With the Dow tumbling roughly 400 and the US dollar rallying, we are about to face one of the great threats to global financial stability.
June 19 (King World News) – This is a portion of today’s note from legend Art Cashin: Is There A Super Dove Now Imbedded In The FOMC – Danielle DiMartino Booth, who for years was the key advisor to Richard Fisher when he was President of the Dallas Fed, is now writing financial letters, which are garnering much interest in Wall Street. The two letters vary in frequency of issue.
The most frequent one is called “The Daily Feather”. It was Monday’s Daily Feather that caused buzz and comment around Wall Street. Danielle noted that John Williams was shifting from being President of the San Francisco Fed to being President of the New York Fed. Here’s a bit of what Danielle wrote:
– The U.S. government’s financing of its debt and deficits has long been dependent on the kindness of strangers in far off lands.
– Japanese holdings of U.S. Treasuries also peaked in 2014; they are the 2nd biggest holder of our debt but their share is down 17% from its high.
– The decline in foreign holdings has occurred alongside the Fed becoming a major holder of U.S. Treasuries as a natural outgrowth of its three rounds of quantitative easing (QE), which ended in 2014.
– In two weeks, Quantitative Tightening, the Fed’s program to reduce the size of its balance sheet, ramps up to $120 billion.
– The growing risk is that foreigners have just begun to pare back their holdings. Will aggressive sales take place? Well, no. Foreign holders may reduce their exposure but not at fire-sale prices.
– The working assumption is that U.S. pension funds, insurance companies and investors will step up with more than enough buying power to replace fading foreign demand, the Fed’s QT and exploding Treasury supply.
As President of the New York Fed, Williams becomes a permanent voter on the FOMC and intimately involved in all open markets operations. A position of great influence to such a notable dove.
Overnight And Overseas – Asian markets got dinged smartly on latest apparent escalation in the U.S./China trade war. Chinese markets were particularly ugly as they were forced to play catch-up, as they were on holiday for yesterday’s weakness. Shanghai plunged 3.8% (down 12% YTD). Japan was down 1.87%, while India fell 0.7%.
In Europe, London was down moderately as they remain consumed by all things Brexit. Markets on the continent got dinged as they are trade sensitive.
Draghi spoke this morning and sounded even more dovish than normal.
Among other assets, Bitcoin is a touch better, trading just above $6,700. Gold is marginally better but crude has turned soft again. The dollar is rallying against the euro and yields are lower. Both look like safe haven plays.
Consensus – As dawn hits Manhattan, futures were predicting a rather bloody opening, primarily due to the apparent escalation of the trade wars. Form chart says they are likely to try a crash and turn reversal. If they turn and fail, it could get very ugly. Keep a low profile and stay very, very nimble.
To listen to the timely KWN audio interview with James Turk that discusses the smash in the gold and silver markets CLICK HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: ANY IDIOT CAN DO IT: We Are Experiencing Some Of The Worst Behavior From Both Of Our Prior Two Bubbles CLICK HERE.
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