Faber News Flow

U.S., China Agree to Limited Deal to Halt Trade War - WSJ Form WSJ: U.S., China Agree to Limited Deal to Halt Trade War - WSJ Updated Dec. 13, 2019 5:33 pm ET Details emerged Friday from the U.S.'s first-stage trade deal with China, which marked a milestone in President Trump's initiative to rebalance trade with Beijing but left questions over how far it goes to level the playing field for U.S. businesses. The limited agreement, capping months of sometimes-testy negotiations, calls for China to purchase more products from American farmers and other exports, U.S. officials said. In return, the U.S. put the brakes on new tariffs set to take effect Sunday and agreed to reduce some existing levies. Both sides termed it a "phase one" deal and said negotiations would continue on remaining issues. Mr. Trump called the deal "phenomenal" and told reporters in the Oval Office that the U.S. would continue to use the remaining tariffs as lever...

BIGGEST WITHDRAWALS ON RECORD There is a lot of relevant information in the text below from a Wall Street Journal article dated December 8, 2019 : "Investors have pulled $135.5 billion from U.S. stock-focused mutual funds and exchange-traded funds so far this year, the biggest withdrawals on record, according to data provider Refinitiv Lipper, which tracked the data going back to 1992." DOES 2019 LOOK ANYTHING LIKE THE MAJOR PEAK IN 2000? Given we know extreme sentiment can be a powerful contrary indicator, we would expect exuberant investors to rush into stock-based investments near a major stock market peak, which is exactly what happened in the year 2000. From a Federal Reserve Bulletin dated December 2000: "Mutual fund investors returned vigorously to equity funds, increasing the pace of net new cash flows into those funds to a record level over the first eight months of 2000." Keep in mind, the S&P 500 peaked in March 2000 and investors were still adding to...

It's been obvious for a while that the next phase of global monetary madness would be both spectacular and very different from the previous phase. The question was whether the difference would be in degree or kind. Now the answer is looking like "both." Let's start with "yield curve control," in which central banks, instead of just pushing down interest rates, intervene to maintain  the relationship  between short and long-term rates. In a recent interview, Federal Reserve Governor  Lael Brainard  said the following: "I have been interested in exploring approaches that expand the space for targeting interest rates in a more continuous fashion as an extension of our conventional policy space and in a way that reinforces forward guidance on the policy rate. In particular, there may be advantages to an approach that caps interest rates on Treasury securities at the short-to-medium range of the maturity spectrum — yield curve caps — in tandem with forward g...

In previewing today's Fed statement regarding repurchase operations, on Tuesday Curvature Securities repo expert Scott Skyrm   said that he expects  the Fed to announce a $50 billion (at least) term operation for Monday December 23 (double the current term ops) and a $50 billion (at least) term operation for Monday, December 30. This prediction was in response to Zoltan Pozsar's warning that reserve levels are too low and the result would be a market crash that could spark QE4. Well, moments ago the NY Fed did publish it latest weekly " Statement Regarding Repurchase Operations " as expected laying out the Fed's expected repo operations for the period December 13 - January 14...  and it blew Skyrm's expectations out of the water According to the statement, the NY Fed will continue to offer two-week term repo operations twice per week, four of which span year end.  In addition, the Desk will also offer another longer-maturity term repo operation that spans year...

The biggest thing about September's repo rumble wasn't the double-digit GC rate(s), it was the timing. Beginning on the Monday the day before the FOMC's regular policy meeting, Jay Powell couldn't accomplish what he had set out to. The Fed's Chairman wanted what was the second rate cut in the series to be a more placid one. A confirmation, of sorts, about how these were all no big deal. Instead, because of turmoil in repo, everything had spilled over into federal funds. And that meant the Fed had to respond; federal funds, by the FOMC's choice, remains to this day both a relatively unimportant money market as well as policymaker's preferred lever for (conveying) monetary policy. More than that, though, repo meant for the first time since 2008 that repo was being mentioned in mainstream financial conversations. The public at large mostly unaware of what goes on in money started to notice and for all the wrong reasons. What should have been another reass...

[ The Case Against the Fed , Chapter 8, "Problems for the Fractional-Reserve Banker: Insolvency."] The fractional-reserve banker, even if he violates his contract, cannot be treated as an embezzler and a criminal; but the banker must still face the lesser, but still unwelcome fact of insolvency. There are two major ways in which he can become insolvent. The first and most devastating route, because it could happen at any time, is if the bank's customers, those who hold the warehouse receipts or receive it in payment, lose confidence in the chances of the bank's repayment of the receipts and decide, en masse , to cash them in. This loss of confidence, if it spreads from a few to a large number of bank depositors, is devastating because it is always fatal. It is fatal because, by the very nature of fractional-reserve banking, the bank cannot honor all of its contracts. Hence the overwhelming nature of the dread process known as a "bank run," a process by...