2q Dashboard

Formally defined as “The sum of currency in circulation outside Federal Reserve Banks and the U.S. Treasury, deposits of depository financial institutions at Federal Reserve Banks, and an adjustment for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories.” Basically it’s the amount of money flowing through the economy. If you can see through the shading, Y-o-Y it’s negative and the trend appears to be negative. I’d need to see this turn less volatile and trend toward 0 before I got more constructive.

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This is the one I pay attention to because GDP is defined as the quantity of money times the velocity of money, which is the amount of turnover/churn money goes through in an economy. To borrow from that cinematic masterpiece ‘Heat,’ “the action is the juice.” If there were any “green shoots” or whatever that were going to sprout, this measure should’ve at least flattened out and maybe started to trend upward. As it is, we’re heading to lower levels of churn. Mathematically speaking, it’s possible we could see a velocity of 0. I think our current Fed leadership is going to test if you can have an economy with no transactions/churn.

2

Not much to say here, % change from YAGO shows credit is not flowing the way the Fed wants it to.

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Non-financial companies typically set-up commercial paper facilities for short-term financing that can be backed by accounts receivable or unsecured. Either way, there is no stopping this slide right now...

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Securitized revolving credit: Probably just as emblematic of the issues in lending as the last 2, maybe more. No balance sheet liquification is happening so banks can’t turn these loans into cash and liquify their sheets. That was a huge driver of lending over the past 10 years – the ability to sell credit off to investors who were hungry for yield.

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I wanted to look at the Durable Goods data in a different way, so I looked at a 3 month moving average to see what it indicates. Is this the first signs of stabilization? Yes, possibly. But you’re looking at levels 25% below this last recovery. Not all of those lost monthly orders were for cars and car parts, so there are other sectors that are going to get hit as well.

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Not so sure this backs the idea things are stabilizing… The trend is still heading lower, albeit at slower level of decline. Plus, just like the New Orders chart before, levels are still 20% lower than where they were before the credit crunch started mashing its Maalox.

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This is a chart of the Y-o-Y change in the spread between income growth measured in current dollars and measured in year 2000 chain dollars (i.e. all dollars are translated to their year 2000 dollar amounts). What the change in this spread is intended to measure is whether purchasing power is increasing or decreasing. A higher spread indicates declining purchasing power and is a proxy for inflation’s presence. Declining spread shows that inflation is slowing or possibly non-existent –i.e. deflationary. Note the ski slope down starting in 3Q 2008. There are no signs it is slowing down, either.

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One big mess… The Fed’s monetary/credit easing has not worked the way it was intended. Leverage/debt are still being destroyed Hedging is going to be key in this tape, the trick is to get it when it’s cheap – not when you and everyone else need it. There will be opportunities to go long, but they are going to fleeting in this secular bear market we find ourselves in.

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