Federal Reserve in stealth intervention mode...
- Thread starter Rickshaw Man
- Start date
We've been hitting basically the same "all-time" highs for a year now.
Rates low, liquidity high thanks to Helicopter Jerome, but cracks are showing.
Buybacks are slooowing. IPO's (WeWork, Uber, Lyft, Slack, Spotify) not so good initially or the weeks that followed.
Maybe just maybe Dump's trade war and day to day irrational behavior will finally take its toll no matter what Fed does.
Rates low, liquidity high thanks to Helicopter Jerome, but cracks are showing.
Buybacks are slooowing. IPO's (WeWork, Uber, Lyft, Slack, Spotify) not so good initially or the weeks that followed.
Maybe just maybe Dump's trade war and day to day irrational behavior will finally take its toll no matter what Fed does.
I was going to start this exact thread last night.
Along with a stat line shared on the author's twitter:
Trillion dollar deficits.
110% debt to GDP.
$120B daily repos.
$60B per month Fed balance sheet expansion.
Rate cuts galore.
Sub 2% GDP growth.
"The economy is in a good place" - Jay Powell
And another piece put out by the author, noting the severe drop in volume.
https://northmantrader.com/2019/10/26/zombieland/
From the article:
"Markets have turned into Zombieland, hardly any humans around, but the living dead walking around.
Volumes have completely collapsed. While shrinking volumes are a common aspect during rallies (as are increasing volumes during sell-offs), this here is not your daddy’s market. $SPY average daily volume has shrunk throughout the years and now averages around 73M shares a day.
Not this week. Volumes collapsed to the lowest volume week ever (outside a holiday week with a half day thrown in), with daily volumes barely making it to 30M-35M shares, it’s stunning:
Indeed 30% of the $SPY volume of the day tae during after-hours, that’s how deserted the actual open trading hours are.
And this is not a sleepy summer week we’re talking about, this is October. Record low volume in October? Unheard of. No, this market is so dead, nobody’s home."
https://northmantrader.com/2019/10/26/zombieland/
From the article:
"Markets have turned into Zombieland, hardly any humans around, but the living dead walking around.
Volumes have completely collapsed. While shrinking volumes are a common aspect during rallies (as are increasing volumes during sell-offs), this here is not your daddy’s market. $SPY average daily volume has shrunk throughout the years and now averages around 73M shares a day.
Not this week. Volumes collapsed to the lowest volume week ever (outside a holiday week with a half day thrown in), with daily volumes barely making it to 30M-35M shares, it’s stunning:
Indeed 30% of the $SPY volume of the day tae during after-hours, that’s how deserted the actual open trading hours are.
And this is not a sleepy summer week we’re talking about, this is October. Record low volume in October? Unheard of. No, this market is so dead, nobody’s home."
As a sort of balance...
From December 2013
https://www.knkx.org/post/stock-market-thrives-uncertainty
From December 2013
https://www.knkx.org/post/stock-market-thrives-uncertainty
Our firm has a locked down place where Partners are encouraged to write their thoughts as to what we see in the market. Senior guy is one of the best Macro guys I've ever seen. Nailed 2008 like he knew it was coming. I've learned a lot from him. This is what he wrote the other day ...
...
Mark this next part under the category of "market awareness", and "what is going on in markets". I want to return to something you know I was saying back in December. Which is that the Fed's rate hikes were a mistake.
It's not often I say things like that, because generally, I find people who second-guess the Fed's every move, to ... well ... be sort of the worst sort of armchair Quarterback. The sort of people who try to make their name, on the backs of giants. Peter Schiff being the worst of the worst, besides being a general jack-muppet to deal with.
However, I said then ... those hikes were mistakes. BIG mistakes. Yesterday, the NY Fed announced: "Effective the week of October 7, the Desk will offer term repos through the end of October as indicated in the schedule below. The Desk will continue to offer daily overnight repos for an aggregate amount of at least $75 billion each through Monday, November 4, 2019." ( https://www.newyorkfed.org/markets/opolicy/operating_policy_191004 ).
For the Fed to keep coming back to the Repo Market, and announcing they need larger and larger injections, and now to extend those injections as they extend the time that they will be doing so? It tells us one thing.
We have ourselves ... an old-fashioned cash shortage.
Like ... a big one.
Like, the sort of cash shortage that we saw in 2008.
What is more concerning about this cash shortage, than 2008? Is 2008, (thankfully) came on the heels of a MASSIVE Dollar Bear Market. There was plenty of ROOM for the Dollar to move higher (which actually, I said back then as you know).
Now, in 2019? We've experienced an 11 year bull market in the U.S. Dollar. The world is already pinched. Not flush with cash, and it looks as if we are facing a world wide demand for Dollars?
As I said in December of 2018? Those rate hikes were a bad, bad, bad idea.
So what are you saying _____? Is another 2008 Financial Crisis on the way? Are you predicting that?
I hope everyone knows me better than that.
I don't know ... no one knows ... and I don't predict.
I do know, that anyone calling this "QE" or making jokes about it being "Not QE", as if ... in some way ... to infer that it IS QE? Is a know nothing hack. Unfollow them. They have no idea what they are talking about.
Because the question is much more serious than that. I at least know what the question to ask is, and the question everyone should be asking is ...
"Is the Fed having trouble controlling their own Target Rate? The one thing they should be able to control"
That is the question. Because it sure does look that way.
And just that we are asking ourselves that question?
Tells us the sort of environment we are in ...
I mean ... they can inject cash indefinitely, as they have that power. But at a certain point, you get into a crisis of confidence. And Sovereigns out there, are short on Dollars, and want them.
I find myself asking the same question that I was asking myself in November 2007, when various Credit Spreads were blowing out to unseen levels.
Uh ...
There's a problem out lurking out there somewhere. I didn't know the full extent of the CDO mess, probably until March of 2008. But by November of 2007, with what was going on in the overnight markets ... anyone with a brain in their head ... knew something was afoot. We just couldn't 'see' it, because we didn't have the $5 Billion to sit at the IASD table.
That's how I feel now. That something is afoot. There's a problem lurking out there, and this obvious shortage of Dollars we're seeing in the Repo market is telling us that ...
...
Mark this next part under the category of "market awareness", and "what is going on in markets". I want to return to something you know I was saying back in December. Which is that the Fed's rate hikes were a mistake.
It's not often I say things like that, because generally, I find people who second-guess the Fed's every move, to ... well ... be sort of the worst sort of armchair Quarterback. The sort of people who try to make their name, on the backs of giants. Peter Schiff being the worst of the worst, besides being a general jack-muppet to deal with.
However, I said then ... those hikes were mistakes. BIG mistakes. Yesterday, the NY Fed announced: "Effective the week of October 7, the Desk will offer term repos through the end of October as indicated in the schedule below. The Desk will continue to offer daily overnight repos for an aggregate amount of at least $75 billion each through Monday, November 4, 2019." ( https://www.newyorkfed.org/markets/opolicy/operating_policy_191004 ).
For the Fed to keep coming back to the Repo Market, and announcing they need larger and larger injections, and now to extend those injections as they extend the time that they will be doing so? It tells us one thing.
We have ourselves ... an old-fashioned cash shortage.
Like ... a big one.
Like, the sort of cash shortage that we saw in 2008.
What is more concerning about this cash shortage, than 2008? Is 2008, (thankfully) came on the heels of a MASSIVE Dollar Bear Market. There was plenty of ROOM for the Dollar to move higher (which actually, I said back then as you know).
Now, in 2019? We've experienced an 11 year bull market in the U.S. Dollar. The world is already pinched. Not flush with cash, and it looks as if we are facing a world wide demand for Dollars?
As I said in December of 2018? Those rate hikes were a bad, bad, bad idea.
So what are you saying _____? Is another 2008 Financial Crisis on the way? Are you predicting that?
I hope everyone knows me better than that.
I don't know ... no one knows ... and I don't predict.
I do know, that anyone calling this "QE" or making jokes about it being "Not QE", as if ... in some way ... to infer that it IS QE? Is a know nothing hack. Unfollow them. They have no idea what they are talking about.
Because the question is much more serious than that. I at least know what the question to ask is, and the question everyone should be asking is ...
"Is the Fed having trouble controlling their own Target Rate? The one thing they should be able to control"
That is the question. Because it sure does look that way.
And just that we are asking ourselves that question?
Tells us the sort of environment we are in ...
I mean ... they can inject cash indefinitely, as they have that power. But at a certain point, you get into a crisis of confidence. And Sovereigns out there, are short on Dollars, and want them.
I find myself asking the same question that I was asking myself in November 2007, when various Credit Spreads were blowing out to unseen levels.
Uh ...
There's a problem out lurking out there somewhere. I didn't know the full extent of the CDO mess, probably until March of 2008. But by November of 2007, with what was going on in the overnight markets ... anyone with a brain in their head ... knew something was afoot. We just couldn't 'see' it, because we didn't have the $5 Billion to sit at the IASD table.
That's how I feel now. That something is afoot. There's a problem lurking out there, and this obvious shortage of Dollars we're seeing in the Repo market is telling us that ...
All time highs, cash market liquidity, undercurrents of problems...
I was visiting the NY trading floor of my then employer, in July 2007. Everyone was obsessed with their brand new first gen iPhones - amazing devices that had only recently hit the streets, no one had seen anything like it before.
Anyway.... for the first time ever, the Dow hit 14,000 on the screen that day. Spirits were pumped! I had a meeting that week at the Fed to discuss liquidity (for no good reason, it was pretty normal for me to discuss liquidity at CB's in various countries).
Some people were talking about the problems in the MBS market and related funding squeezes. Some of us were sensing the change in Money Market blood pressure and flow due to the subprime MBS-CDO narrative that was about to unfold. But really, no one thought much of it in mid 2007. I remember standing there playing with an iPhone, watching the Dow hit 14k, hearing the cheers, thinking of my Fed meeting... and just KNOWING that moment was the tipping point.
A year later I was working at another bank. I was back in NY, meeting with the Fed again, but under very different circumstances (I still feel slightly sick thinking about it.) And oh boy, how I remembered the highs of my July 2007 Dow 14k iPhone visit a year earlier.
I was visiting the NY trading floor of my then employer, in July 2007. Everyone was obsessed with their brand new first gen iPhones - amazing devices that had only recently hit the streets, no one had seen anything like it before.
Anyway.... for the first time ever, the Dow hit 14,000 on the screen that day. Spirits were pumped! I had a meeting that week at the Fed to discuss liquidity (for no good reason, it was pretty normal for me to discuss liquidity at CB's in various countries).
Some people were talking about the problems in the MBS market and related funding squeezes. Some of us were sensing the change in Money Market blood pressure and flow due to the subprime MBS-CDO narrative that was about to unfold. But really, no one thought much of it in mid 2007. I remember standing there playing with an iPhone, watching the Dow hit 14k, hearing the cheers, thinking of my Fed meeting... and just KNOWING that moment was the tipping point.
A year later I was working at another bank. I was back in NY, meeting with the Fed again, but under very different circumstances (I still feel slightly sick thinking about it.) And oh boy, how I remembered the highs of my July 2007 Dow 14k iPhone visit a year earlier.
Last edited:
1 factor is as the price goes higher the same dollar amount buys fewer shares.
but the collapse of volume is good news! (for the bulls).... after all the buy backs, floating shares are getting scarce.. also the public participation is low which means cash on the sidelines.... when the pros control all the shares, it will come the mark-up phase!
How do you fight a trader with unlimited cash. Don't fight the Fed.