Powell Became Neville Chamberlain When Trump and Wall Street Threatened

Twenty years after the end of the War to End All Wars on the European continent, the British government was terrified at the thought of going to war with Germany again. Hitler had become increasingly aggressive. He had already annexed Austria when he declared his intention to invade Czechoslovakia and annex the German speaking Sudetenland, on October 1, 1938.

Unprepared to counter Nazi aggression militarily, and aware of the anxiety of the British people at the mere thought of another war, British Prime Minister Neville Chamberlain decided on a policy of appeasement to keep Hitler at bay.

On September 30, 1938, Chamberlain returned from a meeting with Hitler in Munich in which he simply capitulated to German threats. He agreed to allow Germany to annex the Sudetenland. He declared to a wildly cheering crowd of his Conservative Party supporters gathered in front of 10 Downing Street:

My good friends, for the second time in our history, a British Prime Minister has returned from Germany bringing peace with honour. I believe it is peace for our time. We thank you from the bottom of our hearts. Go home and get a nice quiet sleep.

Meanwhile, a throng of 15,000 protested the capitulation in Trafalgar Square. The leader of the Labor Party suggested that the piece of paper that Chamberlain waved to his adoring crowds was “torn from the pages of Mein Kampf,” Hitler’s manifesto.  

Hitler marched into the Sudetenland unopposed. A year later he invaded Poland, and Britain and France declared war against Germany. The critics were right. Chamberlain’s capitulation was useless. It barely delayed the inevitable. But it did buy time for the United Kingdom, a crucial year to prepare for war, a war for which the nation was woefully unprepared in October 1938.

What the heck does that have to do with the new FOMC statement? Click here to find out just that, and why it’s so important to you as an investor.

This Chart Shows Exactly Where The Cash Came From for the Rally and Why That’s a Problem

If ever there was a chart that graphically illustrates where the money came from the fueled the post Christmas rally, I think I just found it. I’ll show it to you, but first give you a brief story about why it’s important.

Every month I update the data on Treasury auction investor class allotments. Pretty dry, right? Not at all. It’s actually quite fascinating. This data gives us a wealth of information on total Treasury auction supply and who’s buying it. Treasury supply is one of the key determinants of the direction of stock prices. The more Treasury supply there is, the more cash is diverted to Treasuries and away from stocks.

The data shows us the trend of total supply every month. It also shows which class of investors are providing the demand, and how the demand from each of those classes is trending. That’s important too. Knowing who’s buying how much can also give us big clues about what to expect for stock prices.  

Something very unusual came up on the charts for December.  It stuck out like a sore thumb. And it gave us visual proof of just where the money came from the drive the post Christmas stock market rally. More importantly it raises a warning about what comes after. 

Click here to see the chart, and a clear explanation of what it means for us as investors and traders