Where Will the Liquidity Come From 12/24/24

[DrStool]

On 12/24/2024 at 8:58 AM, Jimbo said:

WHERE WILL THE LIQUIDITY COME FROM???

Now that the RRP is mostly history.  

I presume the liquidity to plug the budget deficit will mostly come from bank deposits??? 

Or will it come from the bank reserves at the FED.

There is still 3 trillion of these.

Are they next in line to be drawn down????

Great question. 

Santa Claus, obviously. 

But seriously, the RRP slush fund hasn't been a material factor since it dropped under $400 billion some months back. The important thing to remember is that financial systems normally generate their own liquidity independently of the central bank via lending.

This bull market has been all about that. Rising asset prices create their own liquidity. It's a product of animal spirits, the will and the ability to create credit out of thin air. Just like you do when you use your credit card to buy stuff. Now, you can pay off your balance every month or not. But whether you do or not, the instant you use that card you create money. And if on balance, everyone using their credit card lines of credit does not pay it down to zero at the end of the month, then systemic credit increases. The money in the system goes up, and if production of goods doesn't keep pace, prices of the goods we buy go up. 

It's the same for asset prices and financial system credit lines. 

I'm working on a Liquidity Trader Money Trends weekly update to be posted later today. Here are a few charts from this report to come. 

This chart illustrates the rise in banking system deposits despite the Fed steadily shrinking its balance sheet. It illustrates the principle of the banking system generating more money than the Fed is subtracting. A lot more. To be clear, "Liquidity" is just a fancy word for "Money."

 

This chart shows bank loans on one scale and deposits on the other. It illustrates the fundamental principle that loans create deposits. 

Here's another principle. When the Treasury issues debt, and the Fed isn't buying or funding 90% of it like it did in the 12 year regimen of QE, then dealers, investors, and foreign central banks must buy all of it. There's not enough free cash for them to buy it outright, so what do they do? They use the new paper as collateral and repo it, in the hopes of skimming the excess over the cost of carry. In many cases they use futures to hedge the market risk, but that's another story. The fundamental point is that when the Treasury borrows, market participants print the money to lend via the magic of repo. THAT'S WHERE THE MONEY COMES FROM. 

A byproduct of that is that with all the money creation from repo, stock prices inflate. That's because the system is creating more money than it is creating of shares of stock.

In fact, companies are constantly removing stock from the market with buybacks. They use those to fund the options that they issue to the CEO and other execs. That's another mode of pumping cash into deposits. It's not the only source. Investors can take profits too. Some of it shows up in bank deposits, and some shows up in money market funds. Over the past two years, MMF balances have risen by about $2.2 trillion, all via the magic of conversion of Treasury debt to cash money in the system via the magic of repo, and government spending. 

The bottom line is that they system always has the ability to create as much money as it needs to inflate both consumer prices and asset prices. It's not about the way, it's about the will.  As long as the will exists. And it usually does. 

But sometimes, those who run the system, the dealers, and the whales who play with them lose confidence when they become overextended and underhedged. Then the system can run in reverse and become self perpetuating until a deity intervenes. Sometimes the deity is named Alan, sometimes sometimes Janet, sometimes Jerry. When the players run from a deflating system, they supplicate themselves to these deities, who ultimately save them from themselves. 

First comes the loss of confidence, then the crash, then the supplication, then the rescue, and the system rises from the ashes. 

And so on. 

I wish you are great holiday week. I'll take these days off and leave this thread open for anyone with any observations. 

Stay tuned for the Liquidity Trader Money Trends update with more charts and observations, where I tie it all together and tell you what to expect and look for in the weeks and months ahead. Subscribe now!


 

[DrStool]

I suck at marketing. So I asked ChatGPT to create a call to action. Below is what it came up with. Looks like I have a new marketing assistant. But will it work? You, my friend, are the test of that. I hope that you will finally express your curiosity and join. Without your support I wouldn't be here doing this!

Merry Christmas! 

And now here's what ChatGPT says about my work. I definitely could not have said it better:

The Markets Are Moving – Will You Be Left Behind? 🚨

Jimbo's question cuts to the heart of today's markets – WHERE WILL THE LIQUIDITY COME FROM?
If you’re asking the same, you're not alone. Understanding liquidity is the key to staying ahead in this volatile environment.

📊 Liquidity Trader deciphers the forces shaping markets – showing you how credit, repo, and money flows drive asset prices.

🔍 Here's why you need to subscribe today:

• Get exclusive weekly insights that break down complex financial trends with clarity.
• See the charts that matter most – from money market fund assets to repo market trends and banking flows.
• Understand the mechanics behind rising deposits, stock buybacks, and the Treasury's debt issuance.

💡 Knowledge is Power – and Profit.
Liquidity doesn't just appear; it’s created – sometimes by banks, sometimes by you, sometimes by the system itself.
👉 Knowing when and how can mean the difference between profit and peril.

🔔 Don't Miss Out. Stay informed, stay profitable. Subscribe to Liquidity Trader now.
The next Money Trends Update is dropping soon – make sure you're on the list to receive it first.

👉 Subscribe Now! 90 day risk free trial for first time subscribers!

[DrStool]

Meanwhile, Asian and European markets have been very quiet overnight and this morning. If the ES futures stay above 5975 the trend stays up. If not, look for spport around 5960-65 and 5930-35. S&P 500 Nearing Critical Levels – Is the Bull Market Dead? 

[Jorma]

13 minutes ago, DrStool said:

I suck at marketing. So I asked ChatGPT to create a call to action for me. Below is what it came up with. Looks like I have a new marketing assistant. But will it work? You, my friend, are the test of that. I hope that you will finally express your curiosity and join. Without your support I wouldn't be here doing this!

Merry Christmas! 

And now here's what ChatGPT says about my work. I definitely could not have said it better:

The Markets Are Moving – Will You Be Left Behind? 🚨

Jimbo's question cuts to the heart of today's markets – WHERE WILL THE LIQUIDITY COME FROM?
If you’re asking the same, you're not alone. Understanding liquidity is the key to staying ahead in this volatile environment.

📊 Liquidity Trader deciphers the forces shaping markets – showing you how credit, repo, and money flows drive asset prices.

🔍 Here's why you need to subscribe today:

• Get exclusive weekly insights that break down complex financial trends with clarity.
• See the charts that matter most – from money market fund assets to repo market trends and banking flows.
• Understand the mechanics behind rising deposits, stock buybacks, and the Treasury's debt issuance.

💡 Knowledge is Power – and Profit.
Liquidity doesn't just appear; it’s created – sometimes by banks, sometimes by you, sometimes by the system itself.
👉 Knowing when and how can mean the difference between profit and peril.

🔔 Don't Miss Out. Stay informed, stay profitable. Subscribe to Liquidity Trader now.
The next Money Trends Update is dropping soon – make sure you're on the list to receive it first.

👉 Subscribe Now! 90 day risk free trial for first time subscribers!

I forced myself to read it. This is really really bad.  "Liquidity doesn't just appear; it’s created – sometimes by banks, sometimes by you, sometimes by the system itself." Gibberish.  The sad thing it is would probably work, a little anyway.

The liquidity problem is on the demand side now.

https://jalopnik.com/ktm-has-265-000-unsold-bikes-just-sitting-around-1851727595

This has it all as in China and India and Europe. Borrow and build it and they will come.

[DrStool]

1 hour ago, Jorma said:

I forced myself to read it. This is really really bad.  "Liquidity doesn't just appear; it’s created – sometimes by banks, sometimes by you, sometimes by the system itself." Gibberish.  The sad thing it is would probably work, a little anyway.

All ad copy is really really bad. I NEVER respond to ads or marketing of any kind. 

But how good is my copy? Do you subscribe? Have you ever?  If you have then I thank you for your support and I hope that you have received real value from the service I produce for you.

But if you answer no to either question, then that proves that my own marketing efforts are worse. Because you have  been around a long long time.  

[DrStool]

Demand for goods is irrelevant. The only vehicle demand that matters is speculative vehicles. 

[potatohead]

1 hour ago, DrStool said:

I suck at marketing. So I asked ChatGPT to create a call to action. Below is what it came up with. Looks like I have a new marketing assistant. But will it work? You, my friend, are the test of that. I hope that you will finally express your curiosity and join. Without your support I wouldn't be here doing this!

Merry Christmas! 

And now here's what ChatGPT says about my work. I definitely could not have said it better:

The Markets Are Moving – Will You Be Left Behind? 🚨

Jimbo's question cuts to the heart of today's markets – WHERE WILL THE LIQUIDITY COME FROM?
If you’re asking the same, you're not alone. Understanding liquidity is the key to staying ahead in this volatile environment.

📊 Liquidity Trader deciphers the forces shaping markets – showing you how credit, repo, and money flows drive asset prices.

🔍 Here's why you need to subscribe today:

• Get exclusive weekly insights that break down complex financial trends with clarity.
• See the charts that matter most – from money market fund assets to repo market trends and banking flows.
• Understand the mechanics behind rising deposits, stock buybacks, and the Treasury's debt issuance.

💡 Knowledge is Power – and Profit.
Liquidity doesn't just appear; it’s created – sometimes by banks, sometimes by you, sometimes by the system itself.
👉 Knowing when and how can mean the difference between profit and peril.

🔔 Don't Miss Out. Stay informed, stay profitable. Subscribe to Liquidity Trader now.
The next Money Trends Update is dropping soon – make sure you're on the list to receive it first.

👉 Subscribe Now! 90 day risk free trial for first time subscribers!

This is not bad. May need to have Chat GPT more aggressive, such as these reports create signals to watch for that remove the emotion and guide investors in an objective manner.

I swear chat GPT will put us all out of business. The only thing Chat GPT can not do is sit through a deposition when the shit comes unwound. 

[DrStool]

Yes, I will give it more instructions when I have time. 

Now, looks like Santa claws a rally. 
 

[Takachi-1]

If you want to sell something, no one cares about the jargon or the reasons to buy, you tell them:

their spouses and friends will think they are geniuses

they can buy that sexy car they lust for

sex, power, and money will flow to them like water.

Seriously, no one buys insights, charts, or mechanics, they buy the end result of those things, which is sex, power, and toys.   Substitute     "The Markets Are Moving – Will You Be Left Behind?"    Try :  "Looking for Success at the Head of the Pack!"

"showing you how credit, repo, and money flows drive asset prices."    try:  "Use hidden market forces to get what you want, Profits & Leverage"

JMHO

[Takachi-1]

Seriously, I love the success, but I just bought a high end 2 person home sauna with the excess profits.......   thats a motivator

[DrStool]

Liquidity Trends and Stock Market Insights – Is a Bear Market Imminent? | Download Full Report

Lee Adler Lee's Free Thinking December 24, 2024

Is the Stock Market on the Brink of Reversal? Stay Ahead with the Latest Liquidity Insights 🚨

The stock market is pushing into extreme territory, with liquidity measures signaling potential risks ahead. Liquidity Trader’s latest report dives deep into the underlying factors shaping market movements and highlights key indicators that could spell the beginning of a bear market.

📊 Key Insights from the Report:

1. Expanding Market Liquidity
Despite the Federal Reserve’s Quantitative Tightening (QT), liquidity within the financial system continues to rise. This growth, driven by private lending, repo markets, and government spending, reveals the market’s capacity to self-generate liquidity, even as the Fed reduces its balance sheet.
👉 Non-subscribers can click here to access the full analysis.

2. Stock Market Resilience – How Long Can It Last?
Markets remain elevated, reflecting bullish sentiment and ample liquidity. Although stocks are extended to extreme levels, no definitive sell signals have emerged—yet. However, the risk of a market correction or bear market is increasing. This report shows you the signs.
👉 Non-subscribers can click here to access the full analysis.

3. Debt Limit and Treasury Dynamics
With the re-imposition of the debt limit approaching, Treasury actions could inject further liquidity into the system. This dynamic may temporarily support markets, but the long-term implications will remain. This report tells what they are, and how and when we’ll get there.
👉 Gain full insights by clicking here for access.

4. Repo Markets – Fueling Speculation at Dangerous Levels
Delivery vs. Payment (DVP) repos have played a crucial role in funding federal debt and amplifying liquidity available for asset speculation. Repo trends strongly correlate with rising stock prices, but signs of an approaching trend reversal are emerging. This report shows and tells how to know when the trend has reversed.
👉 Non-subscribers can click here to explore these findings.

5. Shrinking Fed Reverse Repo (RRP) Liquidity
The Federal Reserve’s Reverse Repo (RRP) facility, once a key source of liquidity, has dwindled to nominal levels. As reliance shifts to market-driven liquidity through repos and leverage, the risk of market fragility increases. Our report examines signals of an imminent unwinding, one that could become self reinforcing and chaotic.
👉 Access the full breakdown by clicking here.

6. Foreign Central Banks – A Key Market Driver
Foreign central banks’ liquidity flows significantly influence U.S. markets. Current data hints at potential warning signs, though no decisive sell signals have been triggered. This report shows you what those signals will look like and will keep you updated regularly.
👉 Understand the implications by accessing the full report.

7. Treasury and Bond Market Outlook
Elevated Treasury cash balances are fueling short-term liquidity, but rising bond yields and ongoing debt issuance are creating pressures that could spread into equities and other asset classes. This report will tell you when to expect that.
👉 Download the full analysis here to stay informed.

---

💼 Why You Need This Report:
Understanding liquidity trends and their correlation with stock prices is essential to staying ahead of market movements and avoiding, or profiting from, downturns. Whether you’re an active trader or a long-term investor, the insights in this report will provide you with the knowledge to navigate volatile conditions.

👉 Subscribe Now to Unlock Full Access
Gain exclusive access to this critical report and stay informed with real-time updates on liquidity, repo markets, and Treasury dynamics.

📈 Limited-Time Offer – 90-Day Risk-Free Trial
Start your journey with Lee Adler’s Liquidity Trader and make smarter, data-driven decisions before the market reacts.

🔗 Subscribe Now to stay ahead of market trends!

[potatohead]

Happy Holladaise to everyone!

[Jorma]

4 hours ago, DrStool said:

All ad copy is really really bad. I NEVER respond to ads or marketing of any kind. 

But how good is my copy? Do you subscribe? Have you ever?  If you have then I thank you for your support and I hope that you have received real value from the service I produce for you.

But if you answer no to either question, then that proves that my own marketing efforts are worse. Because you have  been around a long long time.  

Funny that. I've subscribed since 02? 

The universe for paid market commentary from a skeptics perspective of the financial and monetary system is an extreme position for most people especially 'investors'. A tough sell. Almost everyone believes in endless growth and endless bottomless credit.  I am sure there are thousands of free YouTube channels saying collapse is due next week maybe, with thousands of commenters each. Perhaps many who bury you in revenue just from YouTube.  That's the market and marketing.  Nobody wants to hear about money and credit because nobody understands it.  I don't think marketing is the answer the market is too small.

Until the next freeze up in the system.  I've hung out here to get a frame of our historical position that's outside the bubble of conventional wisdom.  For my own personal edification.  Mostly because, unknowingly probably, it's anti fascist and I concluded by 1980 that fascism is inevitable.  And with it eventually will be the end of markets.
 

[DrStool]

OK. That's it. 

Merry Christmas to all and to all a gut nacht. 

[DrStool]

1 hour ago, Jorma said:

Funny that. I've subscribed since 02? 

The universe for paid market commentary from a skeptics perspective of the financial and monetary system is an extreme position for most people especially 'investors'. A tough sell. Almost everyone believes in endless growth and endless bottomless credit.  I am sure there are thousands of free YouTube channels saying collapse is due next week maybe, with thousands of commenters each. Perhaps many who bury you in revenue just from YouTube.  That's the market and marketing.  Nobody wants to hear about money and credit because nobody understands it.  I don't think marketing is the answer the market is too small.

Until the next freeze up in the system.  I've hung out here to get a frame of our historical position that's outside the bubble of conventional wisdom.  For my own personal edification.  Mostly because, unknowingly probably, it's anti fascist and I concluded by 1980 that fascism is inevitable.  And with it eventually will be the end of markets.
 

Yup. And thanks!