DrStool Posted June 5, 2023 Report Share Posted June 5, 2023 I don't completely concur with Jimbo's idea here, but it's an interesting way to look at it, and I absolutely agree with the conclusion. 7 hours ago, Jimbo said: THE CREATURES FROM SCHRODINGER ISLAND Matt Levine of Bloomberg wrote an article "Nobody trusts the banks now" on 5 may. He got close to the truth but not all the way..... He did correctly identify that banks can exist in 2 "energy" states. 1/ State One: Assets long term deposits short term.....duration lossses....deposit flight. 2/ State Two: Assets long term deposits long term (i.e. deposits sticky) ......no duration losses. What has Matt described in these 2 states is..... A Shrodingerian system!!! The Banks can exits as a supposition of both states 1 and 2 at the same time! The outside observer observes state 2 while the inside observer observes state 1!!!! So the normal state the depositor normally sees is state 2 as they are outside the box/frame. Why arnt the banks trusted by depositors anymore.... Because State 2 no longer exists....it has collapsed into state one and the depositors can see the duration losses. Why can they see the losses?????????? 1/ Because the FED stopped printing in April 2022. 2 / Because the banks cant plug the capital gap....because deposits are still fleeing.....because the US Government is sucking them up through high priced ST treasuries. i.e. it is the actions of the US Government and the FED which have collapsed state 2 into State 1. Remember State 2 existed in a strong state because FED NIrp/Zirp was covering up the budget defecit until March 2022. We have gone from a strong state 2 (the box with the door closed) To a strong State 1 (the box with the door open and the duration risk and bank losses on full display) The outside observer (depositors) and the inside observer (shareholders) are now one and now only observe and react to State 1. To close the door....to bring back State 2...to create a healthy and solvent banking system again......requires a FED pivot and US Government fiscal discipline and recapitalisation. Rather low probabilty outcomes at the moment. So expect more State 1 and reaction to State 1. Fact is that deposits are declining dollar for dollar with QT. Nobody is fleeing the banking system, but they are fleeing banks perceived as weak to go to stronger banks. I will have more on that in a Liquidity Trader update to be posted later today. It's imperative to have a grip on this if you want to understand what to expect in the markets. To illustrate, here's a graph of QT, as shown by the Fed's System Open Market Account (SOMA) which is its securities holdings, vs. the graph of total commercial banking system deposits. They both peaked approximately in May of last year. As you can see, the decline in deposits approximately equals the amount of Fed QT. The Fed is literally destroying deposits with QT. This is something that I have warned about ever since the Fed started even thinking about giving birth to QT. Interest rates are rising because neither Congress nor the Almighty gods of economism have repealed the law of supply and demand. The US Treasury keeps issuing more paper, and the Fed isn't buying most of it. The market can't buy all of it at a stable price because it doesn't have the cash from the Fed to do so, ergo prices (the inverse of rates) have been falling, and must continue to trend lower for as long as the Treasury keeps putting more paper on the market and the Fed doesn't buy it or fund it. NO ONE SHOULD BE SURPRISED THAT THIS IS HAPPENING! IT'S CAUSE AND EFFECT GODDAMMNNITTERSCHPLUNGERDERFERHAUZENZEE YEITZERSCHNITELUBERHAFFENLAUBERLUNGENZESCHTOFFENPLOTZ (German for god damn it). And Jimbo is right. The Fed can't reverse course without severe consequences. And long Treasury investors are also feeling the supply pressure. Rising yields are the other side of the coin of falling prices.But hedge funds have a record short hedge on this. And I mean record. It's gigunda. So that could blow up. Keep an eye on the 3.89 area. Again, more coming up. Now that I've got that off my chest let's look at the hourly chart of the ES, S&P 500 fuguetures to get a feel for what may or may not happen today. I want to cover all the bases so that no matter what happens, I can claim I was right. 57 years of observing Wall Street pundits taught me that. Talk loud and fast and nobody will care that you are talking your book and shearing the sheeple. So, a 5 day cycle projection of 4290 has been hit. It's about 5 days from the center of the last double top, and the hourly indicators are on the verge of triggering sell signals. So I'd say that we're at least starting to top out this move for now. Probably just for a 2 day breather. But BEWARE, if they don't break 4275, then this sucker is trending and 4300-4310 would be the next stepping stone to a gigantic move. At least my chart picks are doing really well for a change 😁, and will continue to do well if this scenario takes hold. For moron the markets, see: The Bulls Are Full of It June 4, 2023 Incomprehensible, That’s What You Are June 2, 2023 Swing Trade Chart Picks – Growing Long Side Gains June 2, 2023 Gold Gets Closer to the Bottom May 30, 2023 Modestly Hedged Dealers, Record Short Hedge Funds Suggest Disaster Ahead May 25, 2023 The Most Widely Forecast Economic Disaster In History May 16, 2023 If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam folder. If you're serious about the underlying forces of supply and demand that drive the markets, join me! Link to comment Share on other sites More sharing options...
DrStool Posted June 5, 2023 Author Report Share Posted June 5, 2023 Here's the graph that I forgot before. Link to comment Share on other sites More sharing options...
DrStool Posted June 5, 2023 Author Report Share Posted June 5, 2023 That's an amazing chart. Link to comment Share on other sites More sharing options...
SiP Posted June 5, 2023 Report Share Posted June 5, 2023 SEC and WS mafia want to destroy crypto. Now suing Binance, huuuge exchange and stakeholder in crypto market. Link to comment Share on other sites More sharing options...
DrStool Posted June 5, 2023 Author Report Share Posted June 5, 2023 Flat down phase so far. Link to comment Share on other sites More sharing options...
fxfox Posted June 5, 2023 Report Share Posted June 5, 2023 2 minutes ago, SiP said: SEC and WS mafia want to destroy crypto. Now suing Binance, huuuge exchange and stakeholder in crypto market. They have my approval in doing so. The evil does not reside in the Eccles Building, but somewhere on the Caymans or Belize. Link to comment Share on other sites More sharing options...
fxfox Posted June 5, 2023 Report Share Posted June 5, 2023 „End the FED“ is by 90% a movement of ultra right wing lunatics. Link to comment Share on other sites More sharing options...
DrStool Posted June 5, 2023 Author Report Share Posted June 5, 2023 Crypto is evil, and so is the Fed. The Fed is the banker/enabler for the worldwide mafia banker skimming operation. Powell is the Lansky to Dimon's Capone. Link to comment Share on other sites More sharing options...
fxfox Posted June 5, 2023 Report Share Posted June 5, 2023 5 minutes ago, DrStool said: Crypto is evil, and so is the Fed. The Fed is the banker/enabler for the worldwide mafia banker skimming operation. Powell is the Lansky to Dimon's Capone. It wasn‘t any better when JP Morgan gathered the others in 1907. Before the FED was founded. Link to comment Share on other sites More sharing options...
DrStool Posted June 5, 2023 Author Report Share Posted June 5, 2023 Anal log alert. May 19. Link to comment Share on other sites More sharing options...
fxfox Posted June 5, 2023 Report Share Posted June 5, 2023 So when everybody KNOWS about the liquidity draining effect of the Treasury issuance and its negative impact on stocks why are puts not crazy expansive? Link to comment Share on other sites More sharing options...
DrStool Posted June 5, 2023 Author Report Share Posted June 5, 2023 1 hour ago, DrStool said: Anal log alert. May 19. The May 19 anal log is working out. Link to comment Share on other sites More sharing options...
DrStool Posted June 5, 2023 Author Report Share Posted June 5, 2023 29 minutes ago, fxfox said: So when everybody KNOWS about the liquidity draining effect of the Treasury issuance and its negative impact on stocks why are puts not crazy expansive? They're thinking mostly about the effect on Treasuries, I suspect. Link to comment Share on other sites More sharing options...
WTF Posted June 5, 2023 Report Share Posted June 5, 2023 3 hours ago, SiP said: SEC and WS mafia want to destroy crypto. Now suing Binance, huuuge exchange and stakeholder in crypto market. Reality is what will destroy crypto. Blockchain has some value... Link to comment Share on other sites More sharing options...
DrStool Posted June 5, 2023 Author Report Share Posted June 5, 2023 It's everywhere. And yet, the markets are remarkably quiet. The hedges are working. Hallelujah Hallelujah Hallelujah Hallelujah Hallelujah Hallel ooo ooo ooo yah Link to comment Share on other sites More sharing options...
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