One of the (many) uses of Layered Charts is what I call the “Fed Spread” which ostensibly predicts where the S&P 500 should be in a couple of weeks’ time. Here, hot off the press, are the component parts:
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Balance Sheet
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Assets Held by Fed
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Overnight Reverse Repo
Mash ’em together, roll ’em out, bake ’em, and you get…
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Behold: the Fed Spread
In other words, we’re about 200 points overvalued right.
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