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Category: 1 – Liquidity Trader- Macro Liquidity

How Fed and Treasury policy, Primary Dealers, real time Federal tax collections, foreign central banks, US banking system, and other factors that affect market liquidity, interact to drive the financial markets. Focus on trend direction of US bonds and stocks. Resulting market strategy and tactical ideas. 4-5 in depth reports each month. Click here to subscribe. 

“I Am the Greatest!” Muhammad Ali Financial Crisis KOs the Fed

Lee Adler

The Fed has undertaken so many rescue programs since Friday that my head is spinning. It’s hard to keep track of it all. A schedule of repo offerings for the next month reads like the Old Testament. Even the rabbis are arguing over it, the underlying question being, “Where is G-d already?”

I’ve tacked it to the butt of this report.

Anyway, it’s irrelevant. The dealers can’t borrow a fraction of what the Fed is offering. Here’s what’s relevant. The markets are now a mass grave filled not with COVID19 victims, but victims of the greatest bubble in history. A bubble built by the Fed.

Here’s what’s coming next, and what you can do about it to preserve your capital and maybe even profit from the big moves that lie ahead.  Assuming that trading systems continue to function at all.

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Already Soaring Federal Outlays are About to Explode and Boy Is That A Problem

Lee Adler

Even before COVID-19 the trend was clear that the Treasury would need to keep borrowing money hand over fist. Now the deficit will explode. This is a hideous problem for financial markets in this condition.

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Fed Repeats the Mistake of 2008, Only Worse

Lee Adler

With no prior announcement or clue, the Fed bought $37 billion in Treasury coupons from Primary Dealers on Friday. To pay for them it deposited $37 billion into dealer accounts at the Fed.

It was the largest single day POMO (Permanent Open Market Operation) purchase since the days of TARP and QE 1 in 2009.

It came without warning. I was so glued to the intraday live charts on Friday, I wasn’t even aware that the Fed had taken this emergency action until after the close.

We sure as hell saw the result. But this is only the beginning of this story.

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Dealers Smelling Like A Rose, But Elsewhere the Smell of Death

Lee Adler

Investors and leveraged speculators instead took the coronavirus panic straight to the bond market. Dealers, bless their little hearts, were long up the wazoo. Talk about smellin like a rose.

But somebody was short. Big somebodies. They’re dead. We don’t know where the bodies are buried yet, but the Fed will need to exhume them and fill the graves. We watching for the exhumations to see who the dig up, and what they fill the graves with.

Meanwhile, there’s plenty of liquidty in dealer accounts and more on the way.

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Real Time Federal Withholding Data Signals Shows US Econ On the Brink

Lee Adler

Suddenly the trend of Federal Withholding tax collections is in critical condition.

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Rate Crash of the Century

Lee Adler

The patterns on the charts of T-bills and the 10 year note are unprecedented. Something terrible has happened in the market. The Fed will have to cut on Monday. Tuesday at the latest.

It has implications for stocks, too. Here’s what to expect next.

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DANGER! M-FAT Stalled in February – Negative Divergence Formed

Lee Adler

The market got way ahead of the amount of cash that the Fed was pumping into dealer accounts in February. That took a toll, and we’ve had a little “adjustment” over the past week. Here’s what comes next.

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Here’s Proof that the Fed Is the Real Cause of the Crash

Lee Adler

We knew that Not QE would fall well shy of Treasury issuance in February, and that that would be a problem for the markets.

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Bonds Could Be A Buy In March

Lee Adler

The February supply increase caused the bond rally to stop in its tracks. But that will change in March.

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Federal Revenue Soars, Outlays Soar More, Budget Gets Sore

Lee Adler

Update- A few minor corrections.

Federal revenues soared in January. Spending soared more. A lot more. Despite all that stimulus, the tax data suggests that the US economy is just stumbling along.

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