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27 minutes ago, Jimbo said:

THE BIG TELL

Using poker analogies for asset markets is very useful.

On 16 September 2019 occurred the big tell.

That was when the repo market rate hit 10%.

Where were all the mainstream financial press articles about this.

Missing in action.

The Fed promptly buried the signal under the noise of $500 billion of REPO printed from thin air.

Setting up the mother of all Santa rallies.

After all this liquidity flood had to go some where - Into an already over priced stock market.

Which I predicted on this board.

A lot of money to make a very inconvenient fact/signal go away!!!!!!!!!!!!

But the virus uncovered the signal again.

So now the Fed is spending trillions to make it go away again.

But it will come back in the form of inflation.

If the newly created money stays in Financial market then no inflation,   Since some money is going directly to Joe, Inflation should pick up but it will take time

I am hoping that treasuries sellers buy something other then BONDS like seventies.

 

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EACH SUCCESSIVE FED/TREASURY BAIL OUT COSTS MORE This bail out will cost real money. The 2008 bail out didnt cost that much in the end. After recoveries probably only $100 Billion.

THE BIG TELL Using poker analogies for asset markets is very useful. On 16 September 2019 occurred the big tell. That was when the repo market rate hit 10%. Where were all the main

Here’s Who Loses When Technical Indicators Are Bullish but Liquidity is Bearish  2 - TECHNICAL TRADER MAY 25, 2020 Bullish indications mean that we must

That there will be huge asset price inflation, which also means stocks going up relentlessly, is prevailing opinion. It is „obvious“ so to say.

When I learned one thing the last 20 years than it is: Think BEYOND the obvious.

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And I'm still struggling to remember who that guy was who was always collecting profits "for his dusty bin""..

The way folks in North America are behaving, I think a big destructive second wave is inevitable.  Maybe a rally this summer, followed by a wipeout in the Fall?

I defer to all who are far less stupid than me, which is most.

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1 hour ago, fxfox said:

That there will be huge asset price inflation, which also means stocks going up relentlessly, is prevailing opinion. It is „obvious“ so to say.

When I learned one thing the last 20 years than it is: Think BEYOND the obvious.

I've always found it necessary to simply do the obvious. Don't fight the Fed. Buy when the Fed supports stock prices. Sell when it doesn't. But the COVID threw me for a loop. Now I track it too, although I'm not sure how it fits yet. I think that the decision has been made to let us old motherfuckers die so that others can work. I'm down wit dat.  

Da young are the fucture. 

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13 minutes ago, DrStool said:

I've always found it necessary to simply do the obvious. Don't fight the Fed. Buy when the Fed supports stock prices. Sell when it doesn't. But the COVID threw me for a loop. Now I track it too, although I'm not sure how it fits yet. I think that the decision has been made to let us old motherfuckers die so that others can work. I'm down wit dat.  

Da young are the fucture. 

Of course you are right about the FED.

I am 99% sure that there will not be a second lockdown. No where. Not in the US, not in Germany, nowhere. The economic and social consequences are just beyond comprehension.

So when bears base their bearish stance on that that a second lockdown will come they are wrong. All the bears can hope for is that more money gets destroyed than is created. What wil the FED do?  We will see, they do weird things sometimes. Can‘t be ruled out that they don‘t create enough. But is it likely? Hmm, I‘d rather think they create too much...

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Bullish indications mean that we must assume that the bulls remain in control until proven otherwise, regardless of the bearish liquidity forces (See latest Liquidity Trader report) over the next three weeks. A bull move in stocks would raise the specter of a selloff in the bond market to support a stock rally, because there won’t be enough cash around to support rallies in both. But that’s not our problem.  We just need to be on the right side of the move, whatever it is.

Technical Trader subscribers, click here to download the report.

Not a subscriber? Try Lee Adler’s Technical Trader risk free for 90 days!  

 

Back in December I had no idea that a pandemic was coming. I had no idea that COVID19 would cause Treasury supply to increase 10x. Nor did I know that the Fed would buy all of it at first, and then that it would experiment with cutting back until “who knows what.”

But that’s what happened, and that’s what the Fed has done and is doing. I was concerned about supply demand back then, but I had no clue how understated my concern would be. Here’s what I wrote 6 months back.

12/18/19 Primary Dealers continue to carry all-time record inventories of fixed income securities, far above their historically normal bond positions. They are not well hedged. They are overwhelmingly net long and they are massively leveraged…

Furthermore, with more and more Treasury supply constantly on the way, the Fed must keep buying and/or lending the cash to buy to its straw men the Primary Dealers indefinitely. The dealers and the market at large is in no position to absorb $100 billion a month in new Treasury supply.

So the Fed is now trapped. It can’t simply end Not QE without risking a massive system wide crash. It must continue to add cash to the market indefinitely. But can it continue to print endlessly without horrific unintended consequences?

And what will those consequences be? Endless asset bubbles to the sky? Increasing consumer inflation that ultimately leads to hyperinflation?

When the pandemic hit, the Fed at first was flummoxed. It had been printing since September when the money markets blew up, but it wasn’t printing enough. And it was slow to react. So stocks crashed. That’s when the Fed went into panic mode and began printing money as if there would be no tomorrow.

Let’s be clear about one thing. The Fed did not swing into action to rescue the US economy from depression. The Fed’s first order of business when the SHTF was to rescue the Primary Dealers. Which it definitely did.

The dealers were leveraged to the hilt with record long positions in Treasuries. The Treasury was already issuing a trillion a year in new supply. That forced the dealers into the position of having to buy and own mass quantities of US Treasuries. The pandemic meant that they got well paid for that because yields collapsed and Treasury prices soared as the world’s investors dumped stocks and headed for the perceived safety of Treasuries.

But dealers took it on the chin when stocks and all other assets crashed. There’s no question in my mind that they were down and out at that point. We may never know how bad things were. The Fed papered over their problems by buying a couple trillion of their Treasuries and MBS at record high prices.

But we may still find out just how bad things are. Because the dealers remain leveraged to the hilt. And there’s one more thing.

Subscribers, click here to download the report.

Get this report and access to past reports.  Read Lee Adler’s Liquidity Trader risk free for 90 days!

Those of us over 65 are the walking dead. 

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Just a reminder. Musk's Space X launch of astronauts to the ISS is still on for Tuesday at 4:30PM.  It might mean nothing but I think it might be a hook for a mega bullish faux patriotic launch for stocks as well.  I doubt I'm the only one looking for a hook on this and as well advertised probably won't  follow a script. 

 

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4 hours ago, DrStool said:

Those of us over 65 are the walking dead. 

Hey speak for yourself!  I'm working on living to 100 with quality all the way .. 🤩

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