Archive for the ‘Lee’s Free Thinking’ Category

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires


Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:


The ‘experts’ I hear from keep saying that once 300B more in reserves have been added then the repo market will go back to normal. Everyone seems to assume that demand in the repo market has not gone up and has no analysis of what’s driving repo demand. What’s your take?

Also, I talked to a money market PM who thinks the Fed will need to create a standing repo facility so that other FDIC insured banks can get access to repo market. He said the root problem is that JPM, GS are not lending their cash to the banks who don’t have access to repo. He thinks there is no chance of a legal change to the ‘liquidity coverage ratio’ during an election year. Thoughts?

What are the ramifications of a standing repo facility? I certainly don’t know.


I want to thank Dave for sending me these questions. It reminds me that I need to keep hammering home the message that I believe, rightly or wrongly, is the correct one.

Hammering Home the Message

David, your sources don’t know what they’re talking about. They’re blowing it out their ass. They’re not talking to the Fed or the Primary Dealers. They’re talking to each other. They don’t know, and neither do I. I just track the data that I think is important for correctly identifying and staying with the market trend as it stands now.

What difference does it make anyway? Do you think they know when the Fed will stop? I sure don’t know. And I don’t think they do either.

But it doesn’t matter. The market will react when the Fed stops. Or the market will break before the Fed stops. We don’t need to make wild guesses. So what if guess right and we’re early. The stock

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Fed Not QE 2020 Vision


Fed Not QE 2020 Vision

Courtesy of 

Fed QE will continue in 2020.

2019 marked the start of the Fed’s new program of QE. We refer to it by its official name of “Not QE.” Because Jerry said so. Out of deference to the central bank we have fallen in line.

The Wall Street media says the Fed started Not QE to correct a little problem in the “plumbing” of the system. That little problem has now required that the Fed add nearly a half trillion in cash to the trading accounts of the Primary Dealers. That’s for them to then disseminate into the banking system.

The Fed doesn’t tell the dealers how to do that. It just hands over the cash to the dealers when it trades with them via Permanent Open Market Operations (POMO – outright purchases), or lends it do them via Temporary Open Market Operations (TOMO – repos). The Fed then leaves it up to the dealers what to do with that cash.

They, of course, use it to do what dealers do. They trade. They accumulate inventory, attempt to mark it up, and distribute it.

No doubt another half trillion in Fed Not QE is coming in the first half of 2020 to help them do that. And a half trillion after that, and so on and so on.

The Fed has no choice. It must do QE in 2020, and for as long as we can tell.

Fed Not QE 2020 to Boost Stocks Again

The first place that Fed QE will go in 2020, like every other year, will be into the financial markets. That usually means the stock market.

The dealers, being in the business of accumulating, marking up, and distributing financial assets at higher prices (they hope), then accumulate the assets that are easiest to mark up. With their PR machines at CNBC, the Wall Street Journal, and Bloomberg running full blast, 24-7, that usually means stocks. But they’ve had a little problem with marking up their bond inventories. They haven’t been able to mark them up. Lately they’re losing money on them.

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Powell Spews Baby Poop In Attempt To Reassure Investors


Powell Spews Baby Poop In Attempt To Reassure Investors

Courtesy of  

Let’s look at a few of Chairman Pow’s words at yesterday’s press conference. Please read them and tell me whether this sounds to you like a man who doesn’t understand what he’s doing. Or if you think he’s deliberately pulling words out of his ass, stringing them together, and spewing them from his mouth in an effort to gaslight the investing public.

I’ll take the latter. The Fed is in the propaganda business. It knows what it is doing. Double talk, lies, and utter bullshit are its stock-in-trade.

Powell’s spew was in response to a question from the confused but affable Michael Mckee of Bloomberg, who no doubt served up the question on a suggestion from his Fed handlers.

McKee: The BIS concluded in September that the repo spike was not a one off confluence of random events but reflected structural and regulatory issues that could lead to a recurrence. 

This is the utter nonsense that the Fed and Primary Dealers who own Wall Street want you to believe. The fact is that the dealers and banks could no longer continue to help finance the burgeoning Federal debt. They had reached the end of their willingness, and/or their ability, to continue to use repo funding from each other to fund the growing flood of Treasury issuance.

McKee: I’d like to ask you if you agree with the BIS findings and given that we are approaching year-end for the markets will you be taking any extra steps to ensure that funding is available in the repo and FX swaps markets.

There was a report yesterday, Credit Suisse suggesting there’s a good chance that we will see disruptions and one of the reasons they December 11, 2019 put it forward is that the Fed is at this point buying only T-bills and the market wants to sell coupons, do you have any plans to sell coupons?

I believe that McKee meant to ask if the Fed has any plans to buy coupons, not sell them. But his question was almost as nonsensical as Powell’s response,

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Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance


Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance

Courtesy of Lee Adler, Wall Street Examiner 

The Fed is ramping up “Not QE” .

The Fed bought $2.2 billion in notes today in its POMO, “not QE,” operations. Actually $2.15 billion because they sold back a whole $50 million. Must have been a little glitch in the force.

This brings the Fed’s total outright purchases of Treasuries to $170 billion since it started Not QE, on September 17.

It also did $107 billion in gross new repo loans to Primary Dealers to buy Treasuries, against $94 billion in expirations, increasing total TOMO repos outstanding to $245 billion.

So the Fed has done $415 billion in QE since it started Not QE. The Treasury has issued $517 billion in net new paper since that fateful day.

Fed Says Not QE but Really Is

Powell says it’s Not QE with a straight face. Just another garden-variety, lying, sociopath central banker.

The Fed is buying outright, or lending the Primary Dealers the money to buy 80% of all new Treasury issuance. If that ain’t monetizing the debt, then I’m not in Lisbon.


Apparently, I am.

And If that ain’t QE, then my name ain’t Lee.

It is, therefore I am.

Read Lee Adler’s Liquidity Trader risk free for 90 days! Satisfaction guaranteed or your money back.

NY Department of Welfare Announces Increased Subsidies for Primary Dealers, Thank God!


NY Department of Welfare Announces Increased Subsidies for Primary Dealers, Thank God!

Courtesy of , Wall Street Examiner

Here’s today’s press release (11/14/19) from the NY Fed verbatim. They’ve announced that they will be making special holiday welfare payments to the Primary Dealers this Christmas season. I have highlighted the relevant text.

The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has released the schedule of repurchase agreement (repo) operations for the monthly period from November 15, 2019 through December 12, 2019. In accordance with the most recent FOMC directive, the Desk will continue to offer at least $35 billion in two-week term repo operations twice per week and at least $120 billion in daily overnight repo operations.

The Desk will also offer three additional term repo operations during this calendar period with longer maturities that extend past the end of 2019. These additional operations are intended to help offset the reserve effects of sharp increases in non-reserve liabilities later this year and ensure that the supply of reserves remains ample during the period through year end. They are also intended to mitigate the risk of money market pressures that could adversely affect policy implementation. The Desk will adjust the timing and amounts of repo operations as necessary to maintain an ample supply of reserve balances over time and based on money market conditions, consistent with the directive from the FOMC.

Detailed information on the schedule and parameters of term and overnight repurchase agreement operations are provided on the Repurchase Agreement Operational Details site.

NY Fed Department of Welfare and Mendicant Services

The Fed will offer the dealers AT LEAST $120 Billion per day in overnight repos. It will offer AT LEAST $35 billion in 8, 13-15 day term repo operations. And it will offer a total of AT LEAST $55 Billion in special Christmas Giving Financing, which will almost certainly never need to be paid back.

As I pointed out in an earlier post, the Fed is effectively monetizing the Federal Budget Deficit, dollar for dollar. In addition, it is ensuring that the Dealers can carry their bloated, overstuffed inventory of Treasuries until hell freezes over, and will never,…
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Today’s Fed POMO TOMO FOMC Alphabet Soup Unspin

Courtesy of Lee Adler

But make no mistake, if the Fed wants money rates to stay down by another quarter, it will need to imagineer even more money.

That’s on top of the $281 billion it has already imagineered into existence since addressing its “one-off” repo market emergency on September 17. This came via  “Temporary” Repo Man Operations money, and $70.6 billion in Permanent Open Market Operations (POMO) money.

By my calculations that averages out to $7.4 billion per business day. That works out to a monthly pace of $155 billion or so.

If they keep this up, it will be more than enough to absorb every penny of new Treasury supply. That supply had caused the system to run out of money in mid September.  This flood of paper had been inundating the market, and will continue to inundate it. In September, that constant flow of supply finally absorbed all of the excess cash that had been available to fund the issuance.

Today's Fed POMO TOMO

Today’s Fed POMO TOMO Is Not The Same as QE, Says Powell

Powell says not to confuse it with what he called previous LSAPs- Large Scale Asset Purchases, which is Fedspeak for QE.

I don’t know about you, but I’m not confused at all. This is bigger.

Now the mix of what they’re buying is a bit different under QE New, than QE Two, and One and Three. But the practical impact is the same. The Fed injects this money into the system either via loans to Primary Dealers (repo) under TOMO, or by directly purchasing some of the dealers’ inventory of Treasuries from them.

In both cases, the Fed simply deposits the money into the Primary Dealer checking and trading accounts at the Fed. It’s money that didn’t exist before these “operations,” which is just the Fed’s fancy word for “trades.”

The Big Lie of “Open Market Operations”

In fact, the whole term “Open Market Operations (OMO)” is a euphemism. It’s third rate gaslighting, but it works.

Open Market Operations aren’t Open, they’re not in the Market, and they are trades, not “operations.” An operation is what a doctor does when she…
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Fed POMO Today – $7.501B Bill Purchase 2019-10-29

Courtesy of Lee Adler

The Fed keeps imagineering money into existence, right on schedule. But a few hundred billion doesn’t buy what it used to anymore. Stocks are only up by the width of a pubic hair, and the 10 year yield, while down a similar hair, is still above yesterday’s breakout line. 

I’ll update my thoughts on this for you later today.

Meanwhile, empty Fedwords:

Monetary policy can be implemented through outright purchases or sales of securities, which permanently changes the size of the Federal Reserve’s System Open Market Account (SOMA) portfolio.

The post Fed POMO Today – $7.501B Bill Purchase 2019-10-29 was originally published at The Wall Street Examiner – Unspinning Wall Street ™. Follow the money!

Today’s Fed POMO is Small But TOMO Shows Dealers Have Explosive Diarrhea

Courtesy of Lee Adler

In today’s Fed POMO (Permanent Open Market Operations), the Fed bought $1.6 billion in long term paper. That’s part of its regular POMO program to replace the MBS in the Fed’s SOMA (System Open Market Account) that are regularly prepaid in the normal course of business.

The purpose of the regularly scheduled program of Today’s Fed POMO was first announced in August.  It was ostensibly to keep the Fed’s balance sheet from shrinking. But the practical effect is to take inventory out of the bloated, overloaded, overleveraged, explosive, radioactive accounts of the Primary Dealers, and VOILA! CASH THEM OUT!

Of course, with the QE New programs, this is just vestigial part of the big picture QE New. But at a current rate of $20 billion per month, it’s not inconsequential. Add $60 billion a month in T-bill purchases, and $200 billion or so of defacto Standing Repo Facility TOMO (Temporary Open Market Operations) and pretty soon you’re talking real money.

Today’s Fed POMO Was Small But TOMO Was Massive

While today’s Fed POMO was small, today in TOMO, things got yooge. The Fed added a net of $41.7 billion to the total of outstanding repos. For some undoubtledly scary reason, the dealers demanded, and were granted, an additional $39 billion in overnight repo money. And they took another $2.4 billion in 14 day term repo money.

Here’s what it all looks like since the “one-off” emergency of mid September brought forth QE New.

Today's Fed POMO and TOMO

And the Dealers sang, “Yay though we walk through the valley of the shadow of death, we will fear no evil. For the Fed art with me!”


Massive TOMO Expansion Belies the Fed’s Big Lie

In case you missed it, yesterday the Fed announced a massive expansion of the emergency TOMO program. Remember, they lied out their asses when they said it was due to a “one-off” of the conjoining of corporations paying quarterly taxes at the same time as the Treasury had a big new issuance.

Yeah, it’s a one off all right. Once off per quarter, every effing quarter, every effing year. That’s right, it happens every quarter when estimated corporate taxes are due. That…
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Fed Expands De Facto Standing Repo Facility

Courtesy of Lee Adler

Notice the words, “at least.”

Nothing to see here. It’s not a standing repo facility. It’s just at least $120 billion a day. Move along. 

Statement Regarding Repurchase Operations
October 23, 2019

The Desk has released an update to the schedule of repurchase agreement (repo) operations for the current monthly period.  Consistent with the most recent FOMC directive, to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation, the amount offered in overnight repo operations will increase to at least $120 billion starting Thursday, October 24, 2019.  The amount offered for the term repo operations scheduled for Thursday, October 24 and Tuesday, October 29, 2019, which span October month end, will increase to at least $45 billion.

Detailed information on the schedule and parameters of term and overnight repurchase agreement operations are provided on the Repurchase Agreement Operational Details site.

This news came out just as I was posting this: Federal Reserve Repo Man – No Rant Today, Just the Facts and Meyer Lansky

Fed De Facto Standing Repo Facility

Knowledge is Your Power With Liquidity Trader

Meanwhile, the question to us as investors is how do we protect our own capital in a Humpty Dumpty world. To answer that, I analyze macro liquidity, show you the forces that dictate the trends, and provide common sense recommendations on how to manage your money accordingly at Liquidity Trader. So if Humpty Dumpty does have a great fall, your portfolio won’t.

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The post Fed Expands De Facto Standing Repo Facility was originally published at The Wall Street Examiner – Unspinning Wall Street ™. Follow the money!

Federal Reserve Repo Man – No Rant Today, Just the Facts and Meyer Lansky

Courtesy of Lee Adler

I’m a Federal Reserve Repo Man.

Do doodoo do. Do doodoo do do.

I’m a Federal Reserve Repo Man!

Yes I am.

Alright, so I’m losing it. What else is new?

I’m exhausted from all the useless, foaming-at-the-mouth, ranting and raving I’ve been doing lately about the Fed’s return to its criminal QE scheme. I really should stop.

Federal Reserve Repo – It’s the Same Old Same Old

It’s just the same old “rescue the dealers and bankers, enrich the hedgies, and screw the little guy,” all the time. Bernanke said, “Monetary policy has winners and losers. And you poor schnook, little people retirees, who worked hard, saved your money, did the right thing, and don’t take risk, are the losers! Nyah, nyah, nyah, nyah. Too bad. Eff you! Buy stocks!”

So why do I bother? Insanity I guess.

Anyway, here’s today’s slop. The dealers took “only” $49.85 billion in TOMO repos. That’s Temporary Open Market Operations repurchase agreements, for those of you who may just be joining us. These are overenight loans that the Fed makes to the Primary Dealers so that they aren’t forced to sell any of their under water fixed income holdings that they’ve bought on 90% margin or more.

Fed Also Adding Permanent Money

The Fed is also doing POMO- Permanent Open Market Operations, where they purchase Treasuries from the Primary Dealers outright. Today they bought $7.5 billion of T-bills. This cashes out the dealers and takes some of their bloated, festering inventories off their hands, while they lose money from falling bond prices.

Falling bond prices are, of course, the inverse of rising yields. While the Fed has been stuffing cash into the dealer accounts, that has helped bring Treasury bill interest rates and other short term rates down. But bond yields have not cooperated. They’ve risen 25 basis points since October 8.

And You Bet There Will Be More

If the Fed doesn’t find a way to stop that, it’s game over. And they know it. So watch for the next round of QE New to include additional outright bond purchases. That will be on top of the $20 billion per month in bond…
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Zero Hedge

"These Numbers Are Ugly" - WTO Forecasts Collapse In World Trade, Recovery For 2021

Courtesy of ZeroHedge View original post here.

"World trade is expected to fall by between 13% and 32% in 2020 as the COVID 19 pandemic disrupts normal economic activity and life around the world," the WTO report said. 

The Geneva-based body does not see a recovery in global trade until 2021, and even then, the outcome of recovery is mainly dependent "on the duration of the outbreak and the effectiveness o...

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The Technical Traders

Adaptive Fibonacci Suggests Much Lower Prices Yet To Come - Part I

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system suggests a much deeper price move is in the works and the current price rally will likely end near resistance levels identified by the Adaptive Fibonacci Price Modeling system.  We are posting this research post for friends and followers to help them understand the true structure of price and to allow them to prepare for what we believe will become a much deeper downside price move in the future.

Fibonacci Price Theory teaches us that price moves in waves within up and down price cycles. The recent peak in price, near February 25, 2020, has resulted in a very deep -36% price collapse in the S&P 500 (ES) recently. This dow...

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Phil's Favorites

Striking Amazon, Instacart employees reveal how a basic economic principle could derail our ability to combat the coronavirus


Striking Amazon, Instacart employees reveal how a basic economic principle could derail our ability to combat the coronavirus

Samuel Diaz, a delivery worker for Amazon Prime, loads his vehicle with groceries from Whole Foods in Miami. AP Photo/Lynne Sladky

Leigh Osofsky, University of North Carolina at Chapel Hill

A series of recent protests by the workers preparing and delivering our essential foods and other goods highlights a key risk to our ability to combat the coronavirus.

Some employees at an Amazon warehouse and Instacart “shoppers” ...

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In the rush to innovate for COVID-19 drugs, sound science is still essential


In the rush to innovate for COVID-19 drugs, sound science is still essential

Employees work on the production line of chloroquine phosphate, resumed after a 15-year break, in a pharmaceutical company in Nantong city in east China’s Jiangsu province Thursday, Feb. 27, 2020. Feature China/Barcroft Media via Getty Images

Christopher Robertson, University of Arizona; Alison Bateman-House, ...

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Coronavirus symptoms, causes, prevention and cure

By Jacob Wolinsky. Originally published at ValueWalk.

The best case situation for Coronavirus or COVID-19 is that in a few weeks it dies down and things get back to normal. However, we must entertain the possibility of a far more frightening scenario.

Warmer weather may not hurt coronavirus

April 8, 2020 Update: The number of coronavirus cases in New York State has now topped the number in Italy. New York Gov. Andrew Cuomo said 779 people died of COVID-19 in the state in a single day, marking the highest one-day death total from the virus. More than 6,200 people have died of the virus in New York, which Cuomo said is double the number of people who died there in the Sept. 11, 2001 terrorist attacks.

Many experts have been counting on the warmer months providing some relief from the coronavirus. However, a National Academies of Sciences panel told the White House t...

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Kimble Charting Solutions

Market Crash Reversal Patterns "Experiment" With History!

Courtesy of Chris Kimble

S&P 500 Index versus “Inverted” 30 Year Yield “monthly” Chart

Stocks and treasury bond yields had a wild (and scary) month of March as the financial markets crashed to new lows.

In today’s chart, we highlight this by looking at long-term “monthly” chart of the S&P 500 Index versus an “inverted” 30 Year US Treasury Bond Yield.

Note that inverting charts offers a different perspective and reduces bias. For more on this, ...

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Chart School

The Big Short movie guides us to what is next for the stock market

Courtesy of Read the Ticker

There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.

Previous Post Dow 2020 Crash Watch Dow, Three strikes and your out!

It is important to understand major WallStreet players do not want to miss out on a money making moves.  


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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
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Members' Corner

10 ways to spot online misinformation


10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...

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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream


While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...

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Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  


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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires


Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:


The ‘experts’ I hear from keep saying that once 300B more in reserves have ...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:


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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.