Liquidity Trader – Macro Liquidity- Fed and Banking

Analysis of the major forces of macro liquidity that drive markets, including the Fed, foreign central banks, and the US and European banking systems. Resulting market strategy recommendations. Click here to subscribe. Now published at Lee Adler’s Liquidity Trader.

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Liquidity Trader - Macro Liquidity- Fed and Banking

Fed’s Curve Flattening Starts To Flatten Stock Prices

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The Fed has cut back its POMO purchases to an average of $8 billion per day of Treasuries and $6 billion of MBS this week. That’s down from $10 billion and $8 billion last week, and hundreds of billions in the peak of the panic in April.

The effects of that are beginning to show up in stock prices.  Be prepared because here’s what happens next.

Read on →

Liquidity Trader - Macro Liquidity- Fed and Banking

The Fed Flattens The Curve – Stocks Follow

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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.

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Liquidity Trader - Macro Liquidity- Fed and Banking

These Charts Show The Fed Is the Market Ventilinflator

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Fed QE QE

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.

Read on →