Seeking Alpha

Arnold Landy's  Instablog

Arnold Landy
Send Message
Arnold Landy is a registered investment advisor, managing clients' funds since January, 2006. His previous careers include: small business owner, analyst for "The Value line Investment Survey," urban planner/analyst for State of New Jersey, school teacher in Jersey City, carny at state... More
My company:
My blog:
    Jul 9, 2010 6:19 AM | about stocks: GLD, GLL, TBF, DIA, LQD, QQQ, SPY, TBT, TLO, TLT, ZROZ, PST, TYO, TMV

    This week's (July 8, 2010)  "U S Financial Data" from the Federal Reserve Bank of St. Louis shows that the two-month growth rate of M2 money supply is 9.5%, up from 9.2% last week.  Likewise, the year - over - year growth rate has moved up to 1.8% (still sluggish)  from 1.7%,   The trend toward acceleration in this broad measure of the money supply is very recent, but unmistakeable.  Over the first four months of 2010, M2  actually had fallen at a 2% rate.  The sudden reversal from shrinkage to robust growth in M2  is likely the result of a purposeful effort by the Federal Reserve to head off deflation.

    Gold advocates have critcized the Fed for printing too much money, but the slow growth in M2 belies this.  Bank reserves have increased many-fold, but that new money remains bottled up within the Federal Reserve system, maintained there to bolster banks' balance sheets.  The near zero rate for Federal Funds has not unleashed any flood of money into the economy, as banks have hoarded reserves, while reducing their net lending.  The trend of bank lending does seem to have flattened out, recently, and may be on the cusp of expansion.

    Robust growth in the money supply, if it continues, will boost the rate of inflation and squelch fears of deflation.  The increased liquidity will likely be a boon for stock prices, while putting upward pressure on interest rates.  This is bearish for holders of long term bonds, which have benefited in recent years from the declining rate of inflation.

    Too much inflation is to be avoided, of course.  But, a little more inflation than we have now (under 2% and falling)  can be a good thing, given our sluggish economy and moribund credit markets.

    Speculators who want to benefit from an uptick in long term interest rates should consider the Proshares Short 20+ Year Treasury ETF (NYSEARCA:TBF). 


    Disclosure: none
Back To Arnold Landy's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


  • General Electric (GE) would likely be hit hard if FASB acts to extend mark-to-market accounting to loan porfolios, as is being considered.
    Aug 24, 2009
  • Going higher, with QQQQ continuing to outperform.
    Jun 10, 2009
More »

Latest Comments

Most Commented
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.