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Reverse Digital Confabulator 5/1/2020

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What the FED does and will go on doing is preventing a rapid crash. But that does not mean that we will not go gradually lower over months and months and months to come. In such a way that when you go short via a put option the Greeks will eat you alive, means the VIX could be quite low, but we go lower and lower, interrupted by sudden upmoves every now and then.

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Utter nonsense from people who have no idea what they're talking about. Gross issuance is irrelevant when the Fed (not to mention the ECB and BoJ) buys or finances all of it. It means that net issuanc

They broke 2845 on ES where 200 Ema sma on 1 hour interval.  Next stop 2765 as a key support. 

The Fed was tight 2000-03. Dealers could not maintain orderly markets.  And no. They system was not in place 2007 to 2009. The Fed froze out and starved the Primary Dealers and instead went only

There's no market. It's an illusion created by the Fed and its big cohorts. Mostly the Fed, because it has the best developed Primary Dealer system with exclusive rights of trading with the central bank as a captive market. 

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5 minutes ago, DrStool said:

There's no market. It's an illusion created by the Fed and its big cohorts. Mostly the Fed, because it has the best developed Primary Dealer system with exclusive rights of trading with the central bank as a captive market. 

That system was in place from 2000 to 2003 too, right? 2007 to 2009 definitely, but „Lehman“ did happen nonetheless.

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28 minutes ago, fxfox said:

That system was in place from 2000 to 2003 too, right? 2007 to 2009 definitely, but „Lehman“ did happen nonetheless.

The Fed was tight 2000-03. Dealers could not maintain orderly markets. 

And no. They system was not in place 2007 to 2009. The Fed froze out and starved the Primary Dealers and instead went only direct to retail banking. That was the crux of my coverage at that time, and was the reason for the crash in September 2008. Had the Fed not run an end around to crush the dealers, the crash almost certainly would not have happened. The bear market could have been less severe.  

It happened because the Fed started draining, realized its mistake too late, and did too little for too long before restarting direct purchases from dealers in March 2009. That's what turned the market.  

I'll be posting an update of that famous chart shortly at Liquidity Trader. 

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21 minutes ago, DrStool said:

The Fed was tight 2000-03. Dealers could not maintain orderly markets. 

And no. They system was not in place 2007 to 2009. The Fed froze out and starved the Primary Dealers and instead went only direct to retail banking. That was the crux of my coverage at that time, and was the reason for the crash in September 2008. Had the Fed not run an end around to crush the dealers, the crash almost certainly would not have happened. The bear market could have been less severe.  

It happened because the Fed started draining, realized its mistake too late, and did too little for too long before restarting direct purchases from dealers in March 2009. That's what turned the market.  

I'll be posting an update of that famous chart shortly at Liquidity Trader. 

Thank you for clarifying this. 

Still I have a hard time to believe that the FED can at will bring the indeces to whatever level they want at any time. Preventing a crash is one thing but bombing the indeces to new ATH‘s while 50 million are jobless would be another thing.
 

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I'm thinking the Fed and the Treasury are making a big mistake by doing most all this funding with short term Bills. Since they are compounding so quickly the numbers are just nuts. Next week two, so far,  $200 billion offerings. Cripes, have the Fed buy some 2 or 7 year paper so it doesn't have to be rolled over next week but in years.  

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16 minutes ago, Jorma said:

I'm thinking the Fed and the Treasury are making a big mistake by doing most all this funding with short term Bills. Since they are compounding so quickly the numbers are just nuts. Next week two, so far,  $200 billion offerings. Cripes, have the Fed buy some 2 or 7 year paper so it doesn't have to be rolled over next week but in years.  

Congress would have to approve this, right? So under the current circumstances they will probably do this? 

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1 minute ago, fxfox said:

Congress would have to approve this, right? So under the current circumstances they will probably do this? 

No congress has nothing to do with it as far as I  know.

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58 minutes ago, fxfox said:

Thank you for clarifying this. 

Still I have a hard time to believe that the FED can at will bring the indeces to whatever level they want at any time. Preventing a crash is one thing but bombing the indeces to new ATH‘s while 50 million are jobless would be another thing.
 

The Fed is tight again.  

The Fed just posted how much help it will give the market next week and son of a gun! It’s cutting again. The implications of this are yooge! Apparently Jaysus saves not! At least not the stock market. Doesn’t he care? Is this ritual sacrifice?

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The Fed is Too Tight?

The Fed isn't Loose Enough?

Hmmm. Which is most effective? 

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I called the selloff the other day with my bullish move to 3000 and change. Congrats to all brave enough to short. I suck at trading lol.

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25 minutes ago, DrStool said:

The Fed is Too Tight?

The Fed isn't Loose Enough?

Hmmm. Which is most effective? 

The Fed doesn't know what it's doing. Which gets back to my thing about the mistake of doing all this funding via T Bills. Now any slight tap on the brakes leaves the market with $100bn dollar holes to fill several times a week.

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5 hours ago, DrStool said:

The Fed is tight again.  

The Fed just posted how much help it will give the market next week and son of a gun! It’s cutting again. The implications of this are yooge! Apparently Jaysus saves not! At least not the stock market. Doesn’t he care? Is this ritual sacrifice?

 

It's looking ugly but the bastard usually come up with something to plug the dyke.

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13 hours ago, Jorma said:

No congress has nothing to do with it as far as I  know.

Correct. Maturity distribution is totally up to the Fed.  

I didn't think of the possibility that rollovers might be a problem. Over the weeks where the Fed was buying all of it, obviously not. But in recent weeks when the Fed has been buying less and less, and now only a small fraction, it's something to think about. I have no doubt that the Fed will need to ramp up again as the Treasury continues to pound the market. Also I may have underestimated the number of weeks they'll need to continue at this $200-250 B per week level.  

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