The Federal Reserve is shrinking its balance sheet. Bank assets are flat. The money supply is plunging. These are some of the negative indicators of the US financial system, according to DICK BOVE, chief financialstrategist at ODEON CAPITAL GROUP. Some positives: A rising stock market and the latest readings from the Personal Consumption Expenditure (PCE) and the Purchasing Managers Indices (PMI), he adds. “One of the two indicators, either the negative or positive, has to give way,” says BOVE. “My belief is that the financial system, if it doesn’t reverse itself, is going to cause the economy to slow down.” MAT VAN ALSYTNE, ODEON co-founder and managing partner, weighing up many of the prevailing financial headwinds, says that the “goldilocks”
American economy is on course to eventually make a sharp reversal. “When it happens,” he says, “it is going to be scary.”The latest PCE numbers opens the CONVERSATION. The core PCE rose in April by 0.4 percent, and by 4.7 percent year over year, raising new questions about the Fed’s thinking on interest rates. “If the PCE keeps going up, it can’t stop raising rates,” says BOVE. While inflation still remains elevated, there’s an interesting twist right at the grocery store. The CONVERSATION discusses new ODEON research on a potential price war among retail chains. Elsewhere, the CONVERSATION looks at Morgan Stanley’s announcement of 3,000 job cuts with China expected to see some of the biggest reductions. Meanwhile, Bank of Hawaii, a community bank serving home owners and local businesses is now at high risk, according to BOVE. Joining the CONVERSATION is JOHN AIDAN BYRNE who cites a new study which explains the nature of some of the money flows propping up the US stock market.
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