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Category: Liquidity Trader

Reports on the Fed and Treasury, Primary Dealers, real time Federal tax collections, foreign central banks, US banking system, European banking system, and other factors that affect market liquidity. Resulting market strategy recommendations. 8 reports each month. Click here to subscribe. Now published at Lee Adler’s Liquidity Trader.

Federal Withholding Tax Collections Chart

You Have No Idea How Bad This Really Is

In normal times, the Federal Government has a revenue windfall in April, and runs a large surplus for the month. Revenues are typically at least 140% of outlays. Even more in good years.

Revenues covered just 24% of outlays in April. We borrowed 76 cents of every dollar the Federal Government spent last month.

We knew this was coming. The questions now are how long it can last, when it will start to recover, and whether it might get worse.

The Fed Flattens The Curve – Stocks Follow

Today’s the day. The Fed announces its next plan. You may have already seen it by the time you read this.

But really. What difference does it make? The Fed has trashed its plan without notice 3 times in the past year and a half.

In the past 2 months, it has had no plan at all. It just responds willy-nilly to whatever happens in the news. My god! The Fed bailed out Carnival Cruise Lines. You know we’re in trouble when the Fed bails out Carnival. The blatant cronyism of the plutocrat class is breathtaking. And the sheep just yawn, placated by a few crumbs thrown their way.

So Jerry and the JayJays will sing yet a new song today. Maybe they’ll stick with the new tune for a few weeks or months. Maybe they won’t. We just have to keep tracking what they do and watching the market response.

Here’s what you need to know.

Fed QE QE

These Charts Show The Fed Is the Market Ventilinflator

Ever resolute, the Fed kept pumping the cash into Primary Dealer accounts. It kept at it until, as I calculated elsewhere, it had pumped in about $800 billion more than the dealers, and indeed the entire world, needed to absorb the flood of Treasury supply that was hammering it. That happened by the middle of April.

It was enough for the dealers to get back to their fun business of acquiring inventories of stocks, marking them up, triggering short squeezes, and convincing their herds of institutional sheep customers to follow the shorts and dive back into the market with whatever cash they had raised on the way down.

It worked, as we all know. Stocks have recovered around 55% of what they lost in the crash.

But the Fed has started to do the tighten up. Here’s what you need to know.

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