Liquidity Trader

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.

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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.

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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. 

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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. 

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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. 

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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!