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#175: Who Is Calling The Shots?

#175: Who Is Calling The Shots?

micksonmatch
November 08, 2024

This is the best quality of a noble mind. Honourable things inspire it. No one of noble character is pleased with what is mean and low. The vision of great achievement is what attracts them and uplifts them. Seneca, Moral Letters, 39

Message for the week: Try focusing your mind on things of real importance; that is what I am trying to do.

S2N Spotlight

A few days ago I came across a macro strategist presenting a sensational chart. It turns out the strategist either doesn’t know the history or is simply feeding us with clickbait. If I ever do, please call me out.

We all know there has been a lot of money printing and excessive liquidity pumped into the system. We all know 2020 was when the COVID-19 pandemic ruled the world. The M1 money supply did not go from $500 billion to $17 trillion in the ordinary course of a year.

M1 is the most liquid money category—the stuff you use to make payments like cash & travellers cheques. In 2020, the authorities changed the definition of M1 to include saving and money market accounts.

Here is a look at a slightly broader definition of money M2 money supply for a better look at the increase in money supply. M2 is effectively the new M1.

Despite the increase in money supply, there is some good news in the form of the Fed’s balance sheet dropping (just) below $7 trillion. The big question we need to ask is whether this trend is going to continue or are we about to turn the corner soon to more quantitative easing. If inflation remains stubborn, who will buy Treasury bonds when the Fed is lowering interest rates?

S2N Observations

To quote Trump from his 2016 election campaign. “We are going to win so much that winning will become boring.” Well, I am bored of saying the S&P 500 has made an all-time high. I am not as bored saying the same about Bitcoin as buying and holding this new asset class requires a level of conviction on another level completely.

As today has been a bit of a look at monetary policy and given the Fed and BOE reduced rates yesterday, let me share a few more observations. My G-d the curve has flattened in the last month.

The UK curve has flattened “a bit” as well.

A quick refresher of what the steepness of the yield curve looks like. We un-inverted a few weeks ago, which is meant to mean we are in recession. On the one hand, it feels like we are in a recession (cost of living crisis), but the GDP and job numbers disagree.

S2N Screener Alerts

Yesterday I reported a rare 3-sigma down day in copper futures. Well, today I report an even rarer 3-sigma up day in copper futures. It seems like Dr. Copper needs a second opinion.