Thank you Fed may we have another?
And, by another, I mean another $340Bn that the Fed paid out to their Bankster buddies in "Reverse Repo" purchases at the end of the month. That's right, the Fed essentially bought THE ENTIRE STOCK MARKET (in terms of transaction value) from the banks over the last few days of June and THAT injection of cash is how they kept the rally going into the end of the quarter.
As you can see from the NY Fed's own chart (via Dave Fry and Zero Hedge), this kind of charity buying isn't unusual for the Fed – more like Standard Operating Procedure to inflate equity prices into the end of each quarter. Does it work? Sure, look at the results:
As you can see – as the market gets more and more expensive, it takes more and more money to push it higher. Also note the Fed tweaked (hopefully not twerked – there's an image of Yellen I don't want burned in my mind!) their timing to move it close and closer to the very last day, to maximize their bang for the buck.
UNFORTUNATELY, as you can see from the S&P chart above, these effects are short-term and demand a correction in the not too distant future.
What's very interesting is that our stimulus theory is still holding up. We developed this back in 2012, through observation of the effect of Central Banksters market meddling on Global Equities and it turns out that $10Bn per quarter buys 1 S&P point. Look how perfectly that aligns on the chart!
Bill Dudley, New York Fed president, warned last month that if use of the repo facility were to grow too quickly it might “result in a large amount of disintermediation out of banks through money market funds and other financial intermediaries into the facility. This could encourage further enlargement of the shadow banking system.”
Hey, a little enlargement of the Shadow Banking system never hurt anyone, did it China? China, in fact, also pitched in with more stimulus of their own by changing the calculations they use to determine loan to deposit ratios for their banks. As of today, Chinese Banks can include negotiable CDs they sold to companies or individuals as assets and they can EXCLUDE loans made to small businesess and municipalities that are backed by bonds (even though a record number of those bonds are defaulting).
“This is another ‘targeted stimulus’ policy conducted by the Chinese authorities to help the economy regain momentum,” Zhou Hao, a Shanghai-based economist at Australia & New Zealand Banking Group Ltd., wrote in an e-mail yesterday. “The new loans extended by the Chinese commercial banks in the next few months will be significantly bigger compared with the same period of last year.”
Zhou estimates total lending in China will exceed 10Tn Yuan ($1.6Tn) in 2014, 12% more than last year’s 8.9Tn Yuan. Bank of America estimated that about 1Tn Yuan of existing loans may be excluded when calculating the ratios following this week’s change.
“If the downward pressure on the economy intensifies in the second half of the year, the government may take other easing measures,” said Guotai Junan’s Cao. “Maybe another round of targeted cuts in reserve requirement ratios.”
Great – MORE FREE MONEY!!! So, we can't really be bearish – even though China's economy is being propped up by constantly lowering bank requirements to paper over all the loans that are turning sour. Their ingenious solution – make more loans! Draghi has gone for the bazooka in Europe, Kuroda is simply a madman in Japan, Carney is GS's bag boy in the UK and Yellen makes Bernanke look like a hawk – how can you possibly fight this madness?
Tread the road cross the abyss
Take a look down at the madnessWhen the flames have their season
Will you hold to your reason
Loaded down with your talents
Can you still keep your balance
Can you live on a knife-edge?
Let's enjoy it while it lasts!
From Bloomberg, Jul 1, 2014, 11:44:08 PM
U.K. Prime Minister David Cameron
sold out Hong Kong to the Chinese when he failed to speak out
against China’s attempt to alter the treaty agreed to when
Britain handed the city over in 1997, the city’s former top
civil servant said.
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From Bloomberg, Jul 1, 2014, 6:08:24 PM
JD.com Inc. (JD) decided to push ahead with its initial public offering last quarter even as Internet stocks tumbled, volatility climbed and other technology companies delayed their share sales.
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From Bloomberg, Jul 1, 2014, 11:15:54 PM
Prime Minister Shinzo Abe’s efforts to allow Japan to defend its allies are meeting opposition from a war-wary public, concerned that broadening the remit of the military could drag the country into a conflict after almost 70 years of peace.
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From Bloomberg, Jul 1, 2014, 12:00:01 PM
The calls started months ago to the
recruitment office in the eastern Chinese province of Jiangxi,
asking how much it would cost to pass this year’s tests to join
the army. The going rate, depending on your “guanxi,” or
connections: As much as $16,000.
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From Bloomberg, Jul 1, 2014, 12:00:01 PM
By Shai Oster
July 2 (Bloomberg) – In 1970s Hong Kong, graft was so bad
expectant mothers had to bribe hospital orderlies for a glass of
water or a bedpan. Today corruption monitor Transparency
International ranks Hong Kong 15th cleanest of 177 countries.
To read the entire article, go to http://bloom.bg/1quWNHK
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From Bloomberg, Jul 2, 2014, 3:20:01 AM
Former French President Nicolas Sarkozy was charged with influence peddling, threatening to
upend his political ambitions.
To read the entire article, go to http://bloom.bg/1rWdREg
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From Bloomberg, Jul 2, 2014, 5:16:54 AM
The BOE’s Nils Blythe, Andrew Bailey, Jon Cunliffe and Spencer Dale also participate. (Source: Bloomberg)
The pound rose to a 21-month high
versus the euro after a report showed U.K. construction growth
accelerated in June, adding to signs of strength in the economy.
To read the entire article, go to http://bloom.bg/1kd7jMs
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From Bloomberg, Jul 2, 2014, 5:00:00 AM
Traci Butler and her husband cut out vacations after the U.S. recession five years ago. This week, the couple is taking their two boys on a weeklong trip that includes a July 4th visit to the nation’s capital, just a few weeks after touring Italy on their own.
To read the entire article, go to http://bloom.bg/VExcPY
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From Bloomberg, Jul 2, 2014, 5:03:47 AM
Foreign ministers from Ukraine,
Russia, Germany and France meet in Berlin this afternoon after
President Petro Poroshenko ended a cease-fire and vowed to
retake territory from separatists in the violence-torn east.
To read the entire article, go to http://bloom.bg/1rUUfjT
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From Bloomberg, Jul 1, 2014, 1:12:33 PM
As more and more Americans have been introduced this summer to soccer played at the highest level, crushing television ratings of past World Cups, many fans of U.S. Major League Soccer have been rejoicing in an I-told-you-so moment.
To read the entire article, go to http://bv.ms/V8fYdc
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From Bloomberg, Jul 1, 2014, 12:01:00 AM
Hyatt Hotels Corp. (H) is seeking to make its Park Hyatt New York, opening next month at the base of the ultra-luxury One57 condominium tower, Manhattan’s first new five-star hotel in more than a decade.
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From Bloomberg, Jul 1, 2014, 12:01:00 AM
Sushi restaurants in New York and Greenwich, Connecticut, are on a roll, with both cities ranking among the most expensive locales in the U.S. to buy the Japanese cuisine for the third year in a row.
To read the entire article, go to http://bloom.bg/1qt6KWg
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From Bloomberg, Jul 1, 2014, 8:49:22 PM
China’s Premier Li Keqiang has
promised to cut credit while also meeting a 7.5 percent economic
growth target. Record bond sales last quarter show which pledge
he’s prioritizing.
To read the entire article, go to http://bloom.bg/1jHSnWK
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From Bloomberg, Jul 2, 2014, 4:51:41 AM
He talks from York, U.K., with Anna Edwards on Bloomberg Television’s “Countdown.” (Source: Bloomberg)
London home prices jumped the most in 27 years in the second quarter as Nationwide Building Society warned that Bank of England measures to cool the U.K. property market won’t stem further gains in the short term.
To read the entire article, go to http://bloom.bg/1rW9id4
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From Bloomberg, Jul 1, 2014, 9:36:16 PM
Japan’s consumer prices climbed at the fastest pace in 32 years, boosted by a sales-tax increase and higher utility charges that are squeezing household budgets as wage gains remain limited. Kumada speaks with Rishaad Salamat and Angie Lau on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)
Japanese companies forecast sustained
price gains, providing support for the Bank of Japan’s campaign
to generate stable inflation.
To read the entire article, go to http://bloom.bg/TBadU3
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From Bloomberg, Jul 2, 2014, 2:57:44 AM
Hong Kong’s de facto central bank
stepped in for the first time since December 2012 to prevent the
city’s currency from rising against the U.S. dollar.
To read the entire article, go to http://bloom.bg/1qufWcZ
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From Bloomberg, Jul 2, 2014, 3:41:21 AM
He talks from York, U.K., with Anna Edwards on Bloomberg Television’s “Countdown.” (Source: Bloomberg)
Rules requiring U.K. homebuyers to
prove they can afford their mortgages after interest rates rise
have prompted a jump in fraudulent home-loan applications,
property appraiser e.surv said.
To read the entire article, go to http://bloom.bg/1rWhIB9
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From Bloomberg, Jul 1, 2014, 5:16:26 PM
American factories, propelled by the
strongest orders of the year, sustained gains in June and are
poised to be part of the rebound in economic growth.
To read the entire article, go to http://bloom.bg/1mgXoen
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From Bloomberg, Jul 1, 2014, 6:00:51 PM
(Corrects status of Donald Tsang to Leung Chun-ying’s predecessor in third paragraph.)
To read the entire article, go to http://bv.ms/1m6IiX7
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From Bloomberg, Jul 1, 2014, 5:17:59 PM
The congressional version of immigration reform is finally completely dead for this Congress. And, as expected, President Barack Obama announced yesterday that he’ll do what he can within current law. Jonathan Chait has an interesting post about some of the reasons and the consequences, but I want to focus on the idea that this helps Democrats in the 2016 presidential race.
To read the entire article, go to http://bv.ms/1sVfCpm
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From Bloomberg, Jul 1, 2014, 4:06:58 PM
There are few things in the world less threatening than a meeting of European diplomats. This was demonstrated yet again today when European Union officials met to discuss how to respond to Russian President Vladimir Putin’s aggression toward Ukraine.
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From Bloomberg, Jul 1, 2014, 3:14:02 PM
At this summer’s World Series of Poker in Las Vegas, players can test their skills in 16 modern variants of our 200-year-old national card game.
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From Bloomberg, Jul 1, 2014, 2:31:20 PM
If you want to feel optimistic about U.S. saving habits, read this Medium post by a journalist who paid off six-figure student debt in six years (well done, sir!). If you want to be depressed, read this Time report on how poorly Americans have prepared for nursing home expenses. And if you want to feel downright despondent, check out the latest survey from Bankrate.com on how little people are saving right now. Forget socking it away for a nursing home; most people aren’t prepared for life’s current emergencies. Barely 15 percent of young people have six months’ worth of expenses saved, and the overall average is less than a quarter.
To read the entire article, go to http://bv.ms/1mhEB2J
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From Bloomberg, Jul 1, 2014, 1:06:00 PM
There comes a time in every financial blogger’s life when he feels compelled to write a post about dark pools that uses the phrase “latency arbitrage.” So, sorry, but this is that post. The thing is, some of the worrying about high-frequency trading and dark pools is just fear of excessive efficiency, and some of it is just paranoid fantasy. But latency arbitrage is a straightforwardly bad thing, and it is real, and now we need to talk about it.
To read the entire article, go to http://bv.ms/V8ee3M
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From Bloomberg, Jul 1, 2014, 7:23:28 PM
Facebook Inc. (FB) is being investigated
by the Information Commissioner’s Office in the U.K. after a
study showed a psychological experiment influenced what users
saw in their news feeds, raising fresh privacy concerns.
To read the entire article, go to http://bloom.bg/1mi22J7
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From Bloomberg, Jul 2, 2014, 12:01:00 AM
A single bidder bought a large cache
of bitcoins at an U.S. government auction, part of a larger pool
of the virtual currency seized from the Silk Road website.
To read the entire article, go to http://bloom.bg/1mi41NC
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Good Morning. Phil is oil a good short this morning at $105?
Good morning!
Asia followed us up but those /NKD shorts I left on from yesterday got back to 15,400 just now and I took the money and ran after burning at 15,475 overnight (but I wisely slept through it, so avoided the stress!).
Hang Seng jumped 1.5% while half the town was protesting in the streets, Shanghai up 0.44%, Nikkei officially up 0.3% after all the nonsense, India up 1.27%, Singapore up 0.666%. Europe up only slightly but Italy pretty happy at 0.72% at the moment.
So they're up because we're up and now we'll be up because they are up and the narrative works because no one is actually trading anyway. The strong volume was all red into the close – as we expected it would be on a pump and dump week.
There's a ton of people on TV telling us how the low VIX is the new normal. I never like it when they try to wash my brain – makes me think something is up…