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Market Awash in Cash – Temporarily

Originally posted at The Stool Pigeons Wire.

We’re in the middle of the Fed’s monthly MBS QE purchase settlement week. The Fed is pumping a lot of cash into Primary Dealer accounts. But what will they do with it? Here’s a look at their recent behavior.

Primary Dealers Go Full Reverse Thrusters

I’m really impressed at how JPM, GS, and WFC were able to generate enormous profits in Q1 despite the losses in the bond market. I guess the rise in stocks bailed them out, among other things. Their portfolio positioning was likely better than the 21 other Primary Dealers.

Their Archie Goes Losses will nick them this quarter.

Meanwhile the Gangsta Bankas cook the books.

As the NY Times put it:


Strength in the banks’ investing, lending and trading businesses added to the euphoria. All three reported robust revenues across multiple lines of business, driven by a combination of active and rising markets, a flurry of new mortgage activity and the boom in special-purpose acquisition companies, or SPACs. Corporate merger and acquisition activity also marked an all-time high by dollar value.

Wow. It’s all good. They also pointed out that the banks boosted their bottom lines by sharply lowering their loan loss reserves.


I’m not a micro anal cyst. I do macro. And the macro clearly showed that the banks who own Primary Dealers took massive losses in their bond portfolios. I guess they can subsidize those from all these other skim lines that they run.

Are these profits real, and will they use them to get their dealer subsidiaries through the coming fiscal cliff?

Those are the questions that I’ll attempt to answer in upcoming reports in Days of Our Lives.

By the way, did you know that only 9 of the 24 Primary Dealers are US owned. That’s right. When the Fed pumps money into the markets via the Primary Dealers’ accounts at the Fed, most of the banks receiving the money are foreign. Don’t believe for a second that Fed policy is about US employment and inflation. It’s about keeping the worldwide US Primary Dealer system alive.

Or at least giving it the appearance of being alive.

FREE REPORT – Proof of How QE Works – Fed to Primary Dealers, to Markets, To Money


Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, 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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