The Only Chart That Matters?

BarroMetrics Views: The Only Chart That Matters?

First off, a very happy Thanksgiving to my US based readers. Thanksgiving is my second best hols (Xmas is best): gratefully remembering all we have been blessed with, and in the company of friends and family, what can be better?

Turning to today’s blog….

Today’s charts, Figures 1&2, are courtesy of McCellan Financial Publications.

As Tom explains, “(The chart) compares the SP500 to the total assets held by the Fed.  That plot is made up from the total of the Fed’s Treasury holdings and its mortgage backed securities (MBS), which are sometimes referred to as “agency” debt products.  The agencies which that title refers to are Fannie Mae, Freddie Mac, etc”.

The charts speak for themselves: each time the FED has withdrawn liquidity, the market has stumbled; each time the FED has injected liquidity, the market has taken off. For me monitoring this chart, and FRED’s, Adjusted Monetary Base (Figure 3), will be important to identify when this stock market ‘bubble’ is likely to end. I use the word ‘bubble’ in the sense that the US stock market is held up by QE’s adrenalin pump.

And speaking of ‘bubble’….

It’s interesting that Bloomberg reported today that Greenspan “sees no bubble at Dow 16,000”. Given that Greenspan (and the FED as a whole) have a poor track record for identifying bubbles as they occur, perhaps his comments should be taken as a contrary indicator?[G].

And, speaking of contrary indicators……

I have attached the latest missive from ‘Thoughts From Frontline‘. This is John Mauldin’s free newsletter and well worth a subscription. Though a heavy read, it  contains some insightful comments – especially Page 12.

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FIGURE 1 S&P and Treasury Holdings

sp-and-fed-2.png

FIGURE 2 S&P and Treasury Holdings

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FIGURE 3 FRED AMB

2013_11_27_otb.pdf

ATTACHMENT: Thoughts From the Frontline

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