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MisFit Kid

Tesla Thursday 1/30/20

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Everyone loves the Tesla.......

580.99

After hours +67.51 on 2 rips higher  

648.50   (+11.62%)

 

But they must not talking be about it on FB........

and the indexes do not seem to be in a good mood.

 

 

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Rallying off a double bottom with a higher low. The crowing about coronavirus from bears is overdone. It's always something. Just another shakeout. 

Lucy.  

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My WAG is that the little sell off around the Fed meeting has served to provide a little breathing room for ''adding reserves (there is is again reserves, damn) don't matter' story which has been plastered all over this week, lead by Dudley.

 

 

https://www.marketwatch.com/story/feds-powell-must-clear-up-mistaken-impression-t-bill-purchases-are-fueling-stock-bubble-former-central-banker-says-2020-01-29

Note Dudely said " the Fed’s T-bill purchases are going to end after the April tax season".  Handy timing so it might be right. For a month. We'll see. I admit my mind does not automatically think money, when I hear the word reserves.  The use of the word reserves is rhetorical brilliance.

 

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"

Some investors think that when the Fed adds reserves to the banking system, banks turn those reserves into buying stocks and bonds.

That’s incorrect, he said.

“Those reserves are not used for other stuff.” (huh? OK he is trying to say it is used for other stuff, not stocks and bonds.)

Bank reserves are only used when depositors make purchases with their money. But these purchases at stores flows right back into banks, he noted.

I can see it  now. JPM gets a deposit for a billion when it sells T bills to the Fed. Then a manager calls down, to somebody.  'Hey, run down to the store and get a carton of cigarettes and a fifth of Johnny Walker. Well make that 250,000 cartons and every bottle of Johnny in the world.

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Dudley is full of shit. That is garbage. 

As we know, the Fed buys the T-bills from Primary Dealers. It starts as cash in their trading accounts. What they then do with it is up to them. The dealer can transfer the funds to their parent bank account, or it can buy another security from anyone in the world. When it does a trade with a counterparty buying with cash from its account at the Fed, the money then is transferred to the counterparty's account. Because it isn't paper money, it becomes that bank's reserve at the Fed.   That's how the money gets into the system.

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Breaking 3260 was signficant. It put not only the 5 day, but also the 13 day cycle on the downside.  If the rebound ends here, bears will have the ball. Otherwise LOA. 

Going out for the evening here. 

Ciao! 

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