Menu Close

Fed Transparent Only If The “Facts” Are Bullish

Liquidity indications have remained neutral over the two weeks since I last updated this report. Panic outflows from Europe boosting theUSsystem seem to have taken a breather, or been covered up, in the wake of the massive ECB liquidity operation just before Christmas. However, other indicators which had been bearish such as bank purchases of Treasuries, and an uptick in bank non-Treasury trading accounts have turned mildly bullish. FCB purchases remain bearish but could be coming into a cyclical low. In the Treasury report, there were indications of a moderation in supply. Supply may also be restricted because the debt ceiling has yet to be raised and the government may be forced to go back to raiding civil service retirement funds. All of which seems to support higher financial asset prices over the near term.

Strangely, the Fed’s pumping of cash into Primary Dealer accounts via the MBS purchase program, has been offset in recent weeks by the Fed quietly, and inexplicably, selling Treasuries. The Fed has liquidated a net of $21 billion in Treasuries over the past 2 weeks. This is separate from Operation Twist, whose operations are offsetting and designed to have no impact on the Fed’s balance sheet.

This shrinkage runs counter to the Fed’s policy of maintaining the System Open Market account at a  stated target level of $2.654 trillion, and it runs counter to the Fed’s newly expanded policy of more transparent manipulation, wherein it will publish individual FOMC member rate forecasts to help push the market in the “right” direction. The Fed only wants to be transparent to push the markets up. When there’s something going on that Bernanke andCo.don’t want you to notice, they shut up. That leaves us with two questions. Why is the Fed selling assets, counter to its policy, and why aren’t they explaining it?

So far, no news outlets or other bloggers seem to have noticed this balance sheet shrinkage, or if they have, they aren’t talking about it. See no evil, hear no evil, speak no evil.

Get the full sized chart with analysis in the Professional Edition Click here to download complete report in pdf format (Professional Edition Subscribers) including 93 pages of charts and clear, cutting edge analysis that you can use to gain an edge in the market. 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. 30 day risk free trial for new subscribers. Click here for more information.










3 month subscription to the Wall Street Examiner Professional Edition, Money-Liquidity-Real Estate package, renewing automatically unless canceled.

Price: $89.00

By clicking this button, I agree to the Wall Street Examiner’s Terms of Use.

Stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, along with regular updates of the US housing market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Try it risk free for 30 days. Don’t miss another day. Get the research and analysis you need to understand these critical forces. Be prepared. Stay ahead of the herd. Click this link and begin your risk free trial NOW!

Enter your email address in the form to receive email notification when Professional Edition reports are posted.

2 Comments

  1. Aaron

    Lee,

    What’s your take on H.8 report which shows 4Q11 net equity for banks went down. Looks like first time since 2008. Significant for upcoming earnings?

    Thanks!

  2. Lee Adler

    This is something that I track and report on weekly in the Fed Report. It’s been weak for a long time. Negative changes week to week are not unusual. If they went negative on a year over year basis, that would be a red flag. Right now, just yellow, like so many other things.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

RSS
Follow by Email
LinkedIn
Share