thank you, Bob. I appreciate your Big Picture, I was feeling uneasy as well. I decided to get out and move the retirement funds into money markets.

:hi:
Barcode
Trader
Posts: 81
Joined: Thu Feb 11, 2016 12:00 pm

Economics

Post by Barcode »

Thanks Bob. Very very interesting read.
The 10 most powerful 2 letter words in the world.

If it is to be, it is up to me.
User avatar
nanningbob
Trader
Posts: 4560
Joined: Sun Dec 04, 2011 1:23 pm

Economics

Post by nanningbob »

Dow Jones is now a quadruple top as it hit its high again. Now what? Guess it’s waiting for the summit.
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
User avatar
nanningbob
Trader
Posts: 4560
Joined: Sun Dec 04, 2011 1:23 pm

Economics

Post by nanningbob »

If you understand this, probably the most important message i can give you about the banking system. This will affect everyone worldwide if it blows and it looks like it will. Last time it caused Gold to spike and USD to strengthen but USD is already strong so have no idea. I certainly would be out of the stock market for now unless you are really good trading a bear market.

What’s going on in the banking system. 134 Billion to bail out the banks last Thursday night. Here is a week by week blow. I tried my best to explain what’s happening as simply as possible.

Repo markets: Simplistic explanation. Every night banks balance their books. They receive funds(deposits, payments on loans, various sources of income, payments from other banks that go to customers of the bank, interest, etc.) Banks also have outgo, (checks written by customers, credit cards, loans, bank transfers, businesses doing business, etc.) Some banks will have more money going out than coming into the bank while others have more money coming in than going out. If the amount exceeds what they have they will borrow money from another bank that has a surplus as an overnight loan. This is called the Repo market. It is normal financial activity every night and goes unnoticed to the public every night.

However what happens when there are more banks that need money than banks that have surpluses? There is a cash shortage or a credit freeze. Banks cant clear checks or make fund transfers because they are out of money and other banks cant or wont loan other banks money. The banks then have a crisis, people cant access their money and bills aren’t paid out. Shades of 1929 when thousands and thousands of banks went under and people and businesses lost all their money.

To prevent this from happening the Federal reserve banks will step in and loan money to the banks overnight or on 14 day loans so that financial activity continues to function. The banks put up collateral against the loans. This collateral is returned when the banks pay back the loans usually the next day as deposits are made into the bank. This happened in 2008 during the financial crisis. The last time the Fed stepped in and helped the banks out.

Ok but what happens if the banks can’t balance their books because more and more loans default and causes cash shortages to get worse? When banks have so many loans default or are late, they no longer can borrow overnight loans from other banks or the Fed. They don’t have assets to secure loans, they are bankrupt and become insolvent. If these banks are big enough or many banks are in trouble the financial system crashes and everyone’s deposits disappear. They loaned the deposits out and didn’t get the money back. Total wipeout 1929, Trillions sunk into the banking system in 2008 as govt. bailouts. Remember!!!

Well guess what is happening again as deficits and debt keep mounting day after day, week after week, month after month, year after year. The Federal government is borrowing a trillion dollars a year to pay its bills. (Thanks tax cuts)

The Fed is once again loaning money to banks every night. It started at 30 billion a night Sept. 17, 2019 and hit a high of 134 Billion last Thursday Oct. 24, 2019. Here are the news stories as I’ve been collecting them over the last two months. These Fed injections of cash into the financial markets are the first since 2007/08 Great Recession.

Quotes from financial news sources.

9-17-19 Traders are scrambling to discern what caused an unexpected rate spike in a vital but murky part of the financial system—the market for repurchase agreements, known as repo.

9-18-19 CNN
A crack just emerged in the financial markets: The NY Fed spends $53 billion to rescue the overnight lending market

9-20-19 NYT
In August 2007, the repo markets suddenly tightened, in what turned out to be one of the earliest indications that there were deep problems in the financial system.

9-19-19 Federal Reserve Bank
In accordance with the Federal Open Market Committee (FOMC) directive issued September 18, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct a series of overnight and term repurchase agreement (repo) operations to help maintain the federal funds rate within the target range.

The Desk will offer three 14-day term repo operations for an aggregate amount of at least $30 billion each, as indicated in the schedule below. The Desk also will offer daily overnight repo operations for an aggregate amount of at least $75 billion each, until Thursday, October 10, 2019.

(My notes: thats a commitment of a 105 billion a night.)

9-24-19
NEW YORK (Reuters) - A key borrowing cost for Wall Street remained elevated on Tuesday near the end of the quarter even after the Federal Reserve injected $30 billion in longer-term cash into the U.S. banking system a week after turmoil in money markets.

One principle reason for that: an elevated level of government debt issuances in the past four years have sucked reserves out of the financial system.

(My note: thats what tax cuts do elevate government debt issuance.)

9-26-19 Market Insiders Magazine
Federal Reserve Bank of New York's latest schedule for repo operations through fall 2019, according to the bank's September 20 release.
* September 27: at least $75 billion in overnight repos, and at least $30 billion in 14-day repos
* September 30 to October 10: at least $75 billion in overnight repos
"After October 10, 2019, the Desk will conduct operations as necessary to help maintain the federal funds rate.

9-27-19 CNBC
it's still not clear why there was such high demand for cash. That has led for calls for the Fed to address the situation, which popped up unexpectedly mid-September, not at quarter end or during a period of financial market volatility.

(My note: Banks are not admitting to the number of loans that are delinquent or in arrears. The further behind loans get the less cash flow. The Federal Government keeps borrowing money but only pays the interest. It never pays back the principal on the loans)

9-29-19 NYT
Central bankers had thought that they had a long way to go before reserves became scarce. So until last month, they were shrinking their balance sheet and drawing down that (money) supply.
The New York Fed said it plans to keep injecting funds through Oct. 10 and has increased the sizes of these injections in recent days.

9-30-19 Wall Street Journal
Fed Adds $63.5 Billion to Financial System in Repo Transaction.

10-07-19
Fed Extends Repos Until Nov 4;
The Federal Reserve will extend its cash injections into overnight lending markets for at least another month, after pumping in more than $330 billion since mid-September, as banks face a wave of Treasury bond sales this week amid a near-record budget deficit and ongoing concern over the strength of the world's biggest economy.

Dealers Brace For $193 Billion in Treasury Sales this month to pay the governments bills.

10-15-19
(Note from me: The banking cash shortage is getting worse. Its not even being addressed as we continue to ignore a fundamental flaw in our banking system. These are the same warning signs we ignored during the 2007-09 financial crisis. Between overnight and 14 day loans it pumped over 87 billion last night into the banking system.)

Wall Street Journal:
Fed Adds $87.7 Billion To Financial System in Latest Repo Transactions
Banks asked for $67.6 billion in overnight reserves, all of which the Fed accepted
In a separate operation, banks asked for $20.1 billion in 14-day loans, all of which was accepted by the Fed, offering collateral in the form of Treasury and mortgage securities.

10-22 to 24-19
Quote:
For instance, the NY Fed pumped in $99.9 billion of cash into the financial system on Tuesday alone. It topped that by injecting $134.2 billion on Thursday.

Without the Fed, the repo market just wouldn't function anymore. That's the sad conclusion of what we've seen since September," Marey said.

(My notes: At what point do we quit pouring money into this bottomless pit?? This is what happens when you don’t pay the govt. bills with taxes but borrow money instead. This is now over 4x the money used back in September.)
END
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
User avatar
nanningbob
Trader
Posts: 4560
Joined: Sun Dec 04, 2011 1:23 pm

Economics

Post by nanningbob »

A short explanation of 2008 crash which started with its first warning shot in August 2007.
https://www.nber.org/digest/dec09/w15223.html
I trade http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3964,
I talk about my philosophy of trading here.
http://www.stevehopwoodforex.com/phpBB3 ... =38&t=3627
"The key to converting something useful to others is simplicity. Complexity is the enemy to execution." Tony Robbins
Post Reply

Return to “Macroeconomics and the Forex markets”