May 10, 2021


What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money?

To veterans of financial bubbles, there is plenty familiar about the present. Stock valuations are their richest since the dot-com bubble in 2000. Home prices are back to their pre-financial crisis peak. Risky companies can borrow at the lowest rates on record. Individual investors are pouring money into green energy and cryptocurrency.

This boom has some legitimate explanations, from the advances in digital commerce to fiscally greased growth that will likely be the strongest since 1983.

But there is one driver above all: the Federal Reserve. Easy monetary policy has regularly fueled financial booms, and it is exceptionally easy now.

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Fed Says Covid Is Major Financial Risk, Asset Prices Vulnerable to ‘Significant Declines’

WASHINGTON—The Covid-19 pandemic remains one of the biggest near-term risks to the stability of the financial system, the Federal Reserve said, while noting that asset prices are vulnerable to significant declines if investor sentiment shifts.

“Should risk appetite decline from elevated levels, a range of asset prices could be vulnerable to large and sudden declines, which can lead to broader stress to the financial system,” the central bank said in its semiannual Financial Stability Report. Such scenarios could materialize if progress on containing the virus falls short of expectations or the recovery stalls, straining some households and firms, the Fed

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Meme stocks and Archegos episodes highlight need for greater hedge fund transparency, Fed financial stability report says

Several recent episodes including “meme stocks” and Archegos Capital Management clearly show how risky and opaque transactions among non-banks can transmit stress into the financial system, the Federal Reserve said Thursday.

In its twice-yearly report on the stability of the U.S. financial system, the Fed called for greater transparency at hedge funds and other non-banks. “

The Archegos event illustrates the limited visibility into hedge fund exposures and serves as a reminder that available measures of hedge fund leverage may not be capturing important risks,” said Fed Governor Lael Brainard.

“The potential for material distress at hedge funds to affect

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Opinion: Why it’ll take more than easy money from the Fed to keep sparking this bull market in stocks

Everyone “knows” that the U.S. government’s massive stimulus is the reason the U.S. stock market took off from its March 2020 lows. But, as Humphrey Neill, the father of contrarian analysis, constantly reminded his clients: “When everyone thinks alike, everyone is likely to be wrong.”

Conventional wisdom certainly appears to be based on the evidence. M2 money supply (consisting of cash, checking deposits, and so-called “near money” that can be converted into cash with little difficulty) has grown at a faster rate over the past 12 months than at any time over the last six decades. Sure enough, the S&P

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Pandemic destroyed fewer U.S. businesses than feared, Fed study shows

The Federal Reserve building is set against a blue sky in Washington, U.S., May 1, 2020. REUTERS/Kevin Lamarque/File Photo

Fewer than 200,000 businesses in the United States may have failed during the first year of the COVID-19 pandemic, a lighter toll than initially feared and one that may have had relatively little impact on unemployment, according to Federal Reserve research.

The figure contrasts with the early forecasts that the pandemic would leave America’s”Main Street” desolate as well as with polls that continue to show large percentages of U.S. small business owners are worried about their survival.

Perhaps 600,000 businesses, most

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Buttonwood – The Fed and the bond markets | Finance & economics

JEROME POWELL does not want you to misunderstand him. The Chair of the Federal Reserve knows that communication is a big part of how monetary policy works. Mr Powell speaks plainly. He is not an economist, but that probably helps, because he is less likely to resort to confusing jargon. His messages at the Fed’s press conference on March 17th were admirably clear: no change in the main policy settings; no change in Fed guidance about future shifts in policy; and no real concerns about jumpy government bond markets.

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