Employers Lost Their Minds in April

Treasury Balance and Stock Prices 1

By Lee Adler

This post Employers Lost Their Minds in April appeared first on Daily Reckoning.

[This post on Employers Lost Their Minds in April is from Lee Adler. To find out more about his work – visit Wall Street Examiner by clicking HERE.]

Federal tax collection data for April was both strong and weak. Withholding taxes showed a massive gain. All other taxes were soft or down.

The big increase in income taxes boosted the US Treasury’s cash holdings, but this will be temporary as tax collections dry up and spending continues. At the same time the US won’t be able to sell new debt as it bumps up against the debt ceiling. Treasury cash should dwindle in May. The government will need to continue to rob internal accounts such as pension funds to pay the bills. Experts suggest that the debt ceiling must be raised by October 2, or the government will default.

Meanwhile, there’s a unified message in the conflicting tax data. Employers have gone into a state of delusional euphoria as the increase hiring well beyond what they need. They are following the stock market, not their sales. Excise taxes, demand for gasoline, and personal income taxes suggest that the economy is weak. Employers are always the last to get the news

What should be strong headline employment numbers should spook the market. It would confirm the idea that the Fed will tighten further this year, particularly by beginning to shrink the assets it holds. That will drain cash from the banking system, put upward pressure on bond yields and downward pressure on stock prices.

That will be exacerbated by an increase in Treasury supply when the debt ceiling is raised. A weak economy will cause deficits to widen and will confuse all market participants, not just investors. Weak economic data has heretofore been a bullish influence. That could begin to be perceived differently if it happens while the Fed is tightening.

Don Trump has spent down the massive cash hoard handed to him by the Obama crime syndicate. For that spending he got a bounce in the market and a surge in the economy. For now the debt ceiling will prevent the Don from increasing spending until a deal is done. He won’t be able to spend an extra hundred billion per month like he did from January 20 to early March. That money is gone.

The stock market and economic bump that grew out of it should also be done. Now the market and the economy must adjust to the return to earth of the February-March rocket in Federal Government spending and Treasury debt paydowns. It will also have to deal with first the thought of Fed tightening, and then the reality.

US Treasury Cash

The US Treasury’s cash balance correlates inversely with stock prices. The chart below shows the relationship. When the Treasury spends down its cash, particularly to pay down outstanding government debt, that tends to lift stock prices. When the Treasury builds cash by selling more debt, it …read more

Source:: Daily Reckoning feed

The post Employers Lost Their Minds in April appeared first on Junior Mining Analyst.