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Fed Promises 8/31/22

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9 hours ago, Jorma said:

One thing is with the stock liquidation that the bear market has brought, where is the 'cash' going?  Why isn't there a stampede into Tbills at 2+% ? 

Well who's taking down the bills is one thing, but who is doing the RRP's? That's what we need to know. Has anyone asked?

Falling prices destroy more money than the pittance that liquidation transfers from buyers to sellers at the margin. The losses in margin accounts is far greater than the cash received by sellers. And remember, it's just a transfer. The buyers of the falling stocks must withdraw cash from their bank accounts, liquidate other assets, or also use margin to make the purchase. Falling prices do not create liquidity, they destroy it. 

Meanwhile the Fed has promised for months to tell us which class of permitted buyers -- Primary Dealers, banks, or money market funds-- are depositing their cash in the Fed's RRPs. Why isn't the Fed doing this? It's obviously something that could be done instantly.

 image.png

Meanwhile, back at the market as of 6 AM in New York, this speaks for itself. The red oval is the conventional measured move target of the top breakdown on the ES, 24 hour S&P fuguetures that I posted last week. 

yv60b

They either need to get back above 4000, or hold at the long term trendlines at 3940ish to avoid their ignominious fate. 

From the Department of BTC Leads, Or At Least Correlates, there's a suggestion that stocks won't break below where they are this morning, for the time being. 

yv61x

 

In the bond market, the 10 year Treasury yield is similarly poised for a breakout. With a $57 billion net Treasury coupon settlement today, that could give the yield a little push over the top. 

yv62k

Meanwhile, gold continues to prove itself to be a useless asset class as so-called "insurance," or "money."  It's obvious where this decline must stop and reverse, lest this horror show get even worse. 

yv67l

Finally, a chart of the EUR/USD going back 23 years shows the euro fighting a last ditch holding action, lest it enter an abyss. 

The entire financial world is at the precipice of an abyss today. Right now. And few are here to watch. The rest are still at the beach, or rushing around getting the kids all set for the school year. 

Good luck, world. 
 

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Oh, yes, and I forgot to mention that tomorrow the Fed begins extracting money from the system and extinguishing it at double the rate of the past 6 months. The effect of that will be interesting. 

Warnings of August Liquidity Crash Come to Fruition – Here’s What to Do

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They keep trying to make this a base breakout, but the hourly oscillators give no indication that they'll be successful. 

yv8c5

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Ooops. too late. I have one loser by -0.1%.

Overall average profit 5.8%. Average holding time, 8 calendar days. All cash, no margin, no options. 

How much is 5.8% compounded 45 times in a year? 

But as I told you before, oh, you can't do that. 

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