Archive for the ‘Lee’s Free Thinking’ Category

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…
continue reading





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


continue reading





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


continue reading





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…
continue reading





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…
continue reading





Fed Money Market Crisis – It Rolls The Repo and Then Some

Courtesy of Lee Adler

The Fed has a money market crisis on its hands. It’s a “crisis” that everyone should have seen coming because the handwriting has been on the wall for months.

Yesterday, in an emergency Repurchase (Repo) Temporary Open Market Operation (TOMO), the Fed offered banks $75 billion in overnight loans. The central bank was responding to a crash in the money markets that saw open market repo rates surge to 10%.

You saw the news stories yesterday. The mainstream media and Wall Street talking heads acted as if this was a surprise, a shock. Meanwhile, I’ve been warning in Liquidity Trader for months that when the debt ceiling was lifted, the money markets would start to reflect the pressure soon after, and interest rates would rise.

I have also warned that it would require a response from the Fed.

After a month of increasing pressure following that lifting of the debt ceiling, that rise came with a bang yesterday. How “unfortunate” for the Fed that it came on the first day of a two day FOMC meeting. The pressure is on them to respond. But how?

Fed Money Market Crisis Was No Surprise 

Last night I posted a regular monthly update on a select group of the Fed’s weekly banking indicators. These indicators paint a beautiful picture of what is going on in the banking system with just a few charts. They’ve been warning us for the past year that the primary driver of the stock and bond rallies has been margin and repo borrowing. The exponential rise in this type of credit was an accident waiting to happen. I have repeatedly warned that, “This will not end well.”

Yesterday’s money market dislocation was the beginning of the end. I wrote in that Liquidity Trader banking report last night:

We’ve begun to see problems in the money market as a result of the massive increase in repo borrowing to finance Treasury issuance and stock speculation.  Overnight repo rates spiked to 10% today in the secondary market today. The extreme tightness suggested a lack of cash available to purchase the onslaught of Treasury borrowing totaling $228 billion over the past month.


continue reading





Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

black swans and drone strikes are common.

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A Black Swan Skeptic

Or maybe I’m just one of those “nothing surprises me” skeptics. For example, the creeping Trump dictatorship, about which most people are still in denial, hasn’t surprised me for one second. Nor would it surprise me if he and his sycophants are overwhelmingly defeated in the next election.

It would also not surprise me if there is no election, or if it is rigged for him to win. A military coup would not surprise me. A White House coup would not surprise me.

The end of constitutional government would not surprise me. I’d be more surprised if a functioning constitutional government of laws re-emerged. I’d like to think it can happen. I just think that the trend isn’t exactly promising.

With Black Swans Everywhere, Wall Street Says, “Close Your Eyes!”

And I surely don’t think that the collapse of the housing bubble and the ensuing financial crisis were black swans. Millions of people recognized the housing bubble. And many, many observers recognized it, foresaw what would happen, and even ran websites chronicling the housing bubble and warning of its demise.

I should know. I was one of them. But that was nothing special. There were hundreds of us, all with thousands, or tens of thousands of regular visitors and commenters. Millions of people were paying attention and talking about the bubble risk in 2004-2005-2006. They just weren’t Wall Street bankers or economists, who were too busy trying to shove your head up your ass so that you didn’t see all those black swans swimming with the sharks.

Everything…
continue reading





Nonfarm Payrolls Not Seasonally Adjusted Tell the Real Story – Unspinning Wall Street™

Courtesy of Lee Adler

Not seasonally adjusted nonfarm payrolls, that is, the actual numbers, give us a truer picture of the jobs market than the seasonally adjusted garbage that Wall Street spews.

Friday’s seasonally adjusted nonfarm payrolls jobs headline numbers disappointed investors with slower than expected growth. But was it really that bad?

Here’s How The Street Spun It – Wall Street Journal

Modest August Job Growth Shows Economy Expanding, but Slowly

Employers added 130,000 nonfarm jobs, jobless rate held steady at 3.7%

U.S. employment grew only modestly in August, suggesting that a global economic slowdown isn’t driving the U.S. into recession but has dented growth.

The U.S. economy added 130,000 payrolls in August, the Labor Department reported Friday, and has averaged 156,000 new jobs a month over the past three. That was down from average growth of 190,000 a month in the eight years since employment started picking up after the last recession. The August tally was propped up in part by the addition of 25,000 temporary Census Bureau workers…

Marketwatch

The Journal’s sister publication under dirty old man Murdoch’s smelly trenchcoat, Marketwatch.com, said that the number would push the Fed to cut interest rates again. The token liberal among dirty old Rupert’s organs also noted the analyst miss. Marketwatch blamed the trade war, of course, and noted that Census Bureau hiring padded the number.

U.S. creates just 130,000 new jobs in August, keeping Fed on track to cut rates

The economy added just 130,000 new jobs in August, marking the smallest increase in three months and offering more evidence that hiring has slowed amid a broadening trade dispute with China that’s disrupted the U.S. and global economies.

The soft employment figures are all but certain to keep the Federal Reserve on track to cut interest rates later this month, even after another sharp increase in wages. Hiring fell well short of the 170,000 MarketWatch forecast.

The gain in new jobs was even weaker if hiring tied to the upcoming U.S. Census is stripped out.

But How Bad Were Not Seasonally Adjusted NonFarm Payrolls?


continue reading





Watch Out Bears! Fed POMO Is Back!

Courtesy of Lee Adler

That’s right. The Fed is doing POMO again.  POMO means Permanent Open Market Operations. It’s a fancy way of saying that the Fed is buying Treasuries, pumping money into the financial markets.

Over the past 6 days, the Fed has bought $8.6 billion in T-bills and coupons. These are the first regular Fed POMO Treasury operations since the Fed ended outright QE in 2014.

Who is the Fed buying those Treasuries from?

The Primary Dealers. Who are the Primary Dealers?  I’ll let the New York Fed tell you:

Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a pro-rata basis in all Treasury auctions at reasonably competitive prices.

The Fed is Doing POMO, Injecting Cash Into Primary Dealer Accounts

When the Fed buys Treasuries from the Primary Dealers, the Fed pays them by depositing money in the dealers’s accounts at the Fed. When the dealers get cash from the Fed, you know what they do with it! They do their business. They deal. They use the cash to accumulate inventory, whether Treasuries, stocks, or whatever else they make markets in.

The dealers have had a big problem lately. They’ve been forced to accumulate unusually large inventories of Treasuries, particularly this month. That’s because the Trump Regime and the rump Congress agreed to lift the debt ceiling that had been in force since March.

The Treasury market is under assault, being deluged with new supply. Amazingly, the Treasury market hasn’t buckled. It has had the benefit of a worldwide capital flight into Treasuries as foreign economies and markets weaken. Negative interest rates have also helped drive European capital into Treasuries.

Until early August the Treasury market also had the benefit of hundreds of billions in T-bill paydowns flooding dealer and investor accounts with cash. That game ended when the debt ceiling was lifted a few days ago. The Treasury market no longer has that tailwind. Now, a massive flow of new supply creates an equally large headwind. …
continue reading





The Treasury Supply Drumbeat Has Begun

Courtesy of Lee Adler

The beat goes on. The US Treasury announced a 30 year TIPS issue today, bringing net new Treasury supply for the month so far to $119 billion. 

Here are the details:

Term and Type: 29-Year 6-Month TIPS

Reopening: Yes

Offering Amount: 7 Billion

Announcement Date: 08/15/2019

Auction Date: 08/22/2019

Issue Date: 08/30/2019

Maturity Date: 02/15/2049

PDF | XML

Supply will pound the financial markets to a pulp as far as the eye can see. Those who are currently panicking to buy Treasuries at these levels near all time lows in yield, are picking up nickels in front of steam rollers.

I’ve been warning Liquidity Trader subscribers for months that the problems would start when the debt ceiling was lifted.

Know what’s coming and what to to about it! Read Lee Adler’s Liquidity Trader risk free for 90 days! Satisfaction guaranteed or your money back.

The post The Treasury Supply Drumbeat Has Begun was originally published at The Wall Street Examiner. Follow the money!





 
 
 

Phil's Favorites

Trump Tweeting As Much As Ever Amid Twitter Standoff

 

Trump Tweeting As Much As Ever Amid Twitter Standoff

By , Statista

President Trump has signed an executive order which aims to remove some of the legal protection given to social media companies, though it is expected to face significant legal hurdles. In a nutshell, it sets out to clarify the Communications Decency Act, handing regulators the power to file legal proceedings against social media companies for the way they police content on their platforms. Trump's decision to take action comes two days after Twitter attached a fact check to one of his tweets lambasting mail-in voting. He then threatened to close ...



more from Ilene

ValueWalk

Gold supply chain in recovery mode after pandemic shutdown

By Michelle Jones. Originally published at ValueWalk.

The gold supply chain was largely shut down as the COVID-19 pandemic spread around the world. However, things are starting to open back up, and production is beginning again. The World Gold Council studied the gold supply chain, how it was impacted by the pandemic, and how the disruption of the supply chain has affected investment demand for the yellow metal.

Q1 2020 hedge fund letters, conferences and more

Disruption to the gold supply chain

The World Gold Council said the gold supply chain is entirely global because the metal is mined on evert continent except Antarctica and refined in nume...



more from ValueWalk

Biotech/COVID-19

Antigen tests for COVID-19 are fast and easy - and could solve the coronavirus testing problem despite being somewhat inaccurate

 

Antigen tests for COVID-19 are fast and easy – and could solve the coronavirus testing problem despite being somewhat inaccurate

Antibodies are incredibly good at finding the coronavirus. Antigen tests put them to work. Sergii Iaremenko/Science Photo Library via Getty Images

Courtesy of Eugene Wu, University of Richmond

In late February, I fell ill with a fever and a cough. As a biochemist who teaches a class on viruses, I’d been tracking the outbreak of...



more from Biotech/COVID-19

Zero Hedge

Ted Cruz Accuses Twitter Of Violating Sanctions Against Iran, Demands DoJ Probe

Courtesy of ZeroHedge View original post here.

We've mentioned in nearly every single one of our posts about this week's dustup between the president and Twitter that the Ayato...



more from Tyler

Kimble Charting Solutions

Tech Indicator Suggesting A Historic Top Could Be Forming?

Courtesy of Chris Kimble

Tech stocks have been the clear leader of the stock market recovery rally, this year and since the lows back in 2007!

But within the ranks of leadership, and an important ratio may be sending a caution message to investors.

In today’s chart, we look at the ratio of large-cap tech stocks (the Nasdaq 100 Index) to the broader tech market (the Nasdaq Composite) on a “monthly” basis.

The large-cap concentrated Nasdaq 100 (only 100 stocks) has been the clear leader for several years versus the ...



more from Kimble C.S.

The Technical Traders

M2 Velocity Collapses - Could A Bottom In Capital Velocity Be Setting Up?

Courtesy of Technical Traders

M2 Velocity is the measurement of capital circulating within the economy.  The faster capital circulates within the economy, the more that capital is being deployed within the economy to create output and opportunities for economic growth.  When M2 Velocity contracts, capital is being deployed in investments or assets that prevent that capital from further circulation within the economy – thus preventing further output and opportunity growth features.

The decline in M2 Velocity over the past 10+ years has been dramatic and consistent with the dramatic new zero US Federal Reserve interest rates initiated since just after the 2008 credit crisis market colla...



more from Tech. Traders

Lee's Free Thinking

US Southern States COVID19 Cases - Let's Give Credit Where Due

 

US Southern States COVID19 Cases – Let’s Give Credit Where Due

Courtesy of  

The number of new COVID 19 cases has been falling in the Northeast, but the South is not having the same experience. The number of new cases per day in each Southern state has been rangebound for the past month.

And that’s assuming that the numbers haven’t been manipulated. We know that in Georgia’s case at least, they have been. And there are suspicions about Florida as well, as the State now engages in a smear campaign against the fired employee who built its much praised COVID19 database and dashboar...



more from Lee

Chart School

Is this your local response to COVID 19

Courtesy of Read the Ticker

This is off topic, but a bit of fun!


This is the standard reaction from the control freaks.








This is the song for post lock down!







What should be made mandatory? Vaccines, hell NO! This should be mandatory: Every one taking their tops off in the sun, they do in Africa!

Guess which family gets more Vitamin D and eats less sugary carbs, TV Show



...



more from Chart School

Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



more from Bitcoin

Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



more from Our Members

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.
...

http://www.insidercow.com/ more from Insider

Promotions

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 TradeExchange.com. 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.  

...

more from Promotions

Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

more from M.T.M.





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...

Learn more About Phil >>


As Seen On:




About Ilene:

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