Central Bankers Might Start Talking – About Talking -About Tapering Bond Purchases… The minutes of the June meeting show that the bankers debated when it might be appropriate to purchase fewer bonds.
What it means— The minutes showed that various unnamed officials said they think the economy would make the “significant further progress” required to taper bond purchases earlier than previously expected. Of course, nothing is defined. Investors don’t know what progress will be deemed significant, when such progress was expected, and how fast the bankers will taper their bond purchases. At least we know they’re talking about it. That’s the first step!
The markets took the news in stride on Wednesday, but by Thursday investors appeared to get the jitters. The major stock indices, which had all reached record highs, gave up a bit of ground. It’s not hard to see the connection between record levels, upcoming earnings announcements, and the Fed possibly draining the punch bowl. “To sell or not to sell,” is open for debate.
U.S. Economy Has Almost as Many Job Openings as Unemployed Workers… The number of job openings rose to 9.21 million in May, marking another record and almost matching the 9.8 million people unemployed.
What it means— Is it structural or seasonal? That’s the question. If we’re facing structural unemployment, then the skills and locations of workers don’t match the jobs available. That takes a long time to correct. If it’s seasonal (as in, the COVID season), then when kids go back to school and the weekly federal unemployment bonus checks run out, we should see an influx of workers into the labor market. If this happens, then more workers will fill positions even if the unemployment rate ticks up a bit.
It’s probably a mix, with one caveat that the central bankers and the Wall Street Journal are just now understanding: roughly two million people who left the workforce during the pandemic didn’t quit, they retired. Unlike during and after the Great Financial Crisis, homes and stocks owned by new retirees are rising in value making it easier to kiss the working world goodbye. It will be difficult to entice these people back to the daily grind.
Fed Repo Operations Double to Nearly $1 Trillion… The Fed sold nearly $1 trillion in bonds in the overnight repurchase market (o/n repo) on June 30, up from a record of $500 billion during the first weeks of June. The total declined to $790 billion on July 8.
What it means— All that cash printed by the Fed must go somewhere. When the Fed prints money to buy bonds on the secondary market, eventually the cash ends up as someone else’s deposit. Banks can’t handle and don’t want any more deposits, so they shun new money by offering unattractive deposit rates. Those holding cash have found a new home for it; they are buying bonds for just one night from the Fed. The bonds are returned the next day. Typically, such transactions are renewed on a daily basis. The Fed raised the interest rate it would pay on o/n repos after its June meeting from 0.01% to 0.05%. That’s enough to draw big interest from people looking to place billions of dollars.
Wells Fargo Closes All Personal Lines of Credit… The bank announced that all outstanding debt on lines of credit will be treated as loans and any additional available credit will be eliminated immediately.
What it means— It’s just another slap in the face to customers by their friendly, neighborhood bank. It’s gloriously ironic that Wells Fargo, famous for opening unauthorized lines of credit for customers to boost sales numbers, is now telling customers that they won’t have access to lines of credit they actually wanted. Adding insult to injury, closing a line of credit adversely affects a person’s credit rating. Wells Fargo noted this in the FAQs they sent to customers. However, they did apologize for taking away client liquidity and negatively affecting their credit scores. That’s got to count for something, right?
FBI Seizes Lego U.S. Capitol Building From Alleged Capitol Rioter’s Home… The premiere law enforcement agency in the nation, the FBI, arrested 27-year-old Robert Morss, a former Army Ranger, and accused him of participating in the riots at the U.S. Capitol on January 6 and directing others during the clashes. The FBI documents note that during the arrest, they confiscated clothing and other items Morss appeared to have with him on January 6, including a Gadsden flag and a fully assembled Lego model of the U.S. Capitol Building.
It’s not clear either why the FBI would confiscate the Lego model or why they would report such a thing, but the Internet discussions were certainly interesting. One person noted that it must be a conspiracy, because there’s no way someone actually built an entire Lego U.S. Capitol Building model.
Data supplied by HS Dent Research
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