Registered Investment Adviser Caleb Lawrence
The major averages enter the final hour with small gains on little real news. A recent review of Federal Reserve data shows that it is indeed following through on its promises to reduce its bloated balance sheet compliments of the QE or Quantitative Easing programs run in the post bust period since 2008. The small 29 billion Dollar decline last month reduced the Feds holdings to 4.437 trillion Dollars on a reduction in Treasury and Mortgage Backed Securities balances.
The 2007 financial crisis began with a pair of what was thought of at the time relatively inconsequential hedge fund failures that rapidly spiraled out of control engulfing Bear Stearns and Lehman Brothers. The recent default of Steinhoff International Holdings, and sharp credit downgrade from investment grade to junk as the multinational retail entity hurtles towards bankruptcy with 21 billion in debt outstanding plus off-balance sheet holding that could push the figure much higher. The whole thing has shades of 2008 written all over it and involves the European Central Bank and other significant multinational banks who bought the investment grade paper at par or a little higher only to watch it lose half its value. Fake transactions with subsidiaries, share price manipulation and other forms of egregious financial fraud are of course front and center. The last few years have seen substantial financial chicanery so far with minimal negative consequences, but there is rarely just one cockroach in the pantry.