The Force Awakens?

Includes: DIA, IWM, QQQ, SPY
by: The Nattering Naybob


Discussion of the potential impacts on equity, bond, commodity, capital and asset markets regarding the following:

Jobs Market; Monetary Aggregates; Yen Dollar Carry Trade.

Yellen's Speech Problem?; Monetary Velocity; Reserves Required.

Aggregates and Reserve Balances Maintained vs SP500.

Star Wars:The Force Awakens official poster image courtesy of The Walt Disney Company.

On The Synthetic Matrix a reader commented: "Just binge read the last eight or so of your articles this weekend. Quite entertaining and informative as always. Please continue with the theme headlines, relevant narratives, entertaining links, graphs, data, et al."

On our last missive The 5:15, a reader commented: "OK, I admit it, I read your articles for the pictures. Thx."

For those who enjoy themes, graphs, images, videos and being informed while entertained, this missive might suit you, in spades. At a minimum, we highly recommend clicking on all the video links, particularly the Prologue. Get your popcorn, hot dogs, candy and soda cause it's Showtime...


It is a period of intergalactic economic malaise and currency war. Following three tightening episodes of QE, which have arrested economic growth...

Click here for the complete 90 second introductory crawl video.

Jobs Market

On April 5th in Dollar Hell? or Road to Perdition? we Nattered our concerns regarding: Job Cuts; GDP Estimate; Wages and Spending; Manufacturing and Services; Money Aggregates and Accords.

Those chickens started coming home to roost in the May BLS jobs report +38K with April revised down from +160K to +123K and March revised down from +208K to +186K. Employment gains in March and April combined were 59K less than previously reported. Over the past 3 months, job gains have averaged 116K per month. The Force Awakens?

Above note, confirming the jobs report and our Nattering, the Change in Labor Market Conditions Index with Yoy negative growth since Jan 2015, plunging to its lowest level since the GR. Shhhh! Don't ask, don't tell, carry on, all is well... The Force Awakens?

Monetary Aggregates

Above also noted in Dollar Hell? Or Road to Perdition? In Yoy % growth or ROC (rate of change) note the obvious affect of QE 1,2,3 on the monetary base (grey line) in the large camel humps; and since Q4 2015 in negative growth territory. The Force Awakens?

"by all aggregate measures, M1, M2, MZM, StLAMB, the money supply growth rates are still in contraction, with both monetary base aggregates in negative growth territory, or shrinking."

Above, upon further review, since Jan 6th note the monetary base aggregates (grey, green) decline in negative growth (up-shift) and since Feb 1st, the corresponding reaction in M1 (red). Any surprise the markets rallied off a near term bottom on Feb. 11th? The Force Awakens?

Yen Dollar Carry Trade

Above note, the yen goes up vs king dollar while M1 goes up and vice versa. The trade was off Aug 19 - Sept 30 and Nov 25 - Jan 6. Note the yen dollar carry traders going into hyperdrive from Jan 20 - May 25 and the effect their tractor beams had on M1. Coincidence? The Force Awakens?

And now it's time for intermission...

Star Wars: The Fed Awakens Yellen photo/illustration courtesy of Getty; Megan Pendergrass and CNN Money

Yellen's Speech Problem?

After Fed Head Yellen struggled to finish a speech on Sept. 24th, and had to be helped off stage, we somehow managed to ferret up the following. A rare video which perhaps explains why Yellen may have struggled to convey her thoughts regarding Fed decisions, actions and monetary policy in general. An absolute must see, enjoy. Moving West... let's get on with the show.

Monetary Velocity

On March 16th in Need For Speed? we Nattered about: Transactions Velocity (VT); Required Reserves; Is Money Printed in QE? Monetary Aggregates (M1;M2;MZM); Monetary Base (MB); Monetary Policy; Relevance and Dynamics.

"Since Q4 2007, M1 money supply velocity declining 50% from an all time high of 10.6 to 5.9, a depth not seen since 1975, with M2 and MZM also hitting all time lows. Note MZM peaking in 1980, and M2 in 1996, well before the current crisis."

Above note, upon further review, despite the decline in negative growth rates or up-shift for MB and M1, the velocity of those aggregates is still declining. The Force Awakens?

Reserves Required

Above note, with a precipitous decline since Feb 2009, Yoy growth in Reserve Balances Required making a bid off the recent low in Jan 2016. The Force Awakens?

Aggregates and Reserves Maintained vs. SP500

Above note, as Nattered in Fed Statistical Elephant Tracks, and Need For Speed? percentage change in Total Reserves Maintained with FED by Commercial Banks vs. SP500.

"...when FRB balances decline, the SP500 rises and vice versa, an inverse relationship. Since monetary aggregates and FRB balances mirror each other, is it possible that rises in monetary aggregates spur the FRB balances and the markets?" The Force Awakens?

Above note, percentage change in the St. Louis Adjusted Monetary Base vs SP500. So our previous Nattering would still seem so, and to rephrase more accurately: when StLAMB rises, FRB balances maintained rise and the SP500 declines, and vice versa. The Force Awakens?

Confirming since Feb 11th, StLAMB down, total reserve balances maintained down, SP500 up, synthetic financialism up. Meanwhile, as Howard Cosell might have said, down goes monetary velocity, down goes Capex, down goes investment in economic development, down goes manufacturing, down goes industrial production, down goes imports, down goes exports, down goes GDP, down goes the jobs market, down goes consumer spending, down goes services, down goes the economy and down goes Frazier.

Begging the questions, whats good for equities and synthetic financialism is good for the economy? What will the Fed do at next weeks meeting? and when will the force awaken? I don't know, but in a galaxy far, far away, Nick Winters will tell you...

Star Wars: The Force Awakens mashup wallpaper courtesy of The Walt Disney Company/Getty Images

Would like to thank you folks fer kindly droppin' in. You're all invited back again to this locality. To have a heapin' helpin' of Nattering hospitality. Naybob that is. Set a spell, take your shoes off. Y'all come back now, y'hear!

This is our 103rd in a series of thematically related missives which will attempt to identify the macroeconomic forces with potential to adversely effect capital, commodity, equity, bond and asset markets.

I wish to dedicate this missive to one of my mentors, Salmo Trutta, who is a prolific commenter on SA. Without Salmo's tutelage, and insistence on not masticating and spoon-feeding the baby ducks, as in learning the hard way by doing the leg work and earning it, this missive would not have been possible. To you "Proximo"... "win the crowd and win your freedom" - Spaniard.


Investing is an inherently risky activity, and investors must always be prepared to potentially lose some or all of an investment's value. Past performance is, of course, no guarantee of future results.

Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of an investment vehicle. This and other important information is contained in the prospectus and summary prospectus, which can be obtained from the principal or a financial advisor. Prospective investors should read the prospectus carefully before investing.

Market Plays

As for how all of the above ties into the potential and partial list of market plays below... the market as a whole could be influenced, and this could tie into any list of investments or assets. Those listed below happen to influence the indices more than most.

There are many macroeconomic cross sector and market asset correlations involved that affect your investments. Economic conditions, the eurodollar, global dollar debt and monetary policy all influence the valuation of the above and market plays below, via King Dollar's value, credit spreads, swap spread pricing, market making, liquidity, monetary supply and velocity, just to name a few. For a complete missive series listing covering those subject and more, click here.

The potential global economic developments discussed in this missive could affect numerous capital and asset markets, sectors, indexes, commodities, forex, bonds, mutual funds, ETFs and stocks.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.