I told you this at the end of August.

Summary

In this video, Mike shares a casual update about his gym session before diving into a detailed analysis of government fiscal flows and market implications. He explains the unusually high August deficit as a calendar anomaly and predicts a September surplus due to shifted payments and upcoming tax drains. Mike discusses bond yields, Fed rate expectations, and seasonal market patterns, while challenging conventional wisdom on rate cuts boosting gold. Emphasizing the importance of monitoring economic inflection points, he provides actionable insights for positioning in the market. The video concludes with personal anecdotes, subscriber milestones, and a promotion for his MMT Trader subscription.

Takeaways

• 🏋️ Personal update: The speaker returned from the gym, noted low attendance, and couldn’t spar, planning to go fishing the next day.
• 📅 Government deficit in August was large due to early transfer payments from September 1st being processed on August 29th because of Labor Day.
• 📰 Media misinterpreted the August deficit as excessive government spending, ignoring the calendar effect.
• 💰 September will likely show a government surplus due to no large transfers and an upcoming tax drain on September 15th.
• 📈 Market overview: Mixed day with NASDAQ and S&P slightly up, Dow down, and minor increases in bond yields.
• 💵 10-year Treasury yield expected to hold between 3.75% and 4.20%, influenced by anticipated Fed rate cuts.
• 🏦 Fed rate expectations: Market pricing in a 25 basis point cut next Wednesday, with additional cuts likely in October and December.
• 📊 Seasonal tax drains affect market liquidity: mid-September, mid-October, and December are notable periods impacting market flows.
• 💡 Monetary policy insight: Rate cuts are argued to reduce income and dollar supply, potentially strengthening the dollar and pressuring gold, contrary to popular belief.
• 🌊 Economic flows: Government spending is high ($7 trillion annually) with net transfers around $1.7–$1.8 trillion, currently plateaued but closely monitored for inflection points.
• 🔍 Forward-looking approach: The speaker emphasizes predicting market and economic trends in advance rather than reporting historical numbers.
• 📝 Call to action: Viewers are encouraged to like, subscribe, and explore the website for more in-depth analysis and tools for market positioning.

Q & A

Why was the gym almost empty during the speaker's visit?

The speaker suggests that the low attendance may have been due to weather, as there was heavy rain that evening.

What caused the unusually large government deficit in August?

The deficit appeared larger because the first-of-the-month government payments, normally scheduled for September 1, were moved to August 29 due to Labor Day, creating a calendar-related spike.

What is the expected government surplus in September based on the speaker's analysis?

September is expected to have a large surplus because the early payments in August reduced transfers in September, and a significant tax drain is scheduled for September 15.

How does the speaker view media coverage of government deficits and surpluses?

The speaker believes the media often misinterprets deficits and surpluses, not accounting for calendar quirks like shifted payment dates, leading to misleading reports about government spending.

What were the market conditions on the day of the transcript?

The market was mixed: NASDAQ and S&P were slightly up, the Dow was slightly down, and Treasury yields backed up slightly, as the speaker had predicted.

What is the projected trading range for the 10-year Treasury yield according to the speaker?

The 10-year yield is expected to hold in a range of approximately 3.75% to 4.15%, depending on the Fed's upcoming statements and market reactions.

Why does the speaker caution against assuming rate cuts are always bullish for gold?

The speaker explains that rate cuts can reduce income in the economy and reduce the dollar supply, which can actually strengthen the dollar and may not be bullish for gold.

What are 'tax drains' and how do they affect the market?

Tax drains are periods when significant tax payments are collected, temporarily reducing liquidity in the market. They tend to create seasonally weak periods, such as in September and October.

How does the speaker suggest traders position themselves around government flows and tax drains?

Traders can anticipate market cycles by understanding the timing of government transfers and tax drains. For example, buying opportunities often resume after tax drains end, around October 15.

What are the approximate annual government spending flows and net transfers discussed in the transcript?

Annual leading government spending flows are around $7 trillion, with net government transfers of approximately $1.7–1.8 trillion.

What personal activities does the speaker share, and how do they relate to the overall video content?

The speaker mentions going to the gym and fishing, which adds a personal touch and casual tone to the video, making financial analysis more approachable for viewers.

Why does the speaker emphasize forward-looking predictions rather than retrospective analysis?

The speaker believes providing forward-looking insights gives traders an advantage in positioning for market movements, rather than just reporting historical data.