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Fed Withdraws $1.5 Billion In Liquidity Via Reverse Repo, Stocks Predictably Turn Negative
In confirmation that the market is nothing more than Fed liquidity game, the sudden drop in the S&P back to the red is driven by the just completed reverse repo. As this is the opposite of a liquidity ramp, the amount withdrawn is apparently directly impacting stocks. And today's amount was a doozy (at least by historical standards): the $1.5 billion withdrawn may well be a record for recent reverse repo operations. The $1.5 billion was roughly equally split between USTs, MBS and Agencies. The weighted rate was 0.215% on USTs, 0.226% on Agencies, and 0.237% on MBS. Total amount submitted was $3.64 billion, implying a 41% hit rate. The only thing that matters is that the Fed actively withdrew liquidity today. Should the market close red today it will be pretty clear what is going on: Monday and Wednesday: POMO days, and huge gain, Tuesday - no POMO, today: Reverser Repo (negative liquidity): market down. It is all so transparent at this point. And yes, there is a POMO tomorrow. We can't wait for the Fed to extract as much liquidity via reverse repos as it injects via POMOs - then the confusion will be total and complete as the Fed becomes a pulsating neutron star of liquidity.

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operation twist!
Dow looks like Space Mountain. The entire market now is 100% grafted to the Federal Reserve.
Ben..you can never exit the markets and the further in you push the more impossible it becomes.
My thoughts exactly - exit strategy impossible - circling the whirlpool faster and faster.
Less circling, more like in-and-out...
While I agree with both of you, everyone should *also* take this as an explicit warning by the Fed: "Don't mess with us, we can take it out any time we want."
When Correlation is *perfect*, there's no debate about what your action will cause. (IMHO, the Fed is probing to try to understand the amplitude of the "market" response.)
True but players become more reluctant to enter the game the more they realize how nationalized the stock market has become.Then the next thought of someone being skeptical is.."What if the Federal Reserve encounters an event that prevents them from stemming the bleeding regardless of the actions taken"
Agree. But now that they have broken an real market the amplitude is going to increase - maybe that's what they seek.
my thought as well, testing the water. Sufficed to say, they have proof positive.
think about what just happened though. SP lost 1.6% hi/lo off a roughly $10.6 Tril market cap. with a $1.5bl reverse repo, the market lost 100x the extraction (controlling for some stops and such that went off) safe to say market is leveraging over 50x, no sweat.
they also extracted on Monday, same day of the massive POMO - wtf is going on??
http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Just another 999 Billion left to repo out. So Ben when is the last time you landed a Modified Supersonic 777 on a runway like this in the middle of the ocean without even being able to slow down?
http://www.slide.com/s/lRIl5gqu7z-sai1tJKRKG6Yjo9CfNPLP?referrer=hlnk
I think they are nervous about how much garbage they bought that is losing even more value daily and the ass kicking that MBS will get when housing takes a cliff dive again because of fraudclosure.
From a contrarian stand point, if that even works anymore, almost all market participants are on one side of the trade. In fact, this is historically unprecedented in that there has never been a situation where returns have been guaranteed by the Fed through printing money to prop up asset prices in a desperate reflation strategy. Nevertheless, any unexpected countertrend movement will be amplified massively, a point reinforced by the leveraged positioning used by hedge funds like Goldman Sachs that are causing a 50X response to pomos and repos.
The critical question IMHO, is what could take control from the hands of Helicopter Ben? How could there be a sentiment shift that can't be manipulated by Fed policy?
IMHO, you're asking the right question.
IMHO, there is no possible solution.
I completely agree with your comment -- everybody is on the same side of the trade, that's why we see such an amplified reponse. However, there's no way out of this. Even if we got half-and-half on each side of some "big trade", the reality is that we will unwind this worldwide derivatives market (measured in the $ quadrillions), that Greece will default, that nation-states will be unable to deliver to their boomers what was promised.
It's like saying, "What's the solution to keep the ponzi going?" I seriously doubt their ability to put it off day-by-day, but fundamentally, it's still a ponzi. That's why there's no solution.
what could take control from the hands of Helicopter Ben?
The currency market and sovereign debt market. Debt buyers will demand higher yield for U.S. Treasurys which will result in a spike in the dollar as shorts cover like crazy. Short dollar trade is way too overcrowded and can cause a massive selloff in the stock market since, as you said, almost all market participants are on one side of the trade.
Excellent thread, exit strategy DOES NOT EXIST! Pump and dump to retail is a total fail. Theyre trapped with no way out so next up is massive false flag diversions that will make stock markets and FED asset list the last thing on anyones mind. Prepare yourself.
whats fascinating is the "overlooking" of the gold/silver stocks on the POMO days, and on a day like today, the nuking of the sector. this has been going on for months......everything is allowed to participate EXCEPT those naughty, naughty stocks that can possibly show even the dimmest retail investor what Ben and his boys are doing.......
i mean, they aren't just manipulating the market...they are manipulating sectors and selecting "marquee" names to try and get retail in....
which has not worked, so now what? now what?
Lighten up, dude, the fed can string this along for years, they're just backdooring a bit of a pullback to counter the strong earnings so QEII can be pushed through with minimum pushback.
Other than that:
GO PHILLIES!!!
If only pension funds were smart enough to buy gold after mr irrational exuberance made his proclamation !!!!
The answer is quite obvious remember "what is the purpose of POMO?" to pump.
Eventually every pump leads to...
A dump.
And like a military exercise we have ourselves a test dump (mainly for statistical purposes).
This data will be used for impact analysis over a series of dumps.
The news is all bad. QE2 is happening as congress is inept and FED is all-powerful.
My suggestion.. Hold your gold and silver buy more under 1250 and 21.50 respectively. Prepare to move to an ideal location after maxxing out all debt for cash. And ultimately move to Helsinki for a few years or Canada.
This must be the grand experiment Ben referred to in his speech. Unbelievable.
They can create or distroy at will. Man what a free market. O what a feeling.
So, buy?
Chart: SPX
Hey Ben. POMO this.
http://99ercharts.blogspot.com/2010/10/spx.html
Moron.
"a pulsating neutron star of liquidity" !!?!! :-) Beautiful.
Where do you get these similes ? Are you one of those Physics Ph.D turned into a quants ?
NOOOOOO.. NOOOOO.. THIS CAN'T BE.... NOOOOO.. PLEASE UNCLE BEN - PROP UP THE STOCK MARKET.
Wow. Let's hope for a few more days like this. Or months.
It will making profiting from the Fed as easy as turning on a light switch. Go long at EOD for days when they withdraw liquidity (day before POMO), and go short at EOD on POMO days.
Heh...first read through the topic saw..."pustulating neutron star of liquidity".
Can someone tell me why they would do a reverse repo when they're doing pomo and yapping incessantly on QE2? Is there a technical reason they would do this?
At first, orgasm may be achieved simply by insertion. As time passes, an in-and-out cycle is required.
Cute, but I'm genuinely serious. Why would they do this?
I don't know. Maybe they are playing with the average duration of the portfolio? Maybe they had to get some real shit off the books before someone sees it? Maybe the counter-party has figured out the value of the MBS, and they want them back in exchange for crappy FRNs? And they threw in some USTs for cover?
Maybe it is only, "...part of our operational readiness program," and they just want to make sure the joystick still works when they pull back on it? Lord knows their game controller has been getting a work out.
Appreciate the response. I was just curious, because it smells of inconsistancy.
Controlled ejaculation. Late next week would be the PERFECT time for the "DOW HITS HIGH FOR THE YEAR!" HL to cum out. That way the story would still be fresh enough for a weekend media blitz just befor the elections
Depends on who you think is really in control. Personally, I still expect an epic crash before the election. You know, to show how badly Obummer has ruined the economy.
It was a test. They have been testing "tools" all year for when they will be needed. Earlier they paid 1% to certain banks for parking their deposits with the Fed. This was seen as a possible alternative to trying to influence (raise) the lending rate which will be harder since their balance sheet is so large.
Kabuki!
What will the evil overlord Bur Naki do next? How will peasant traders respond as he pulls the strings behind the scenes?
BWAHAHAHAHAHAHAHA!!!!!
(deep sinister laugh from offstage)
Suddenly a figure steps into the spotlight center stage ...
Barliman
... a large conference table of "bankers" (dressed in expensive suits where all pockets are overflowing with bonus cash - there is so much it makes them look like puffer fish) turn all eyes to the figure that just stepped into the spotlight.
BUR NAKI!!!!! (played by Robert Deniro in a tuxedo)
He holds a maple baseball bat in his hands and begins to take practice swings as he paces around the table and speaks:
"You know this business of ours is all about teamwork. Everybody on the team has a role to play. Some of us are coaches, some of us are fielders or playing the bases. Somebody is supposed to be giving all they got pitching (eyes the GS representative across the table). And occasionally, one of us has to take one for the team."
He stops behind the BAC representative and raises the bat over his head ....
Barliman
... am I being too subtle so far????
And it's going, going...pop fly! Caught by the right fielder. We now go to extra innings. The sacrifice fly failed to bring home the winning run.
Or maybe the Ministry of Truth is your preference:
Adami: Weakness In BofA Is Telling You Something
http://www.cnbc.com/id/39779193
Barliman
Now that I am thinking about it does anyone else think that the Fed is more concerned with Fraudclosure than they are letting on? Maybe Ben now that he realizes he failed to reflate housing and the danger imposed by a halt in foreclosures wants to get some of that Toxic garbage he sopped up with taxpayer money. Maybe he is cleaning up the crime scene before the hearings and reknewed calls for a Fed audit as surely the politicians must take a peek at what he is holding eventually.
Good luck Ben..
"Maybe Ben now that he realizes he failed to reflate housing and the danger imposed by a halt in foreclosures wants to get some of that Toxic garbage he sopped up with taxpayer money."
It should be obvious to everyone right about now that he failed. All the housing numbers for September are coming in Dismal. Roughly 30% drop from last Sept. Even in Austin at 27% drop.
September was before the halt.
http://www.google.com/imgres?imgurl=http://www.threadbombing.com/data/media/17/jiggle_juggs.gif&imgrefurl=http://www.threadbombing.com/details.php%3Fimage_id%3D3583&usg=__preP2kSCRahQpDcIoyNsFefck9M=&h=216&w=216&sz=1694&hl=en&start=0&sig2=hAr9dW4oy3u5X7iygfzSQQ&zoom=1&tbnid=WynnmhlPSPPsDM:&tbnh=136&tbnw=136&ei=iX_ATMqtB8GgnQefsZWLCg&prev=/images%3Fq%3Djugs%2Bmoving%2Bgif%26hl%3Den%26sa%3DX%26rls%3Dcom.microsoft:en-us:IE-SearchBox%26rlz%3D1I7GWYE_en%26biw%3D1259%26bih%3D555%26tbs%3Disch:1%26prmd%3Div&itbs=1&iact=hc&vpx=529&vpy=87&dur=195&hovh=172&hovw=172&tx=103&ty=94&oei=eH_ATODDKtTLnge215nNCw&esq=6&page=1&ndsp=21&ved=1t:429,r:3,s:0
Monday looked large too.
http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
A most excellent avatar dude!
Thank you, benji Phat Stax.
Ever check out "Dysfunctional Family Circle?"
By the way...where is the schedule for these operations?
http://www.newyorkfed.org/markets/tot_operation_schedule.html
http://www.newyorkfed.org/markets/tot_operation_schedule.html
Welcome to the United Socialist States of America.
Free Market my cornhole. Let's see how they unwind this mess.
Operation- 'Make FED the Ultimate Bagholder' damn well complete!
Ben, if I may say, the reverse thingys kick ass.
I concur
LOL!! Harry, where did your rally run off to?
Why the reverse POMO? Anybody....Buelller....I don't get it, but want to-whats the purpose of amping this thing up only to back it down?
Getting some well deserved respect from the longs.
4 play
pretty sure the reverso-popo is just to try and push the dowside momo in the pm's while it still looks pretty on the charts.
So, apparently there is no intention of re-creating Main Street trust in the (non)markets.
That too was a feint.
I am just a ball of yarn and the government is a giant cat.
+catnip
Dollar correlation at historic levels too. POMO, TOMO, dollar, EUR/YEN. Watch movies, buy and sell used stuff, talk on the cell phone, surf the net. AMZN tonight.
Probably ramp right back up into close today. No news on tap tomorrow and POMO Monday continues to generate "buyers" on any and all dips right now.
Could be, but an 1168 close would be more normal action.
If only short interest had caved. :(
...and now back to the highs. Sorry for the hiccup.
"..then the confusion will be total and complete as the Fed becomes a pulsating neutron star of liquidity."
Will I be able to see it from my telescope?
Try and photograph it without an appointment and you'll be arrested.
the fed is definately a pulsating something but not a neutron star
Bet you're thinking Thrombosed Hemorroid...
Welcome back my friends to the show that never ends
We're so glad you could attend
Come inside! Come inside!
There behind a glass is a real blade of grass
be careful as you pass.
Move along! Move along!
Come inside, the show's about to start
guaranteed to blow your head apart
Rest assured you'll get your money's worth
The greatest show in Heaven, Hell or Earth.
You've got to see the show, it's a dynamo.
You've got to see the show, it's rock and roll ....
Right before your eyes we pull laughter from the skies
And he laughs until he cries then he dies then he dies
Come inside the shows about to start
Guaranteed to blow your head apart
You gotta see the show
It's a dynamo
You gotta see the show
It's rock and roll
Soon the Gypsy Queen in a glaze of Vaseline
Will perform on guillotine
What a scene! What a scene!
Next upon the stand will you please extend a hand
to Alexander's Ragtime Band
Roll up! Roll up! Roll up!
See the show!
Performing on a stool we've a sight to make you drool
Seven virgins and a mule
Keep it cool. Keep it cool.
We would like it to be known the exhibits that were shown
were exclusively our own,
All our own. All our own.
Come and see the show! Come and see the show! Come and see the show!
See the show!
Great album. Brain Salad Surgery. I love Emerson Lake and Palmer. Try the album Trilogy, Track # 1, The endless enigma.
Why do you stare
Do you think that I care?
You've been mislead
By the thoughts in your head
Your words waste and decay
Nothing you say
Reaches my ears anyway
You never spoke a word of truth
Why do you think
I believe what you said
Few of your words
Ever enter my head
I'm tired of hypocrite freaks
With tongues in their cheeks
Turning their eyes as they speak
They make me sick and tired
Are you confused
To the point in your mind
Though you're blind
Can't you see you're wrong
Won't you refuse
To be used
Even though you may know
I can see you're wrong
Please, please, please open your eyes
Please, please, please don't give me lies
I rule all of the earth
Witnessed my birth
Cried at the sight of a man
And still I don't know who I am
(Chorus)
I've seen paupers as kings
Puppets on strings
Dance for the children who stare
You must have seen them everywhere
So by reverse POMO - are these the primary dealers taking profits cause the puppet master pulled on the right string? I mean, if the PD's swap w/the fed and go shopping, how can the Fed tell them what to do?
This is actually a question - I'm missing something.
Sop to TurboTimmah to get him to shut up over the fiatsco.
Someone needs to explain this schizophrenic bullshit to me.
The FED POMOs every other day and waxes philosophic regarding QE2 but today they drain $1.5B? What the fuck? Help?
There is POMO as well as reverse repo tomorrow. Thoughts anyone?
http://www.newyorkfed.org/markets/tot_operation_schedule.html
http://www.newyorkfed.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
It's called a love-hate relationship. I will have sex with you, but punch you in the stomach on my way out.
fed trying to frontrun itself and is now just afu?
the repo data is what's been done. tomorrow is the settlement date for today's repo
there is a reverse repo delivery date that is today. there was also a repo delivery yesterday.
Still time this year to till up the back yard and get ready for next years victory gardens!
congrats Ben, you just proved to us how leveraged the PD's are in this market.
And they have to lever even more just to squeeze out those pennies. Great report out of Credit Suisse today as well and their trading revenues:
"Revenue at Credit Suisse equities sales and trading unit fell by 41% to Sfr1bn in the third quarter, the lowest level since the end of 2008. Sales of bonds and loans almost halved, to Sfr1.46bn, from Sfr2.48bn last"
Looks like Mortal Kombat is nearing. 8 man knife fight in a broom closet for trading profits and NOBODY is allowed to sell without taking down the whole system. Should work out splendid.
Turd - I'm with you....I don't get it. Does anyone or are we not supposed to question "The Ben".
My take on it is laid out in my comments above
Barliman
Markets almost green..Harry was that you?
I would say that was Leo jamming on his buy the dip key.
The universe is mostly empty space, but there is a large concentration over at the FED
FED balance sheet got to "big" and FRNY were not authorized to "swell it"...so dump some before someone complain?
But why did they buy "to much" in the first place?
This is a gold supression attempt orchestrated with the PD's until futures expiration on Tuesday.
soooo. does that equal a 30 x or 40 x drain? whats 80B suck out of the market.....good thing they preannounced it or we'd have 50% flash crash
PPT to the rescue...cannot make BO look bad now...not that he can look good.
So, I'm going to go out on a limb here.
I have a few things I've been working on for technical analysis. I won't go into the entire timeline of how long I've been developing this, just suffice to say I think it has an edge.
I know -- if you've followed me at all, you know I got burned on an options play that was anticipating a decline in prices on the indexes. Yep, I sure did. Problem was - I had the right tool, but wasn't applying it correctly.
My strategy was to fade moves, when what I should've been doing was sticking with the move and exiting with a trailing stop to prevent loss and lock in profits.
So, what I'm going to do is post the status of this thing. I call it the "Market Impulse" indicator, or MI for short. (No, it has nothing to do with Prechter's theories - it is pure technical and not subjective in application.)
Executive summary: The MI for now is in positive territory - this means, don't short. Yet. I'll keep you guys updated.
Now back to your regularly scheduled thread-tertainment.
WTF is up with Netflix?? Its as if they just announced they are going to start streaming Seka and Johnny Wadd flicks.
They only announced they are now stocking plenty of XXX movies for all to stay preoccupied while they are having their life savings stolen from them.
Seka: "It's like I'm sitting on a fscking telephone pole!"
Pump in, pump out, pump in...
Could somebody please get me a f*ing schedule?
or... Do Not Resuscitate.
I bet Friday is going to be a bloody day.
Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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