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Category: 1 – Liquidity Trader

Reports on the Fed and Treasury, Primary Dealers, real time Federal tax collections, foreign central banks, US banking system, European banking system, and other factors that affect market liquidity. Resulting market strategy recommendations. 7-8 reports each month. Click here to subscribe. 90 day risk free trial!

Fed Hyperinflates Its Balance Sheet But It’s Only A Holding Action

On March 3, the Fed converted Not QE into Panic QE. Since then it has pumped $766 billion in cash into Primary Dealer accounts. At the same time the US Treasury issued “only” $147 billion in new debt. So in essence, the Fed issued $619 billion in excess cash.

Other than the hyperinflationary implications, what good has it done? What does it mean for us looking ahead.

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

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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Fed Repeats the Mistake of 2008, Only Worse

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

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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