The Fed began its seasonal push to boost reserves in the banking system for the prime retail shopping season. It added a net of $6.75 billion to the market by replacing $40.5 billion in expiring paper with $47.25 billion, including $8 billion in 14 day, $20 billion in 6 day, and a gargantuan $19.25 billion in overnight repos. Lest anyone think there’s anything special about this… Click here to download complete report in pdf format (Professional Edition Subscribers).Try the Professional Edition risk free for thirty days. If, within that time you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.
Fed Pump Job Really A Mirage- WSE Pro
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Dear Sir, Please excuse me for questioning your reasoning, but I must. The Fed is still floating an UNREASONABLE amount in repos whether they add or withdrawal. You seem to expound daily that it’s not big add, or, oftentimes, a negative… but the overall float or “slosh” number is outrageous and preventing liquidation of assets as far as I can figure.
Dear Karen-
Thanks for your comment!
I don’t make a value judgment as to what is reasonable and what isn’t. Is a 3.5% growth rate in the SOMA reasonable or outrageous? I don’t know. Seems reasonable to me, but at the same time, it’s not relevant to what I do, which is to report what the Fed is doing, and what that’s likely to mean to the market. My only interest is in helping my subscribers trade successfully. The only way to do that is to get at the facts behind the fluff.
I don’t know what you mean by “float or slosh”. I simply report the level of the SOMA on a daily basis, the amount of change, how it differs from the past, how it stands in relation to the level of Treasury borrowing, and how that is affecting and likely to affect the markets. If you are interested in making money in the market and preserving your purchasing power, then it is essential that you leave your value judgments about what is too much at the door.
If you have not already done so, I invite you to try a risk free trial to the daily Fed report and see for yourself if you don’t think this will help you in achieving your investment goals. As the end of the 30 days approaches you can make a judgment as to whether you think I am achieving that aim, and continue or discontinue your subscription as you see fit.
If you are already a subscriber, I hope that this explanation of my approach better helps you in your understanding of my work.
Regards,
Lee
Yes, it could be that I am way off base. But, taking this statement from the 2005 report, “Altogether, in 2005 the Desk bought $24.8 billion from the dealers in 24 outright operations arranged in the
market, and it bought another $3.3 billion (all bills) for the SOMA from foreign accounts. In the preceding year, the Desk purchased $43.5 billion from dealers in 40 operations arranged in the market, while buying another $7.0 billion from foreign accounts.”
What will the “altogether” numbers be for 2007, i wonder?
I agree that I should give your subscription a go… thanks again.
We’re talking apples and oranges here. The report you are referring to is talking about permanent operations, i.e. outright purchases or sales. In the first case we are talking temporary ops, or repos and reverse repos.
This year the Fed has done only about $10.6 billion in permanents, and absolutely nothing since May.
http://www.ny.frb.org/markets/pomo/display/index.cfm?showmore=1
In fact, as the crisis flared in July and August the Fed even retired some of its 4 week bill holdings rather than roll them over as they always normally do. They then replaced these by increasing the size of their temporary operations, so in essence it was a wash, but it allowed the Fed to toss more coin around on a day to day basis, which we have seen.
Doesn’t change the fairly steady growth rate of SOMA holdings, which so far this year is half the rate it was in 2004. Since then they have been gradually slowing the SOMA’s growth rate.