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Currently, the Fed is maintaining the balance sheet at a high level by reinvesting funds from maturing bonds they hold. At some point they're going to stop rein
by Finnucane 9y ago
Currently, the Fed is maintaining the balance sheet at a high level by reinvesting funds from maturing bonds they hold. At some point they're going to stop reinvesting the funds, and let the balance drop. Which means the initial impact will be in long-term rates, esp. mortgage rates. It probably won't effect stocks too much directly in the near term, but eventually will. It will be interesting to see what effect this has on certain overheated coastal real estate markets.
- cm2187 9y agoThere might be a month or two of lags but when you look at a 10y chart of the S&P vs the size of the Fed B/S, the correlation is striking.
- icebraining 9y agoDoesn't seem to be that correlated: https://www.pragcap.com/wp-content/uploads/2013/12/stupid_chart1.png https://www.pragcap.com/wp-content/uploads/2013/12/stupid_ch...
- cm2187 9y agoCorrelated from the introduction of QE of course. I made that chart a year ago: http://imgur.com/kOXtm8N http://imgur.com/kOXtm8N The correlation only started to break a couple few months ago, with the S&P skyrocketing. But many suggest this is bubble territory.
- icebraining 9y agoEven during the same period, the two graphs of the Fed sheet don't seem to match up, do you know why? I'm not clear what CERBTTAL means.
- cm2187 9y agoIt is just the bloomberg ticker for the weekly size of the Fed assets. What difference do you see? They both end up at about $4.5 trillons, they should be exactly the same.