The forecast has changed. It’s less bearish, but it’s still bearish. Here’s why.

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Macro liqudity been bullish since early July. That was no secret. We were fully informed and prepared. And it’s no secret that this balance is about to flip to bearish. Really bearish. Can our beloved Fed get ahead of that curve? Follow the money. Find the profits!Liquidity is money. Regardless of where in the world…

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Macro liquidity is growing at a historically rapid pace, but much slower than in the second quarter. And there are signs of trouble brewing. Here’s what they are and what to do about them.

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Fed QE and Treasury supply remain roughly in balance. The Fed is still funding most, if not all new issuance, either by direct purchase of Treasuries, or indirect funding via purchases of MBS. Meanwhile delayed tax collections are creating a July cash windfall for the Treasury. It’s all bullish for the next two weeks. Follow…

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The Fed doesn’t know what it will do until it does it, neither does the market. And it’s likely to take the market longer to figure it out than it takes us, if we’re paying attention. Which we are.

Here’s what we know and what to do about it.

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Wall Street media shills have noted that the Fed’s balance sheet has shrunken a bit in recent weeks. Let’s get this out of the way first. Follow the money. Find the profits!Liquidity is money. Regardless of where in the world that money originates, eventually it flows to and through Wall Street. So if you want…

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The Meyer Lansky like Fed has cut back QE, but Treasury supply has also receded. So the Fed is still funding most new issuance, either by direct purchase of Treasuries, or indirect funding via purchases of MBS. That has allowed the dealers enough flexibility to keep the players at the gaming tables. Are they being…

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As the Fed has cut back on QE, Primary Dealers have also cut back their inventories of Treasuries and the leverage that they use to finance them. That’s not bullish. Here are the details and a few charts along with a suggested strategy to play the dealers’ game, not the one they want you to play as they set up new traders for the kill.

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The imbalance between Fed QE and Treasury supply is ugly as as it gets for the next week, but then it gets less ugly. Here’s what you need to know and how you need to see it to trade successfully.

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We know that total liquidity is still growing. The Fed is still printing and pumping money into the system at an historic rate. That rate is well above the norms of the original QE back in 2009-10, but well below the peak panic levels of March and April. The Fed has been dialing it back from the extreme pumping it reached at the market bottom in March.

Ay, but theres’s a rub, and it’s not barbecue. It’s an irritant. And the markets won’t like it.

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