“The short covering in TSLA ( when shorts need to close their positions and essentially “buy” whether they like it or not ) has now propelled the stock to the stratosphere, with Tesla now having a market cap higher than both ford and GM – COMBINED?? They’ve only sold 400,000 vehicles!
Kong and Musk
I loooooove Tesla, but the amount of “hot air” now, has this thing floating out of our atmosphere where the air starts to get thin…..really thin.
Regardless…..today will mark the very first day of a new DAILY CYCLE in equities where in…….we can generally look at anywhere between 18-21 days of upward activity “unless” this thing rolls over hard this afternoon or tomorrow morning.”
If anyone thinks this is “for real” – please…..I’ve got some swamp land in Florida I think you’d be interested in buying.
In being a kind, compassionate Gorilla I just I can’t help myself. I need to let you know these disturbing facts so that ( at the very least ) you can arm yourself with as much information as possible.
The Fed pumped 94 BILLION DOLLARS of funny money into the system last night…..and China chipped in for an additional 1 TRILLION YUAN to assure you, your grand children, and your goldfish that there is nothing to worry about..
Markets Floating In Outer Space
The short covering in TSLA ( when shorts need to close their positions and essentially “buy” whether they like it or not ) has now propelled the stock to the stratosphere, with Tesla now having a market cap higher than both ford and GM – COMBINED?? They’ve only sold 400,000 vehicles!
I loooooove Tesla, but the amount of “hot air” now, has this thing floating out of our atmosphere where the air starts to get thin…..really thin.
Regardless…..today will mark the very first day of a new DAILY CYCLE in equities where in…….we can generally look at anywhere between 18-21 days of upward activity “unless” this thing rolls over hard this afternoon or tomorrow morning.
Do what you will, but as per my projections some time ago……if you aren’t 100% protected OR weighted very heavily in a cash position now…..
March sees the GORILLLA MARKET coming on – AS EXPECTED.
Planning on getting short USD “again”? Maybe consider picking up some Bitcoin.
The United States central bank will inject at least $425 billion of nonexistent money into the economy by the middle of next month.
In a statement released Dec. 11, the Federal Reserve confirmed it would ramp up so-called repurchase, or “repo,” operations on key dates over the new year period.
Fed to “print” 3x Bitcoin market cap in weeks
The time of year required extra assurances for banks, the Fed claims, with repo operations designed to support their day-to-day operations.
“The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has released the schedule of repurchase agreement (repo) operations for the monthly period from December 13, 2019 through January 14, 2020,” the statement reads.
Dollar Falling Hard In January
The Fed then confirms:
“In accordance with the most recent FOMC directive, the Desk will conduct repo operations to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures around year end that could adversely affect policy implementation.”
Repo offerings on Dec. 31 and Jan. 2 will be $150 billion. By the Jan. 14 deadline, the minimum the Fed expects to generate is $425 billion.
While common, such moves involve conjuring vast new liquidity based on zero backing — essentially money printing without physically printing any money.
Critics, especially in Bitcoin (BTC) circles, have long highlighted the policy as an example of the failure of central banks to “manage” economies.
The argument forms a central tenet of Saifedean Ammous’ popular book, “The Bitcoin Standard,” in which he argues that the fall of nations and empires stems from the fall of a currency that is not allowed to operate free of manipulation.
Similar calls in favor of Bitcoin surfaced in September during a previous repo spike.
Commenting on the most recent Fed announcement, Bitcoin advocate known as Rhythm on Twitter noted that $425 billion is over three times the size of Bitcoin’s market cap.
“Everything is fine though,” he ironically summarized.
As Cointelegraph previously reported, U.S. national debt reached $23 trillion in November — around $12 million for every Bitcoin that will ever exist. That figure is now at $23.12 trillion, according to online monitoring resource U.S. National Debt Clock.
What a complete and total joke, as your purchasing power continues to dwindle / money continues to fall from the sky. Please start looking at your “escape plan” BEFORE you start seeing the massive red candles some time around March.
You’ve all heard the hype surrounding Lithium and the incredible applications / needs for future tech like car batteries / aerospace and even mental health (strange but true).
The Global X Lithium and Battery ETF has only “just now” began to breakout, paving the way for many, MANY excellent value trades / investments in several smaller Lithium companies down at these levels.
Remember: WE BUY IN THE RED and SELL IN THE GREEN Right? Right?
I have done a pile of research on several smaller mining companies, who all stand to gain considerably from a break out in Lithium names in general. One World is 100% completely and totally oversold.
This company is on the verge of something big. Ie…….a major deposit on the Baja Peninsula of Mexico ( go figure eh? ) could soon be announced as one of the largest found in recent years. I’m talking about a major, major discovery.
Looking at the chart, one might consider holding off but as far as my math goes……I can’t imagine lower. The demand for lithium is insane, and “any” new discovery / deposit will be serious news – globally.
Take it for what it is: I am a buyer down here – no questions asked. Nine cents? Common.
Lithium Stocks For Value Investing
The Salar del Diablo Property is about the same size and has similar geologic attributes as the Salar de Atacama ( huge deposit in Argentina ) , which has two lithium/brine productions with one of them, SQM that produces 27% of the world ‘s supply and has 15% of global reserves.
A little more about the company if you give a rat’s ass.
One of the larger salars in the world that is being drilled in 2019 with a 4,250 meter (14,000 feet) in 12 drill holes that started on May 24, 2019. The initial 5 drill holes did not reach the planned total depth to intersect their targets. The drilling program will resume in the fall of 2019 which may include re drilling of some of the five holes.
A large property covering a 103,430 hectare or 400 square mile salar.
All 83 geochemical surface samples taken over 80 kilometers had an average grade of 78 parts per million(ppm) lithium. 59 of these geochemical samples taken within the geophysical survey grid have an average grade of 86 ppm lithium that defines a geochemical anomaly covering 150 square kilometers. As surface samples, these results are anomalous.
The five geological conditions that are necessary to develop lithium brine are present at the Property, which include hot springs, a volcanic source rock containing lithium, fault structures, a closed basin (meaning that water does not escape the basin), and a regional volcanic heat source.
Initial geological analysis indicates an extensive and active structural environment including both north-south and lateral faults that are present throughout the survey area.
Geophysical survey results identified 3 large highly conductive zones that cover more than 54 square kilometers and may indicate the presence of brines.
Zone One may be more than 100 meters (300 feet) thick and zone three may be more than 200 meters (600 feet) thick.
The salar is estimated (based on prior gravity surveys) to be 8,000 feet deep at the western margin and could contain lithium-bearing aquifers that may be stacked to depth.
The Salar del Diablo is located 35 km from San Felipe, which is a regional service center that will likely reduce exploration and development costs. It also has a seaport that may be upgraded to ship product worldwide, including Asia.
The Salar del Diablo is about the same size and has similar geologic attributes as the Salar de Atacama, which has two lithium/brine produces with one of them, SQM that produces 27% of the world ‘s supply and has 15% of global reserves.
As I see it these guys are sitting on something absolutely incredible, but of course – we can’t know until we know for sure! Do your own homework, as I can only imagine you guys must see a new one of these things every day of the week.
The implied chance of the Federal Reserve cutting rates this month jumped above 90% Thursday following another weak economic indicator. The ISM’s services measure hit a three-year low for September, which followed a 10-year low in its manufacturing index earlier this week. Chances of a rate cut were below 50% at the end of last week.
QE5 Has already begun
The fed funds futures are now pricing in a 91.9% chance that the Fed cuts its benchmark rate to the range of 1.5% to 2% from 1.75% from 2%, according Investing.com’s Fed Rate Monitor Tool.
Expectations of a cut topped 75% in the previous session.
We are going to zero people. Zero and then SUB ZERO interest rates coming as the Fed has clearly lost all control.
You caught the 300 BILLION dollar injection thru the repo market last week ya?? Get this……that is more “fake printed money” pumped into markets in ONE WEEK….than the ENTIRE market cap of the ENTIRE CRYPTO CURRENCY MARKET. In one week!
Stay safe people. You will wake up one morning with Dow – 1200 and that will be that!
VANCOUVER, British Columbia, Aug. 27, 2019 (GLOBE NEWSWIRE) — Aequus Pharmaceuticals Inc. (TSX-V: AQS, OTCQB: AQSZF) (“Aequus” or the “Company”), a specialty pharmaceutical company with a focus on developing, advancing and promoting differentiated products, today reported financial results for the six months ended June 30, 2019 (“Q2 2019”) and associated Company developments. Unless otherwise noted, all figures are in Canadian currency.
“We’re pleased to announce a return to revenue growth in the second quarter,” said Doug Janzen, Charmain and CEO of Aequus. “The commercial team has been successfully driving sales, with Vistitan growing in unit volume by 76% in Q2 2019 over the same quarter last year.
Meanwhile, our strategic team has been executing on new collaborations to bring revenue-generating products into the territory. With the regulatory approval of the Evolve line of products expected in 2019 and continued strength in our currently marketed products, Aequus is poised to continue the trend in revenue growth over the coming quarters.”
Q2 2019 Highlights
Revenues in the first quarter 2019 were $397,263, a 5% increase over the same quarter in 2018 (“Q2 2018”) and a 20% increase over the three-month period ending March 31, 2019 (“Q1 2019”).
On May 2, 2019, the Company issued convertible debenture units of the Company at a price of $1,000 per Convertible Debenture Unit for aggregate gross proceeds to the Company of $2,348,000. Each Convertible Debenture Unit consists of one 9.5% unsecured convertible debenture of the Company in the principal amount of $1,000 and 2,380 common share purchase warrants.
Each Convertible Debenture will be convertible at the option of the holder into common shares of the Company (each, a “Debenture Share”) at a conversion price of $0.21 per Debenture Share, with interest payable semi-annually in arrears on June 30 and December 31 of each year and maturing May 2, 2022. The Company issued 5,588,240 common share purchase warrants pursuant to the debenture financing. Each Warrant entitles the holder thereof the right to purchase one common share of the Company at an exercise price of $0.22 per common share purchase warrant at any time up to May 2, 2022. The Convertible Debentures and Warrants began trading on the TSXV on May 6, 2019.
Planned Shelf Prospectus Filing to Replace Soon to Expire Existing Shelf Prospectus
The Company’s financing strategy includes maintaining an active Shelf Prospectus to give the Company the ability and flexibility to efficiently raise money by way of a public offering when market conditions are favourable or to provide resale registration rights for investors. The current Shelf Prospectus expires on September 17, 2019.
The Company is currently drafting an updated Shelf Prospectus and expects to file the preliminary short form base shelf prospectus with the securities regulatory authorities in the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario this week, a copy of which will be available under the Company’s profile on SEDAR at www.sedar.com after it is filed.
The terms of such future offerings, if any, will be established at the time of such offerings. At the time any securities covered by the Shelf Prospectus are offered for sale, a prospectus supplement containing specific information about the terms of any such offering will be filed with the applicable Canadian securities regulatory authorities.
Subsequent to June 30, 2019
In July of 2019, Aequus signed an exclusive distribution agreement with Medicom Healthcare Ltd. (“Medicom”), a United Kingdom based pharmaceutical company with a focus on preservative free therapies in ophthalmology. Under the distribution agreement, Aequus will receive commercial rights to novel portions of Medicom’s portfolio of ophthalmology products including the Evolvetrademark line of preservative free dry eye products which contains 5 commercial products and 2 products in development, an undisclosed preservative free ophthalmic medication, and the diagnostic eye drop Fluosine within Canada.
This agreement adds 9 products to Aequus’ portfolio. Aequus will have first right of refusal in Canada on Medicom’s development pipeline products.
Aequus continues to make progress in discussions to form a medically focused cannabis collaboration and expects further announcements this year.
Aequus also had positive meetings with Supernus regarding the clinical advancement of the Trokendi program and expects activities and discussions to continue.
“We are pleased to see such strong growth in our products over the first half of the year,” said Ian Ball, Chief Commercial Officer of Aequus. “As a newcomer to the intimate Canadian ophthalmology space in 2016, our team has been steadfast in building a brand through close relationships, conference sponsorships, physician webinars, and patient outreach. We are now seeing the benefit of this hard work, with Vistitan actively gaining market share from the brand leader. We are excited to continue the momentum within ophthalmology with our recently announced distribution agreement with Medicom. Medicom is currently preparing for a regulatory audit of their manufacturing facility required by Health Canada which is scheduled for October. This same facility has successfully passed audits by European regulators. Aequus and its regulatory consultants have completed the regulatory submissions for Health Canada and will be allowed to file for approval for the Evolve line as soon as the manufacturing audit is completed. This timeline of regulatory events allows for expected product approvals this year.”
Revenue for Q2 2019 was $397,263 compared to $377,855 earned in Q2 2018 and $328,996 earned in Q1 2019. The 5% and 20% revenue increases, respectively, can be primarily attributable to strategically directed promotional activities focused in markets with positive market access and reimbursement listings.
The signing of the distribution agreement with Medicom had terms consistent with the term sheet that was previously announced in March 2019. The agreement grants Aequus commercial rights to novel portions of Medicom’s portfolio of ophthalmology products including the Evolvetrademark line of preservative free dry eye products, which contains 5 commercial products and 2 products in development, an undisclosed preservative free ophthalmic medication, and the diagnostic eye drop Fluosine within Canada. This agreement adds 9 products to Aequus’ portfolio.
Launched in 2015 in Europe, the Evolvetrademark brand has grown to 5 products across 35 countries with 2 products in development. With an array of products, the brand can address the various symptoms involved with dry eye disease and blepharitis including discomfort, stinging, burning, and dryness. Currently in Canada, the dry eye market is estimated at over $90M, which includes both prescription and over-the-counter products. Aequus and Medicom are currently working with Health Canada to review Medicom’s manufacturing facility prior to submitting the regulatory package for the Evolvetrademark line of products. Aequus expects to detail these products with our existing commercial infrastructure, allowing for effective and efficient use of resources, and a seamless launch into the Canadian marketplace.
“We are very excited about the developing relationship with Medicom,” said Ian Ball, CCO of Aequus. “Not only is the fit between the two businesses ideal, but Aequus’ access to Medicom’s development pipeline will give the Company the ability to address unmet clinical and patient needs in Canada. Evolve will be launched in Canada by our existing sales infrastructure, bringing the broadest range of preservative free dry eye products to the market. Finally, the companies have discussed the possibility of expanding the agreement to cover other territories in the future which would greatly enhance the value of the partnership to both companies.”
The Company looks to continue leveraging its existing core capabilities and commercial infrastructure to expand its presence and product offerings within ophthalmology. Aequus has positioned itself as a key partner for international companies looking to access the Canadian marketplace. The Company will continue its strategy of adding to its existing product portfolio through promotional partnership agreements, asset acquisitions, in-licenses, and internal development programs.
Operating expenses for the three months ended June 30, 2019
The Company reported a Q2 2019 net loss of $678,006, an increase of 2% from the $666,243 loss in Q2 2018. The loss for the six months ended June 30, 2019 was $1,408,218 (June 2018 – $1,482,727).
Sales and marketing costs for Q2 2019 was $451,185, as compared to $363,846 in Q2 2018, an increase of $87,339 or 24%. The majority of the second quarter increase related to the addition of new sales reps and higher related salesforce expenses relative to the Q2 2018. Q2 2019 also included the addition of a National Sales Manager in Ophthalmology, a new position created after June 30, 2018. Non-cash expenses for depreciation and amortization, and share-based payments for Q2 2019 were $47,400 and $15,362, respectively, compared to $47,279 and $11,767, respectively, in Q2 2018.
The Company incurred research and development project maintenance expense of $52,493 in Q2 2019 compared to $179,963 in Q2 2018 when the company was actively working with FDA regulatory consultants for the AQS1303 Pre-IND related work.
General administration expenses were $575,841 during Q2 2019 as compared to $502,971 in Q2 2018, an increase of $72,870 or 14%. The increase was primarily due to $84,827 in costs related to interest and accretion expense related to the convertible debt issued during the quarter in May 2019. Costs also include consulting expenses relating to corporate marketing during Q2 2019 that was not required in Q2 2018.
ABOUT AEQUUS PHARMACEUTICALS INC.
Aequus Pharmaceuticals Inc. (TSX-V: AQS , OTCQB: AQSZF ) is a growing specialty pharmaceutical company focused on developing and commercializing high quality, differentiated products. Aequus has grown its pipeline to include several commercial products in ophthalmology and transplant, and a development stage pipeline in neurology and psychiatry with a goal of addressing the need for improved medication adherence through enhanced delivery systems.
As a complement to its focus in neurology, our most recent addition to the development pipeline was a long-acting form of medical cannabis, where there is a high need for a consistent, predictable and pharmaceutical-grade delivery of products for patients.
Aequus intends to commercialize its internal programs in Canada alongside its current portfolio of marketed established medicines and will look to form strategic partnerships that would maximize the reach of its product candidates worldwide.
Aequus plans to build on its Canadian commercial platform through the launch of additional products that are either created internally or brought in through an acquisition or license; remaining focused on highly specialized therapeutic areas.
CannaOne Launches CBD USA Marketplace (TheBWellMarket.com) Becoming the First CBD Focused Online Marketplace
Vancouver, British Columbia, July 10, 2019 — CannaOne Technologies (CNNA: CSE/FSE: 3CT) (“CannaOne” or the “Company”) is proud to announce the launch of BWell CBD online marketplace on June 24th, 2019. This exhibits the company’s launch of its first revenue model, as well as, establishing CannaOne as one of the first CBD focused online marketplaces in an industry that is estimated to be valued at over US$16 Billion by 2025 in US alone, according to analysis Cowen & Co.
In addition to the successful launch of its online platform ahead of schedule, the company has already received over 11,000 customer sign-ups seeking access to purchase almost 100 individual CBD products.
Reward programs were also implemented throughout the pre-launch campaign to encourage loyalty, customer retention and community building.. CannaOne (CNNA) aims to maintain the momentum by continually running sign-up and awareness campaigns to increase and expand it’s customer base as the marketplace grows exponentially.
CannaOne’s CEO, Mr. Riby-Williams stated, “our teamwork has been validated by reaching this significant milestone and we have proven our strengths in platform development and marketing. The Company’s BWell Online Marketplace ( thebwellmarket.com ) was launched just months after the Farm Bill was passed in the US, which has opened up a plethora of opportunities to sell and market CBD products. We are truly in on the ground floor level of this rapidly growing CBD revolution in America and we’re now ready to compete as a dominant player in this online space.”
“The realization of the BWell Market portal has proved the Company’s competence as a premium developer of enterprise online marketplace solutions including, site engineering, inbound marketing, running a successful pre-launch campaign, stocking the shelves with leading global CBD brands and the successful marketing campaigns all in just a few months.
The BWell Marketplace encapsulates all of these key components. The Company is now well positioned to provide third party providers, a premium turnkey technology solution for their CBD products that not only supplies them with products, but educates and engages their community from the ground up. Our immediate goal is to “cookie cutter” this process and launch more marketplaces in other countries around the world. ”
The USA CBD Market:
CBD, a non-psychoactive cannabinoid found in cannabis, has had a surge in popularity over the past couple of years. Unlike THC, the chemical compound that gives marijuana its signature effect, CBD has been shown to help with everything from PTSD and anxiety to MS and epilepsy—without the effects associated with THC. ” In past years CBD products were available mostly in head shops, with a few doctors recommending them for various maladies. But in 2017 and 2018, the products spread rapidly to natural food stores, beauty aisles, cafés and doctors’ offices. It was expected that the industry was on track to hit $591 million in 2018, and thanks to a number of factors—including, surprisingly, Senate Majority Leader Mitch McConnell—that could increase 40 times in the next four years.” – Cannabis Business Times According to a new estimate from cannabis industry analysts the Brightfield Group, “the hemp-CBD market alone could hit $22 billion by 2022.”
THE BWell Partnership
About Real Health Science
Real Health is a California based company with a focus towards delivering the highest quality CBD products to its customer base covering the California mass market in the most timely and professional services manner possible. In order to accomplish this, Real Health has established working relationships with superior providers in each vertical within our industry; U.S.A. cannabis genetics businesses, U.S.A. cannabis terpene extractors and suppliers, efficient and cost-effective hemp CBD extraction and purification labs in the USA, cGMP manufacturers of finished products, highest rated cannabis testing and certification labs & supremely effective drop shipping and logistics providers.
About CannaOne Technologies
CannaOne (CNNA) has developed Bloomkit, the first product in the Bloom Product Suite; a turnkey enterprise software solution that can be utilized by any B-to-C cannabis company.
Inherent functionalities ensure its users the highest levels of on-going customer satisfaction while the adaptability of Bloomkit, gives clients the ability to operate and satisfy regulatory environments of any governing body around the World, truly affording CannaOne (CNNA) the opportunity to serve an overall base of global clientele with a software suite that sits at the forefront of the industry.
The Bloom Product Suite is representative of complete data driven and design focused software solutions that contain diverse system architectures and provide intelligent, machine learning that will give clients detailed industry business insights and ultimately lead to the creation and management of predictive content and product recommendation engines.
I’ve been patiently awaiting the bottom in Silver, and the correlated “top” in the U.S Dollar.
We have now arrived.
The same principle in markets playing out time and time again…..commodities priced in USD fall, as the “perceived value” of the U.S Dollar rises. This “inverse correlation” will now flip – with commodities ( silver / oil ) moving decidely higher, while my ol buddy the U.S Dollar get’s back on it’s way to the basement.
You just can’t have both folks. The recent “strength” in USD coupled with the massive blow to U.S companies exporting to China is most certainly not good for markets. Remember??? Forex?
The U.S ( and every other country for that matter ) wants / “needs a weak domestic currency” in order to compete / promote sales abroad.
Here’s how the two charts look:
U.S Dollar Top
Take note of today’s candle formation = top top top.
I’m looking at a couple super cheap silver mining stocks in order to take advantage as…for the most part the sector moves as a whole. Endeavour Silver Corp ( EDR ) looking like a great way to go as it’s only 2.37 cents.
Don’t get me started about China and the trade war – this is serious shit. Markets no likey.
Haven’t you noticed? It’s not a silly headline and it’s not “that stupid Trump”. It’s serious shit gang.
I don’t own any stocks first off…….and I haven’t for months. What have I missed? Jack squat man……15 weeks of watching this thing day in day out – wiped in a few afternoons? Not my bag.
I don’t trade Forex much anymore either as it’s lost it’s appeal in comparison to “riding into the future” on a spaceship purchased with Bitcoin.
You may want to to revisit my previous posts / suggestions about cryptocurrency and consider my firm belief that we are on the cusp of an entirely “new financial paradigm” wherein – I don’t want anything to do with the phoney baloney / last gasp / hand off to retail / overvalued / bought back stocks of the day.
Wall St. is selling like mad, as the last of the “armchair investors” scrape together their last few shillings to buy stocks – right at the top. Just like always. This will never change.
Did you happen to see any of the recent crypto currency gains? Gary? You there? You dolt. Way to go man….running a pay service with suggestions that crypto will go to zero….pure brilliance.
From a technical standpoint, you stock jockey’s are gonna catch another break here mid week with the equities cycle on day 44 now. we are totally oversold and the bounce will come within days “if not” tomorrow. I don’t question that stocks will bob along over the next 3 – 4 months but……if they do get anywhere near the previous highs…once again you’d count yourself as “batshit lucky”.
Dow now at support
Here on the weekly chart we can clearly see an area of support and resistance around these levels, and the daily trend is still “up” so……another run towards the highs quite probable, although please keep in mind…
This will be the 4th attempt to break thru. How does that line up with a recession on deck? Perfectly…if you plan to sell.
Bitcoin is on a tear as expected but I assume it will pull back to a new level of support here soon – then be off to the races FOREVER.
I’m just throwing out another quick reminder to all – please be cautious. Please bank profits. Please don’t buy anymore CNBC Kool-aid.
So The Fed has essentially abondonded it’s previous plan for both “raising interest rates” AND “dramatically reducing it’s current balance sheet”. Both ideas now well off the table.
Authored by Ryan McMaken via The Mises Institute,
The Federal Reserve’s Federal Open Market Committee on Wednesday voted unanimously to keep the federal funds rate unchanged. Overall, the FOMC signaled it has made a dovish turn away from the promised normalization of monetary policy which the Fed has promised will be implemented “some day” for a decade.
Although the Fed began to slowly raise rates in late 2016 — after nearly a decade of near-zero rates — the target rate never returned to even three percent, and thus remains well below what would have been a more normal rate of the sort seen prior to the 2008 financial crisis.
Much of the Fed’s continued reluctance to upset the easy-money apple cart comes from growing concerns over the strength of the economy. Although job growth numbers have been high in recent years — and this has been assumed to be proof of a robust economy — other indicators point toward less strength. Workforce participation numbers, wage growth, net worth numbers, auto-loan delinquencies and other indicators suggest many Americans are in a more precarious position than headlines might suggest.
The Fed’s refusal to follow through on raising rates, however, has highlighted this economic weakness, and today’s front-page headline in the Wall Street Journal reads: “Growth Fears to Keep Fed on Hold”
Abandoning Plans to Reduce the Balance Sheet
For similar reasons, the Fed has also signaled it won’t be doing much about its enormous balance sheet which ballooned to over four trillion dollars in the wake of the financial crisis. Faced with enormous amounts of unwanted assets such as mortgage-backed securities, the Fed began buying up these assets both to prop up — and bail out — banks and to produce an artificially high price for debt of all sort.
This kept market interest rates low while increasing asset inflation — all of which is great for both Wall Street and for the US government which pays hundreds of billions in interest on federal debt.
At best, “total balance sheet will be around $3.8 trillion, down from $4.5 trillion at its peak.” Moreover, “the Fed will soon be a net buyer of Treasurys once again,” analysts said, and some estimate “the Fed is on course to be buying $200 billion of net new Treasurys by the second half of 2020.”
Put simply: the days of quantitative easing are back, and we’re not even in a recession yet.
Some observers might simply respond with “big deal, the economy’s growing, and better yet, the Fed has given us both growth and little inflation.”
But things are not all as pleasant as they seem.
Problems with Easy-Money Policy
First of all, even by the Fed’s own measures, inflation isn’t as subdued as the headline “core inflation” or CPI measure suggests. According to the Fed’s “Underlying Inflation Gauge” which takes a broader view beyond the small basket of consumer goods used for the CPI, inflation growth over the past year has returned to the elevated levels found back in 2005 and 2006.
This hasn’t been great for consumers, and it’s been especially problematic when coupled with ultra-low interest rates. The low interest rates are a problem because people of ordinary means — i.e., the non-wealthy — don’t have the ability to access the high yield investments that wealthier investors do.
Earlier this week, finance researcher Karen Petrou explained the problem that comes from ultra-low rates which lead to yield-chasing for the wealthy:
“”When interest rates are ultra-low, wealthy households with asset managers acting on their behalf can play the stock market to beat zero or even negative returns. We’ve shown in several recent blog posts how wide the wealth inequality gap is and how disparate wealth sources help to make it so. However, even where low-and-moderate income households can get into the market, their investment advisers should not and often cannot chase yields. As a result, ultra-low rates mean negligible or even negative return.””
Thus, ordinary people are faced with rising asset prices — driven in part by the Fed’s balance sheet purchases — while also finding themselves unable to save in way that keeps up with inflation.
Meanwhile, the wealthy reap the most benefits from Fed policy as they’re able to more effectively engage in yield-chasing.
Ordinary people get the short end of the stick from Fed policy in other ways. Petrou continues:
“”Historically, pension funds and insurance companies have invested only in the safest assets. These are now in scarce supply due in large part to QE andcomparable programs by central banks around the world . Pension plans and life-insurance companies increasingly have two terrible choices: to play it safe and become increasingly unable to honor benefit obligations or to make big bets and hope for the best. Under-funded pension plans are so great a concern in the U.S. that the agency established to protect pensioners from this risk, the Pension Benefit Guaranty Corporation, faces its own financial challenges . Yield-chasing life insurers are also a prime source of potential systemic risk.””
Middle class people who have been told for decades to rely on pensions are now imperiled by Fed policy as well.
Not surprisingly, this has led to rising income inequality. While some free-market advocates tend to dismiss inequality as an unimportant metric, this is not a good approach when we’re talking about public policy. Fed policy — and resulting inequality — does not reflect natural trends arising from market transactions. Monetary policy is something imposed on markets by policymakers. And that’s what’s going on when we witness rising inequality due to the Fed’s monetary policy.
This has been going on since the late 1980s when Alan Greenspan relentlessly opened the easy-money spigot to spur economic growth throughout the 1990s. But, there were problems that resulted, as noted by Daniell DiMartino-Booth:
“”[A]t the National Association for Business Economics recent annual conference, University of California-Berkeley economics professor Gabriel Zucman presented his findings on the widening divide between the “haves” and “have nots” in the U.S. His conclusion: “Both surveys and tax data show that wealth inequality has increased dramatically since the 1980s, with a top 1 percent wealth share around 40 percent in 2016 vs. 25 – 30 percent in the 1980s.” Zucman also noted that increased wealth concentration has become a global phenomenon, albeit one that is trickier to monitor given the globalization and increased opacity of the financial system.””
Defenders of ultra-low policy tend to claim low rates aren’t the real culprit here because even middle-class buyers can take advantage of easy money.
But experience suggests this hasn’t been the case. Part of the problem is that banking regulations handed down by the Fed and other federal regulators make loaning to smaller enterprises and lower-income households less attractive. Writes Petrou:
“”But, wasn’t there a burst of lower-rate mortgage refinancings that allowed households to reduce their debt burden and thus accumulate wealth? Did low rates allow higher-risk households at least to reduce their mortgage debt through refinancings? Again, low-and-moderate income households were left behind. They continued to seek refis after the financial crisis ebbed, but subprime borrowers current on their loans regardless of loan-to-value (LTV) ratios were less likely than prime or super-prime borrowers to receive refi loans even though higher-scored borrowers may or may not have been current and lower rates enhance repayment potential.””
The overall effect suggests the accelerating reliance on quantitative easing and near-zero interest rates has been great for some Wall Street hedge fund managers — but for those at the low end of the lending and saving apparatus, things are even more constraining than ever. It’s hard to get a loan, and it’s also hard to save.
But at least the aggregate numbers are great, right?
Well, the Fed can’t brag about even that. A policy that favors billionaires might work on paper, of course, so long as the aggregate numbers point toward sizable growth. But even those numbers are so iffy as to prompt growth fears at the FOMC, and to ensure that the Fed puts an end to its promises to return policy to something that might be called normal.
As it is, it looks like we should expect a continuation of the policies which have coincided with both an unimpressive economy and rising inequality.
If that’s not evidence of the Fed’s failure, it’s hard to imagine what is.