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Fed Report and Market Update Publication Note

Everybody thinks the Fed is monetizing and no doubt that is the Fed’s absolute aim. Whether they will be successful or not in achieving reflation is a whole ‘nudder question. It is a complex one, and there is no simple answer, but for those who think future inflation is a done deal, it’s not. Tha’ts because it is entirely plausible, maybe even probable, that the Fed will not succeed for reasons that I discuss in a Radio Free Wall Street podcast to be posted tonight, and yesterday’s Fed Report.

I will be out of the office for most of the afternoon and evening due to “pre-holiday family commitments”. There will be no full Professional Edition Fed Report update today. However, you should note that the Fed allowed the $25 billion in RRPs that it had been rolling since mid October to expire today. That’s a $25 billion pump job that puts an exclamation point on yesterday’s Fedwords. It is the first significant open market operation in many weeks. Still, it does not guarantee a successful reflation. We’ll need to see the entire balance sheet for the next 2-4 weeks and the market’s reaction before we make any judgments about this issue. As I discussed in yesterday’s report for subscribers, there will be some elements of the balance sheet likely to undergo significant contraction in the weeks ahead. The Fed will have to pedal twice as fast just to overcome that.

The $53 billion in Trashury paydowns this week are a very big deal. I’d say that’s the single biggest factor in today’s Treasury market action. But they are strictly a one shot deal. Caveat emptor.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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