The US FED balance sheet and the current asset bubble

In my last blog I concluded that the US market is in a bubble and that the day of reckoning is close (Oeistein Helle: Market implosion is not imminent, it is already here). I started this week by selling everything and moving into a defensive portfolio of US treasuries, managed futures, gold, short European stocks and long some solid oil stocks.

These graphs tell the whole story of the current US stocks, bonds and real estate bubble:

Federal Reserve Balance Sheet, 2003 - 2015:

Source: Econbrowser.com

Federal Reserve Balance Sheet vs. S&P 500:

Source: Raymond James

Explanation: The US Fed buys less risky assets such as treasuries from market actors in order to pump liquidity into the system. The liquidity is invested by banks and others in stocks, bonds and real estate (the second chart illustrates the tight correlation between FED money printing and the value of the S&P 500). All the buying will push up asset prices. The FED recently stopped propping up the markets with liquidity (cash), making the bubble system super fragile. The fragility in combination with any external or internal shock (such as the Brexit) will eventually and most likely very soon popp the US bubble. As previously mentioned, the bubble has already popped in many other markets.


Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it.