M3 for the month of September just COLLAPSED! The monthly change from the previous month shows HUGE GROWTH from May to July of this year, with some continued growth in August, and then a total reversal in September. This bodes well for a CORRECTION in the Equity Markets! May: +92.6 billion June: +66.0 billion July: + 161.5 billion Aug: +23.4 billion Sept: -24.0 billion :eek:
I generally check the Fed's web site every couple of weeks to have a look at the money supply figures. I was wondering in recent weeks why the stockmarket remained so strong in the face of the decline in M2 and M3. Article from Mark Hulbert @ CBS MW http://cbs.marketwatch.com/news/story.asp?guid={DC538C00-FB42-4E2D-BB81-40BB99CD5282}&siteid=mktw Wondering if this is a one-month abberation or a change in printing press policy. Since it's taken the stockmarket over one month to react negatively (see data below), I'll take my cues from the stockmarket (waiting for a couple of months of declines) to tell me if debt deflation will be a problem. For the moment I'll assume that this a short-term thing.
Some extracts from http://www.federalreserve.gov/releases/h6/Current/ H.6 Table 2 MONEY STOCK MEASURES Percent change at seasonally adjusted annual rates M1 M2 M3 ---------------------------------------------------------------------------------- 3 Months from June 2003 TO Sep. 2003 5.0 4.4 7.3 6 Months from Mar. 2003 TO Sep. 2003 8.3 7.6 7.9 12 Months from Sep. 2002 TO Sep. 2003 8.1 7.2 7.2 http://www.federalreserve.gov/releases/h6/hist/h6hist10.txt SEASONALLY ADJUSTED M2 M3 Aug 18 6176.4 8985.2 25 6114.2 8926.7 Sep. 1 6122.2 8921.5 8 6119.3 8934.4 15 6116.3 8953.0 22 6107.0 8928.9 29 6092.7 8921.9 Oct. 6 6086.7 8882.9
Yesterdays release of Money Stock measures shows a HUGE drop in Money Supply across the board M1 M2 M3. Since Mid August Money Supply has been SHRINKING, this does not bode well for the equity markets! Loss of liquidity means equity markets will have a much needed CORRECTION! Money Supply is the Life Blood of Equity Markets! Good Luck!
If M3 is the total national US money supply and it contracted, does this mean some of the money supply went out of the country in trade deficits and or foreigners cashing in and taking dollars out of the US or dollars flowing out of the US in some form or another? If so then there is less available to spend domestically. Or is it fair to say that in the past, the FED has inflated the money supply faster than it has disappeared from the US and this month, they just failed to inflate it faster than the outgo? Would appreciate an explanation from anyone.. Thanks
Very interesting indeed, however, if you shorted Friday and held, based on this economic development.......i would have to say...you just got ur arse handed to you. The market has been reacting strange indeed for the last couple of days, however.....we just have not been able to sell hard, and stay down. not yet, at least.