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Rivers of Cash – Professional Edition Treasury Update

Treasury supply was heavy this week, but the new paper doesn’t settle till Monday. That allowed Fed pumping to keep the market elevated early for the first half of the week as we expected, but the effects were finally felt on Friday, as some sellers may have needed to free up cash in order to pay for the Treasuries. This has happened in the past, and it will happen in the future. I’m not prepared to read any more into Friday’s action than that, yet. Maybe the technicals will say otherwise when I do the market update. We’ll see.

Next week, the Treasury will begin to pay off the weekly $25 billion in SFP CMBs. That will go on over 8 weeks in order to reduce outstanding debt as the statutory debt limit is approached. There will be little in the way of new supply to absorb that cash next week, meaning that it will combine with another $20-$30 billion in POMO to most likely boost prices of both stocks and bonds.

Although I should not have been, I was unpleasantly surprised that the Fed chose to completely ignore the raging commodities inflation in the FOMC statement. Bernanke and the Sycophones are determined to run out the QE2 program to the bitter end while pretending that inflation is too low, inflation expectations are “well anchored” and that massive input cost increases, and food and energy price increases, won’t inflict damage on a weak economy.

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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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