Menu Close

Lee Adler’s

Lee Adler’s

Menu

Category: Fed, Central Bank and Banking Macro Liquidity

Analysis of the major forces of macro liquidity that drive markets. Click here to subscribe. 90 day risk free trial!

For Primary Dealers Easy Street is No More

Lee Adler

Primary Dealers have reduced their fixed income portfolio hedging at the worst possible time. They are facing a deluge of supply in the months ahead, and they are not well hedged. They have reduced leverage a bit, but this doesn’t appear to be enough to help them through the supply tsunami that is headed their way. Non-subscribers, click here for access.

Subscribers, click here to download the report.

Here’s what this means for stocks and bonds, and what you should do about it.  Non-subscribers, click here for access.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Go to the post

Here Cometh the Grim Repo Man

Lee Adler

Repo data has been an important part of our liquidity analysis for many years. But the data had shortcomings. It showed only the banking system data, which is not the entire repo market by far. And it was only somewhat timely, offering a weekly snapshot with a 10 day lag. Non-subscribers, click here for access. 

Subscribers, click here to download the report.

I have found something better. It’s daily data on the entire repo market, current through the last business day before yesterday. No surprise, it correlates with the trend of stock prices and even shows evidence of divergences that precede changes of stock market trends. Non-subscribers, click here for access. 

The current data through Monday supports the stock market rally, but only up to a point. A negative divergence has developed since January. A breakdown from here could be a bearish signal for stocks. A breakout would be bullish confirmation. They’re not at either point yet, but it’s now week to weak. Pun intended. We’ll keep an eye on it. Non-subscribers, click here for access. 

It’s a similar story from the other drivers. There’s enough liquidity to keep the rally going for a bit longer. But the sands of time are falling to the bottom of the hourglass. Long for now, but not for long, looks like the watchword for this market. Tick tock. Non-subscribers, click here for access. 

This report illustrates each component of the liquidity data to give you a complete view and deeper understanding of the dynamics that drive market trends so that you can invest and trade with greater confidence. Non-subscribers, click here for access. 

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

Go to the post

May Tax Collections Were Super Bullish

Lee Adler

Withholding tax collections boomed in May. Consequently, the US Treasury is flush with cash. This means that T-bill paydowns are likely to hit my previous estimate of $80-100 billion for June. It could be more than that, but the difference shouldn’t be enough to materially impact the market. The current estimates are bullish enough.  Non-subscribers, click here for access.

Subscribers, click here to download the report.

This report gives the details of the May tax windfall, what it means for the market, and how you can use that information in your trading and investment strategy.  Non-subscribers, click here for access.

Here’s a snip from last month’s summary of the review of April tax collections.   Non-subscribers, click here for access.

5/3/24 This is the second straight month of strong tax revenue. That means less supply. The usual April-May tax bulge cash cow could hang around through June, when the government sees a mini tax collection bulge from June estimated taxes. That could extend the T-bill paydown period into late June or early July before the well runs dry.  Non-subscribers, click here for access.

And that, my friends, will be a bullish influence between now and the end of the second quarter.  Non-subscribers, click here for access.

As I wrote in this update last month, “Cash doesn’t guarantee a bull stampede, but it means that the gates are open for them to easily run through.”  Non-subscribers, click here for access.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Go to the post

After Growth in the Spring Comes the Harvest

Lee Adler

The Treasury supply issue is still favorable for most of June. The Treasury has already resumed paying down T-bills thanks to a huge cash balance and the prospect of a big wave of estimated tax collections on June 15. Non-subscribers, click here for access. 

Subscribers, click here to download the report.

I now estimate that paydowns should rebuild the Fed’s RRP facility to xxxxxxxxxxxxxxxx. That should be enough to last until xxxxxxxxxxxxxxxx. It doesn’t guarantee bullish markets until then, but it’s potential cash flow that will offset ongoing QT until it doesn’t. That should be xxxxxxxxxxxxxxxx at the latest. So enjoy the party while it lasts. Non-subscribers, click here for access. 

Meanwhile the stock market had looked historically overbought versus the level of bank deposits in recent weeks. But it has now blown through that record extreme into a supernova of bullishness. When that finally turns, it should mark the end of this bull run. But we’re not there yet, and there’s no reason to try and anticipate the turn by selling too early. The market will tell us. Meanwhile, I would let xxxxxxxxxxxxx xxxxxxxxxxx. Non-subscribers, click here for access. 

However, the buildup of divergences between liquidity indicators and the direction of asset prices means that when the market finally does give it up, we should believe it. It will be time to sell and sell short, not just wait out the next correction. Non-subscribers, click here for access. 

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

Go to the post

June Swoon Called Off

Lee Adler

Fed balance sheet and banking data, along with Treasury supply data had previously shown the prospect for some stock market weakness around the enormous expected end of May Treasury coupon settlement. I warned about it in our last update of this data on May 13, which was headlined, “Why Sell in May and Go Away.”  Non-subscribers, click here for access. 

Subscribers, click here to download the report.

Last week, the Treasury confirmed the amount of the settlement that I had estimated. Over the past few days, we’ve begun to see the effects of that in stocks and bonds. But how bad will it be? This report answers that question, and shows you why.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

Go to the post

Primary Dealers Get a Break from Impending Doom

Lee Adler

Headline Corrected

The storm warnings of extreme dealer leverage have dissipated over the past two months. For the moment, the skies are only partly cloudy with a chance of showers, but no sign of any big storms. They’re still over the horizon. Non-subscribers, click here for access.

Subscribers, click here to download the report.

Dealers are required to buy a significant percentage of every Treasury offering by the deal they made with the devil to be its Primary Dealers. And those offerings keep coming in a never-ending tide. But they were sharply curtailed from late March through early May by the annual tax collection bulge. Those collections enable the US Treasury to pay down debt over that period. That reduction in supply accrues to the benefit of the dealers. It enabled them to not only reduce leverage, but also to add to hedges as the accumulate inventory. So over the past two months they have taken the opportunity to get a little healthier than they were through early this year. Non-subscribers, click here for access.

We know from our other reports on the Fed’s balance sheet and the banking system that the time when trouble is likely is when the Fed’s RRP slush fund runs out. It’s been holding in the 400-500 billion range, but as T-bill issuance picks up it will begin to diminish. We’ll watch that data as always and will keep an eye on the dealers’ positions as the other signs of impending doom begin to appear. Right now, they’re on hold. Non-subscribers, click here for access.

This report shows the pictures that tell the story, and that tells us what to do about it.  Non-subscribers, click here for access.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Go to the post

Why Sell in May and Go Away

Lee Adler

“Sell in May and go away,” looks like a good idea again this year. The time has come. The time is now. Here’s why.   Non-subscribers, click here for access. 

Subscribers, click here to download the report.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

Go to the post

April Tax Collections Soared

Lee Adler

Forget the modest increase in jobs reported by the BLS. Withholding tax collections were strong in April. The US Treasury is flush with more cash than expected, well above its target for the end of Q2. This means that T-bill paydowns may extend for longer than just through late May as is normally the case. That is, unless the Federal Government decides to hold on to all of the massive $900 billion war chest that it has accumulated through better-than-expected tax collections and lower spending than last year in April, mostly the former. Non-subscribers, click here for access.

Subscribers, click here to download the report.

This is the second straight month of strong tax revenue. That means less supply. The usual April-May tax bulge cash cow could hang around through June, when the government sees a mini tax collection bulge from June estimated taxes. That could extend the T-bill paydown period into late June or early July before the well runs dry. Non-subscribers, click here for access.

And that, my friends, will be a xxxx xxxxx between now and the end of the second quarter. Non-subscribers, click here for access.

As I wrote in this update last month, “Cash doesn’t guarantee a bull stampede, but it means that the gates are open for them to easily run through.” Non-subscribers, click here for access.

This report gives the details of the April tax deluge, what it means for the market, and how you can use that information in your trading and investment strategy.

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Go to the post

The Fed Doesn’t Matter Any More

Lee Adler

Bulletin- Fed Cuts QT by $35 billion per month. This is irrelevant and immaterial in the face of the mushrooming Treasury supply ahead. Read on!   Non-subscribers, click here for access. 

Subscribers, click here to download the report.

Today is FOMC circus day, with the Chairman’s Dog and Pony Show after the main event.  Non-subscribers, click here for access. 

It’s all irrelevant. The First Law of Market Dynamics—Don’t Fight the Fed—has been called into question since October 2022 when a new cyclical bull market was born despite Fed policy. It was tight then, and remains tight now, as the Fed relentlessly drains money from the system by shrinking its balance sheet.  Non-subscribers, click here for access. 

That won’t change until the Fed does more than talk about it. And why should it change. Inflation marches on, and the markets are doing just fine.  Non-subscribers, click here for access. 

Tight Fed policy hasn’t mattered because the players have been determined to create their own liquidity. Who needs QE when you can just borrow your own cash into existence. With plastic in our pockets, we are all mini central banks. We create credit and money by simply spending what we don’t have because the banks give everybody, especially hedge funds and dealers and private equity, a blank check for credit when they want it.  Non-subscribers, click here for access. 

Of course, the Fed had also set up an enormous sludge fund, oops, I mean slush fund, called the RRP facility. That was set up as a piggy bank where all the money market funds deposited all the excess cash that the Fed had pumped into the system during 12 years of QE. At one point in 2022, that fund exceeded $2.5 trillion. That will fund a lot of stock purchases.   Non-subscribers, click here for access. 

And it has.  Non-subscribers, click here for access. 

Gradually that fund was drawn down as the US Government ran persistent huge deficits and had to borrow the money to fund them. Only since 2021 has the Fed not been there to buy all that debt. That debt issuance, particularly in the form of short-term Treasury bills had sopped up all but $330 billion of the RRP slush fund by two weeks ago, April 15. But since then, things changed as we knew they would.   Non-subscribers, click here for access. 

Here’s what it means, along with a road map of how to drive the markets’ winding roads over the next few months.   Non-subscribers, click here for access. 

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

Go to the post

Watch Closely as Warning Signs Abound

Lee Adler

There were more signs in last week’s banking and Fed balance sheet data that the market has begun to build an important top. But tops take time. This report lays out what to expect. Non-subscribers, click here for access. 

Subscribers, click here to download the report.

Last week I wrote that we should still expect a rally in the near term as the US Treasury continues to pay down T-bills. That has begun to play out. The paydowns should continue for another 3-4 weeks. That will be a bullish influence. Non-subscribers, click here for access. 

After that, liquidity will xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. But it will depend on how much borrowing that dealers and hedge funds will be willing to undertake to buy the immense supply of Treasuries that is headed to market beginning in late May. This is an unknown. Therefore, we must continue to monitor this data every week. Non-subscribers, click here for access. 

Subscription Plans

KNOW WHAT’S HAPPENING NOW, before the Street does, read Lee Adler’s Liquidity Trader risk free for 90 days! Act on real-time reality! 

Attention New Subscribers! Please check your spam folder for your subscription welcome messages and post notifications and whitelist Liquiditytrader.com. Some email providers like Hotmail and others which use the Proofpoint gatekeeper are blocking Liquidity Trader emails completely. I have been unable to get them to stop. Please notify them to “Let my emails go!”

If you continue to have issues receiving Liquidity Trader emails, just check here daily at 9 AM ET for the latest posts.

THANK YOU FOR YOUR SUPPORT!

Go to the post
%d bloggers like this: