Archive for the ‘Lee’s Free Thinking’ Category

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.

https://www.newyorkfed.org/markets/pomo/operations/index.html

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!”

Amen.

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

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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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Repo Market Bank Regulations and the Slings And Arrows of Outrageous Leverage

 

Repo Market Bank Regulations and the Slings And Arrows of Outrageous Leverage

Courtesy of 

Are repo market regulations really behind the money market’s problems? That’s what bankers and their hired mouthpieces are saying.

So I need to get a few things off my chest about this notion that post financial crash Dodd-Frank bank regulations are the cause of the current repo market problems.

It’s total bullsh*t. The bankers and their superleveraged hedge fund friends, with Jamie “Teflon Don” Dimon leading the way, are all bleating like stuck pigs that, “Oh, if it weren’t for that evil witch Liz Warren, and her capital and cash coverage ratio rules, we’d have no problems in the repo market.”

What a bunch of crap. These fat pigs are so leveraged that they can’t meet margin calls if their bond portfolio values so much has downtick by a percent or two. And they’re arguing that they need even MORE LEVERAGE? WTF is wrong with these greedy [people]?

Oh, right, that’s what’s wrong. Because as we all know deep down, greed isn’t really good. Sure maybe a little bit drives innovation, but exponentially growing greed manifested in the financial markets inevitably leads to really horrific outcomes.

Take a drive through Appalchia, or the former industrial heartland towns, or our inner cities sometimes, if you want to see the physical manifestations shutting people out of participating in the economy.  While Manhattan and Greenwich, the Hamptons, Silicon Valley, LA and DC are doing just great, vast swaths of the US have been devastated. The rich are getting richer, and what was the great middle class is shrinking and getting poorer.   

Bank Leverage Regulation Isn’t The Problem

No, repo market bank regulation isn’t the problem. Bank leverage rules are not the problem. Too much leverage is the problem! They say that they need more. And paid Wall Street talking heads and analysts pick up the cudgel and agree with them? Deflecting attention


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Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 billion in less than 2 weeks. Things must really be bad out there. Much worse than we can imagine.

But is it bearish? Typically, massive money printing can only mean one thing for asset prices. Up, up and away.

Fed De Facto New QE Announcement

Here’s the NY Fed announcement covering this New Fed QE.

In accordance with the Federal Open Market Committee (FOMC) directive issued September 18, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct a series of overnight and term repurchase agreement (repo) operations to help maintain the federal funds rate within the target range.

The Desk will offer three 14-day term repo operations for an aggregate amount of at least $30 billion each, as indicated in the schedule below. The Desk also will offer daily overnight repo operations for an aggregate amount of at least $75 billion each, until Thursday, October 10, 2019. Awarded amounts may be less than the amount offered, depending on the total quantity of eligible propositions submitted. Securities eligible as collateral include Treasury, agency debt, and agency mortgage-backed securities. Additional details about the operations will be released each afternoon for the following day’s operation(s).

Here’s Where the NY Fed Tells Us that New QE is Permanent

After October 10, 2019, the Desk will conduct operations as necessary to help maintain


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Federal Reserve Bank of New York Statement On Repurchase Operation – Roll Over Beethoven!

Courtesy of Lee Adler

This is a syndicated repost courtesy of NY | Press Releases:

September 19, 2019

In accordance with the FOMC Directive issued September 18, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct an overnight repurchase agreement (repo) operation from 8:15 AM ET to 8:30 AM ET tomorrow, Friday, September 20, 2019, in order to help maintain the federal funds rate within the target range of 1-3/4 to 2 percent.

This repo operation will be conducted with Primary Dealers for up to an aggregate amount of $75 billion…

– Federal Reserve Bank of New York (Reposted with permission.)

Meanwhile, if you haven’t read it already, my extended take on this is here:

Show Me The Money Jerry! Here’s Why Fed TOMO Repos Will Be a Feature Not a Bug

The new Fed TOMO (Temporary Open Market Operations) are the first sign that the Fed must move aggressively to counter the tightening of the money markets.

Now, I’ve been forecasting this for months in Liquidity Trader. We were well aware the massive waves of Treasury supply would collide with a shortage of cash. We also knew that the exponential growth in margin and repo lending would end badly. But the necessity for the Fed to act aggressively has come upon us much quicker than I thought it would.

And this could be a game changer.

The Fed Has No Choice- It Must Print

The Fed must print wads of money to counter the immense supply pressure of wave upon wave of newly issued US Treasury securities of all durations. This supply pressure will virtually never end, as the government finances a booming US economy with constant, massive deficit spending, or, what some call “defecate” spending.

The Fed has actually been tight since 2014. It got tighter in 2017 with “normaliztion” of the balance sheet. The ECB and BoJ effectively tightened in 2018. All 3 of the big boy central banks were forced to reverse course over the past couple of…
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Show Me The Money Jerry! Here’s Why Fed TOMO Repos Will Be a Feature Not a Bug

Courtesy of Lee Adler

The new Fed TOMO (Temporary Open Market Operations) are the first sign that the Fed must move aggressively to counter the tightening of the money markets.

Now, I’ve been forecasting this for months in Liquidity Trader. We were well aware the massive waves of Treasury supply would collide with a shortage of cash. We also knew that the exponential growth in margin and repo lending would end badly. But the necessity for the Fed to act aggressively has come upon us much quicker than I thought it would.

And this could be a game changer.

The Fed Has No Choice- It Must Print

The Fed must print wads of money to counter the immense supply pressure of wave upon wave of newly issued US Treasury securities of all durations. This supply pressure will virtually never end, as the government finances a booming US economy with constant, massive deficit spending, or, what some call “defecate” spending.

The Fed has actually been tight since 2014. It got tighter in 2017 with “normaliztion” of the balance sheet. The ECB and BoJ effectively tightened in 2018. All 3 of the big boy central banks were forced to reverse course over the past couple of months. The ECB is loosening more aggressively than the Fed. The Fed had merely gone from tight to less tight.

Until this week. Suddenly, the Fed has been forced to become loose, very loose.

That’s because there’s no longer enough cash in the system to absorb what the US government deficit spending dumps on to the market. The shortgage of cash has meant that dealers and others have been forced to use debt in the form of repo and margin borrowing to finance the ever growing wads of US TP (Treasury paper) bombarding the markets.

With Cash Shortage, Fed Must TOMO Repo

If the Fed wants to maintain the appearance that it controls interest rates, it has no choice but to print the cash needed to buy up enough paper to keep private market short term rates from continually spiking to 5-10% as they have this week.

The Fed’s instant reaction so far has been to use the tool…
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Zero Hedge

Watch: SpaceX's Starship Prototype Dramatically Explodes On Launch Platform

Courtesy of ZeroHedge View original post here.

The first beta test of Elon Musk's "Starship" Mark 1 prototype didn't quite go exactly as planned unless, of course, the plan was for it to explode on the launch pad. The prototype, which was built as a "pathfinder for SpaceX's planned human-rated Starship rocket" literally saw its top explode during a pressurization test on Wednesday, according to CBS and - well, video that shows exactly that. 

Th...



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Phil's Favorites

More than 1,000 cryptocurrencies have already failed - here's what will affect successes in future

 

More than 1,000 cryptocurrencies have already failed – here's what will affect successes in future

Gaining currency? Wit Olszewski

Courtesy of Gavin Brown, Manchester Metropolitan University and Richard Whittle, Manchester Metropolitan University

Many cryptocurrencies have been launched in the past few yea...



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Digital Currencies

More than 1,000 cryptocurrencies have already failed - here's what will affect successes in future

 

More than 1,000 cryptocurrencies have already failed – here's what will affect successes in future

Gaining currency? Wit Olszewski

Courtesy of Gavin Brown, Manchester Metropolitan University and Richard Whittle, Manchester Metropolitan University

Many cryptocurrencies have been launched in the past few yea...



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Kimble Charting Solutions

Junk Bonds About To Send Stocks A Bearish Message?

Courtesy of Chris Kimble

Are junk bonds about to send stocks an important message? It looks like it from this chart!

Junk Bond ETF (JNK) has created a series of lower highs and lower lows over the past couple of years, inside of falling channel (1). When it broke support in early 2018 at (2), stocks struggled to make much upward progress for the next few months.

The rally off support last year saw JNK hit falling resistance a few months ago and some softness has set in. The small decline of late has it testing a series of higher lows at (3).

What JNK does at (3), looks to sen...



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Insider Scoop

PayPal Will Buy Honey Science For $4B

Courtesy of Benzinga

PayPal Holdings Inc. (NASDAQ: PYPL) is acquiring Honey Science Corp for $4 billion.

Honey Science Corp was founded in 2012 and is headquartered in Los Angeles. Honey helps people automatically find online coupons and discounts while ...



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Lee's Free Thinking

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)...



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The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Chart School

Dow Jones cycle update and are we there yet?

Courtesy of Read the Ticker

Today the Dow and the SP500 are making new all time highs. However all long and strong bull markets end on a new all time high. Today no one knows how many new all time highs are to go, maybe 1 or 100+ more to go, who knows! So are we there yet?

readtheticker.com combine market tools from Richard Wyckoff, Jim Hurst and William Gann to understand and forecast price action. In concept terms (in order), demand and supply, market cycles, and time to price analysis. 

Cycle are excellent to understand the wider picture, after all markets do not move in a straight line and bear markets do follow bull markets. 



CHART 1: The Dow Jones Industrial average with the 900 period cycle.

A) Red Cycle:...

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How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

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