Jimbo

THE BIG HEDGE FUND SQEEZE OUT Now that the Fed has gauranteed profits to the Wall Street banks. They are starting to report blow out quarters. JPM, Morgan Stanley. All blindingly inevitable. While QE crushes net interest margins and profits from the "investment" side of banks. At the same time it is boosting trading profits from the "speculation" side of banks. Thats what QE does, it punishes investment and rewards speculation. So front running the Fed becomes the only game in town. (instead of picking up dimes in front of the defecit steamroller they are now picking up silver dollars). But the banks will want to keep all the cheap Repo money for their own speculations. And squeeze out the hedge funds. Que complaints from the hedge funds to the Fed. Que Fed raising trial balloon in financial press to fund hedge funds directly.

THE APPLE FILES ....IN NOT QE 4 FAIRYLAND So Apple is no longer a value stock above $300 Its in"Not" QE fairyland. No natural lift left from the former cheap valuation metrics. But still powered up by two great forces Force One: The artifiical lift of massive stock buybacks ...Coyote lift Force Two: The momo crowd jumping on board funded by cheap Not QE 4 finance. But these forces a very artificial and could be stopped anytime.

IMPEACH THE FED So the Fed continiues on its asset inflation ways No asset or stock no matter how valueless must be left behind!!!!!!!!!! The REPO without end. But any pull back from the Fed and its goodbye stock market.

ANOTHER VERY SAD SET OF FINANCIAL STATEMENTS Looked at FedEx's cash flow statement the other day Where is the free cash flow?????????? There isnt any!!!!! Market cap of $40 billion and does not produce any FCF because of massive annual capex consumes its entire operational cash flow. This company needs to cut expenses by $3 Billion a year to justify its martket cap. Because right now the market cap is completely unjustifiable.

ITS THE DEFECIT STUPID Alternative title (The REPO market activity explained in a couple of easy sentences) The FED is conducting open ended REPO as a rather sneaky and underhanded way of funding the federal Governemnt's $1 trillion annual budget defecit. If it does not do so the treasury market will fall rates will go up and this will puncture the stock market. This would likely cause a recession in 2020. I will let you guess what that would do for the President's re-election chances (hint "Not Good"). Without the FEDs intervention the REPO market would find its own equilibrium but at a much smaller size. Which would be a lot less profitable for Wall Street.

A VERY REPO XMAS TO ALL How could we not have a Santa Rally with this open ended repo flood from the FED. How much so far???? 400 billion.....500 billion...... Its a very Feddy Xmas A happy Fed to all Its print to the heavens Its printing for the Wall No hedge fund will lack Cheap REPO for every Treasury filled sack. But what about The man in the street Perhaps the Fed Itself has over reached Perhaps the Fed is the one Who should be impeached. I think Jay will get a very nice Xmas card from Donald this year. He is sticking very closely to the asset inflation script.

THE FED NOW RIDES A TANDEM BIKE So the Fed wants to drive treasury rates even lower. Making treasuries a terrible investment instead of just a bad one!!!!!!!!!! But there is one big problem. The Great Wall of Nil Bond Real Return. If the FED drives rates significantly lower everyone will start to sell treasuries as they no longer work as an investment. I.e. the real returns over the life of the Treasury are nil to negative. Even though they would still work as a speculation (so long as the FED continues Not QE) Leaving the Feds Not QE only partially effective in funding the Federal deficit as it will be purchasing mostly existing treasuries and not new treasuries. So it has to drive the Repo rate down as well as Treasury rates in tandem!!!!!!!! Otherwise the Wall Street Banks and hedge funds with all those treasuries would have to dump them onto the FED. As it would no longer be profitable to use the Repo market to fund their treasuries holdings. So the margin between REPO rates and Treasury rates has to be maintained!!!!!!!!. Thats the reason for the massive intervention in the repo market.

REPO EASING The more i think about it the more I think the FED will conduct not QE 4 almost entirely through the repo market. Why is the FED cutting Wall street in for part of the take??????????????. After all the Fed could just buy treasuries directly and cut Wall Street out. But no......it is throwing money away providing the lowest cost funds to Wall Street which then buys the Treasuries and makes its cut. Its subsidising Wall Street ....a Wall Street Employment Scheme. Of course the Wall Street banks would rather own the Treasuries themselves rather than lend the funds to the Hedge Funds to buy them.

THE FED AS HEDGE FUND SANTA...........PART XXX PLUS ONE So the FED continues it open ended REPO intervention. I'm sure there are a lot of relieved hedge funds out there. Not having to dump their leveraged treasury positions in a sudden "Liquidation" event. The cheap repo funding party continues.......for now. But for how long.....all parties eventually come to an end. The Wall Street banks would also be quite relieved given their large treasury holdings. Santa Fed loves you and has your back!!!!!!!!!!!!!!!!!!! A very merry and safe (SAFE FROM CAPITAL LOSS) CHRISTMAS TO YOU ALL!!!!!!!!!!!!!!!!

To be advised

THE REPO FILES PART XXX The Fed can't stop the REPO. Not if it wants Treasury rates to remain supressed. This reminds me very much of the interest rate suppression policies pursued by the FED during WW2. The long bond was pinned at 2.5% in WW2. (while inflation got up to 14% in 1946) The FED is suppressing rates and pinning the entire yield curve in order to fund the 1 trillion defecit. This is massively inflationary. Expect CPI to be watched like a hawk!!!!!!!!!!!! Any private holder of bonds with half a brain will start to dump treasuries.

THE FED AS SANTA Santa rally full steam ahead. The overvalued stock market was being a real Grinch. Until the Fed as Santa came to the rescue on cue on 25 September. Lots of full stockings this year on Wall Street. Lets raise a toast to the QE that dare not speak its name!!!! The QE that is not QE!!!!!!!!!!!!! REPO away there lads!!!!!!!!!! I hope they remember to send Santa a big christmas thankyou card!!!!!!!!!!!!!!!!!!!!!

APPLE......THE OIL WELL ANALOGY Apple is like and oil well. The share price appreciation has been almost all multiple expansion since 2013. The business operational metrics have not improved much. The price has moved up powered by the wells natural pressure - natural lift. Natural lift is provided by the operational metrics of the business. Its been a real gusher. But as we get above a price to free cash flow ratio of 15 for the stock. The wellhead pressure for the price appreciation is dropping. The management of APPLE wants to keep the share price appreciation game going. By adding a lot of artificial lift (share buy backs) to replace the loss of natural lift. Coyote lift.

MANTRA OF THE DAY Real assets yes financial assets no.

NEW ETF SUGGESTION Where is the Imploding IPO lockup period expiration short ETF when you need it. Of course it needs a catchy name for marketing purposes of course How about the Lost Dreams ETF??????