Back on March 23, I was interviewed by my friend Lindsay Williams for his nightly drive time business radio program in South Africa. Lindsay is a former CNBC Africa anchor who always asks the right questions and understands and respects honest, independent viewpoints about the market, including my super bearish one. While this interview is now 2 weeks old, the message remains very much on point.
As the market stages a spirited rally off a test of the lows and the 200 day moving average, it’s important to keep one thing in mind. Liquidity factors are not going in the right direction and won’t be for a long time. Consequently, I see every rally as a gift, an opportunity to sell before the real ugliness gets under way later this year.
The most important driver of liquidity, after the Fed, is the US Treasury, and it is not a positive. It is sucking hundreds of billions of dollars out of the worldwide liquidity pool that fuels financial asset purchases.
Four factors have exacerbated that problem. They all require the Treasury to borrow more money, issuing more and more debt for investors to absorb without the help of the Fed replenishing the cash pool as it did every month under QE. In effect, the Treasury is crowding out the stock market.
View this page online: https://suremoneyinvestor.com/2018/04/three-short-recommendations-as-the-treasury-sucks-up-money/