25.36%.
That's the size of the Fed's balance sheet in relation to the US GDP. It's gone from 6% in 2008 to 25% in 2015 so 19% in 7 years is 2.7% or about 180% of our 1.5% average GDP growth over that time. So all the money being printed by the Fed isn't just responsible for the stock bubble because, without it, we'd still be CONTRACTING!
That's why the markets get the shakes every time the Fed even hints at withdrawing what is still currently $65Bn per month that is being rolled over each month. If they stop rolling it over, that $780Bn/yr (4.3% of GDP) will have to come from somewhere else and, unfortunately, there is nowhere else for it to come from. Certainly don't look to China, who have their own problems and just this morning disappointed their banks by failing to roll over $108Bn in 3-month loans that were supposed to be a "temporary" fix in March. Clearly the PBOC would rather not go down the Fed's path to monetary madness if they can avoid it.
The lack of a Chinese debt rollover tightens liquidity that’s already strained as 25 initial public offerings lock up funds and at least five regional governments sell bonds this week. The PBOC may add funds to the financial system by cutting lenders’ reserve requirements or in open-market operations – it remains to be seen how they rearrange the deck chairs on the titanic.
Nonetheless, we took the money and ran on our China ETF (FXI) July $50 puts yesterday in our Live Member Chat Room as they hit the $3.95 mark, which was up over 100% from our $1.90 entry on 5/21. Our goal had been $45 by July and that would have been $5 for a $6,200 gain on 20 contracts in our Short-Term Portfolio but given the chance to take a $4,100 gain after less than a month with more than a month to go was the proverbial bird in the hand for us – especially as you never know when China will do something else to prop up the markets. This also, of course, terminates the FREE TRADE IDEA we gave you on 5/11 ("Market Manipulation: China's Third…
