I was just reading about the record deficit the federal government ran during June–just a measly $864 billion. This was above the record April deficit of $738 billion.
During the last 4 week the Fed balance sheet has been falling week after week as 30 day repo’s ran off. This is interesting given the massive deficits since April. Is there no QE?
Looking back I see that the Fed did massive QE in March and April–a grand total of about $3 billion. Now the falling balance sheet makes some sense—all the cash was raised upfront, but has been spent at a much slower pace. My rough calculations show that we could see another few weeks before the Fed will need to start more QE—I mean is there any doubt?
With tax revenue way down–or minimally delayed, obviously we will be running massive deficits for many months to come–and you can be certain congress will approve more ‘helicopter’ money soon.
It is really had to fathom what the future holds for our economic system—I used to like to formulate my ‘outlook’–that seems to be such a waste of my old brain cells now–we are in uncharted waters.
But as I watch stocks go up week after week–‘party on’ and watching the talking heads on the business news totally ignore the hazards out there it makes one very (I mean VERY) uncomfortable. As such I keep plenty of dry powder while dabbling with a few investment grade utility baby bonds or preferreds–I may be ‘dabbling’ for some time to come–you really ‘can’t fight the Fed‘.