Thought you guys might be interested in some information I posted elsewhere, yesterday.
If the U.S. Federal Reserve hadn't started on April 19th w/ the 3-per-week coupon passes, the equities markets would have capitulated. The credit-feed from other sources is either insufficient or not of dependable frequency. Not coincidentally, it was also in April that the securities component of bank credit -- all loans, leases and securities -- initiated a sharp, V-shaped recovery.
More to the insufficiency, outstanding non-financial commercial paper skyrocketed $45 billion since the first of this year, peaking and turning at a new all-time high of $260 billion. This speaks to me of an industry requirement for evermore financing in order to maintain the current level of viability. There are only three instances since 1991 of comparable growth in commercial paper: Summer 1995, late Summer/early Fall 1997, and September 1998. All three instances correlate with three record-setting y-o-y returns for the S&P 500, prior to that index turning down hard.
The only other instances that bettered the three S&P record-setters above were in Q3 1987 and the very start of the bull at year-end 1982. There are no coinciding tables for commercial paper, financial or non-financial, for those two periods.
I'm attempting to indicate that some sort of an exhaustion, or exhaustive, effort has been underway.
Also, last July, as the U.S. equities markets were slumping, the securities component of bank credit began a growth trend that did not level until October. The dollar-value of investment securities held in commercial banks doubled, $100 billion to $200 billion, during that July/October period.
I believe the coupon purchasing we've been witnessing is the Federal Reserve hand-feeding the credit system. Add to the reasons in the first passage, that the Federal Reserve may have opted for more positive control while maneuvering nearer 2000.
Today, as I may have mentioned earlier, I was surprised that more coupon purchasing was not conducted by the Fed. Also, I am suspicious of the recent move by the Federal Reserve that increases monitoring of the largest U.S. financial institutions.
So, more hand-feeding? Maybe an announcement of an enormous federal spending program? Surpluses aren't the greatest way to generate money, and it seems this boat requires enormous and ever-increasing amounts to make any headway.
As my brother often warns me, "Watch my hand,... watch my hand,...."
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