Here is where I don't understand Snider with his constant claims that bank reserves are not money: "if this is massive-scale money printing, where’s the inflation?" He seems to think massive money printing has to create inflation, or the money isn't real; and that's just not how it works. Money only creates inflation if it circulates and WHERE it circulates. So, it wouldn't make a BIT of difference if the money the Fed is now creating in reserves (and elsewhere via bailout) is made of ones and zeros on a computer or if it was all Treasury money printed on presses and backed with gold stored in vaults. So long as all of it goes into bank vaults (whether reserves or actual hardened steel cases), the money will do NOTHING to cause inflation until it actually circulates. And banks can hold gold coins or silver certificates or printed Benjamins backed 100% by gold, as in the days of old; and it makes no difference at all. So long as they hoard them there will be no inflation from them, no matter how much of the stuff is made. The money in reserves is just as real because it is, in any of these forms, the chosen medium of financial exchange and trade of its generation. No money ever creates inflation if it stays out of circulation. The banks can loan on reserves to create even more money in the general economy than the Fed has put into reserves. They can do repos, and then the corporations do what they want with that money. Etc. So, is the Fed money real money. Yes. One can argue over whether it is a stable as silver certificates or gold-backed notes, but it is just as useful and does all the same things IF you choose to circulate it, rather than cling to it. So, where did all the Fed money go. Follow the inflation. It all got pumped into stocks and bonds where it created massive inflation. That doesn't make it "not money." Any person on earth who owns those stocks could trade those stocks for actual gold to someone who wanted some stock action, or could sell them for cash and go buy a new house. So, it's real money. It can be spent to buy anything! It's not that reserves were not real money. It is that the ENTIRE financial system was rigged to make it desirable to keep that money in "vaults." To keep it in those tight circles of reinvestment. One of the main drivers I've pointed out for that is the low capital-gains tax (trickle down doesn't trickle down). If you're going to offer people a lower tax rate on their profits/gains if they make the money by just buying and selling assets, why would they ever even think of using it to build a factory or some other kind of business? That's WAY more risky and takes WAY longer to see any profits if it does make profits, and THEN you get taxed at a higher rate on those profits IF you ever see them! So, no one is going to take that gamble! That's why I keep arguing that trickle-down economics absolutely guarantees all money (of ANY kind) will stay circulating in asset markets, except in those instances where the rich who can afford to play in those markets say, "I want to have some fun today" and go out and buy themselves a new yacht.

Thanks. Just as you were typing this, I moved my reply below where I meant for it to go.

I don't have a particular take on where 3M is going but I think its fall in April did wind up foreshadowing deeper economic troubles developing throughout the economy. A lot of economic indicators that weren't looking too bad last spring have taken a turn for the worse, and suddenly the talk of recession rose almost exponentially. So, I think the concept of 3M as a harbinger for things to come for the overall economy may be proving out.

"The unemployment rate is currently worse than one year ago." No it isn't. Your graphs clearly show it is better. Lower unemployment rates are better like a lower golf score is better.

I wish the article indicated what changed on May 29th other than statistics. (Maybe the author hasn't figured that out yet either.) Why did the eurodollar break? Why did this one measure of employment break while other measures did not? What were other things that Snyder alludes to as happening on May 29th? He sounds as though May 29th is a date that keeps coming up, but it looks in this article more like a convenient alignment of 2-3 statistical changes at most.

This sounds like the usual pro-bull story that tries its hardest to recreate a bullish narrative in bad times. I predicted the stock market would take its first plunge in January of 2018, which it did at the end of January in a record-breaking drop at the time. I predicted the market's second leg down in this protracted crash would not come until summer, which it did when the FAANG stocks that had been the market generals for a decade utterly crashed (falling by about 40%). And I predicted that the market's worst leg down would be its third event in October, and it was. Why was the future predicable. Not because I'm divinely inspired or extra brilliant or have a crystal ball or have the market rigged.... but because the Federal Reserve has the market rigged and it told us exactly what its balance-sheet unwind schedule would be. It was a fundamental deduction to conclude that the start of QT in the fall of 2017 would not amount to much because it was so small that its only effect would be the fear that it was beginning, but that when the Fed doubled that rate in January, bond yields would spike and start drawing money out of stocks. Then, the market would digest this new reality, new tax breaks would fully kick in with economic benefits that were frontloaded to fuel a massive built-in guarantee of stock buybacks, which would carry the market along until summer when the Fed's third increase in its Great Recover Rewind speed would click in at a level that would finally start to get actually serious. And then, at then, just in time for an October surprise, they would kick things up to full velocity -- a rate of financial tightening equal to 5/8 of the massive doses of financial loosening they used to goose the market to heady heights in the first place. If you look at a graph of any market index it is undeniably obvious that the market blew all to pieces in January of 2018. The dive down then was not just a jolt down, it broke the markets trend line like a falling person breaks their back landing backward on a stair rail. It couldn't be more obviously broken, and the market has failed to recover throughout the Fed's tightening period. So, until the Fed stops it Great Recover Rewind, it is going to keep rewinding its fake recovery all the back to the pit of the recession where it started. --David Haggith The Great Recession Blog

Kind of like The Mnuchin Candidate. I like the concept!

Lance, Lance, Lance, with so much in the middle of your article about how fragile the market is, how the Fed (and other central banks) will not be there to provide support if something goes wrong, and how much contagion possibility exists with the Turkish lira crisis, why on earth would you be counseling clients to cautiously move up to full 100% equity exposure -- especially in an article with the giveaway title "The Run Ends at the Highs." Here we are moving back to an all-time high at at time with all the fragility you describe, and you're counseling investors to buy in more??? --David Haggith The Great Recession Blog

Good point. It can turn the market from leaning toward being a black market to being a mainstream out-in-the-daylight market. Right now, a lot of people are afraid to get involved because it is unregulated, prey to hackers, and obscure.

Thanks, Anastasjia. (Love that name by the way.) I'm sure there can be many other factors, but I think supply and demand is the big one another. Another factor would be opportunity cost. If you're going to buy a bond, you have to ask yourself, "What other opportunities are there for me with this much money that are similar in risk, but maybe better in reward, or the same in reward but lower in risk." So, right now, with stocks looking risky in response to what was happening in the bond market, some people might actually decide to buy and hold bonds for safety (different than buying into a bond fund because bond funds can crash due to lack of liquidity (like a run on the bank); but bonds can be safely held and keep paying predictable interest for years. So, there is an equilibrium kind of force that sets in when stocks start to really crash, and people move to buying and holding bonds directly. That onslaught of buying creates more demand for the bonds and starts lowering their interest back down. That in turn, will make the stock market that is nervous right now a little less nervous if it sees bond yields going back down. In fact, one of the things that makes it nervous about seeing bond yields go up is that investors fear other investors will move out of stocks. So, it's a dynamic relationship like a game of tug-o-war.