Here Comes Another $25 Billion In Excess Weekly Liquidity To Ramp Up Stocks

Tyler Durden's picture

Frequent readers may recall that 11 months ago, when the economy was falsely rumored to be doing better, and the Fed was expected to take baby steps in withdrawing liquidity (only to end up having to inject another $900 billion shortly... and probably much more soon), one of the key mechanisms used was the Treasury's Supplementary Financing Program, whereby the Treasury would issue 56-Day Cash Management Bills each week with a $200 billion ceiling. In addition to funding the Treasury with a $200 billion debt ceiling buffer, the program was supposed to extract a fifth of a trillion in liquidity which would be locked into the rolling of each 56 day bill (each one amounting to $25 billion) up to a total of $200 billion, as disclosed each day in the Treasury's DTS SFP Table 1 open cash balance. Well, not even 11 full months later, it is now time to unwind the program. The immediate catalyst for the unwind of the SFP is that the Treasury will most certainly breach the debt ceiling by the end of March unless it gets the benefit of the $200 billion buffer, which counts toward the total debt issued by the UST. However, what that also means is that the US stock market is about to become awash with another $25 billion in suddenly free cash every single week, until the entire $200 billion SFP buffer is depleted. In other words, take the liquidity impact of POMO, which is roughly $25-30 billion a week, and double it! We are confident the US Treasury will announce that beginning with the week of February 14, it will no longer roll maturing 56-Day Cash Management Bills, which means that for the ensuing 8 weeks, one on every single Thursday, there will be a total of $200 billion in incremental liquidity flooding the market, and probably sending stocks, commodities, and everything else that is not nailed down into the stratosphere all over again.

Below is a table laying out our estimated weekly liquidity boost. We believe the starting date for the SFP winddown will be the week of February 14, although we could be off by one week in either direction.

This makes sense, especially when considering of our expectation that the Fed will force the market to do a repeat performance of 2010, whereby it goes parabolic through mid-April and then it is smashed in another flash crash like event due to some exogenous variable, opening up the path for further Quantitative Easing. That said, it is likely that the PDs and the Fed's OMO will now orchestrate the perfect market boil up over the next 2 months as more than ample liquidity chases stocks at increasingly ridiculous multiples until the point where everything goes bidless just like on May 6.


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Salinger's picture

a bullish equity call from ZH



plocequ1's picture

Yes. Stay tuned. Bad news at 11

mule65's picture

I need a DOW 12,000 hat.

Mongo's picture

+100000 (that is binary if you were wondering)

In Fed We Trust's picture

How many $ is that per minute of the trading day?

Just wonder n if its worth my fucking time.

Dr. Doom's picture

Cue David Tepper..."Everything."

Tyler Durden's picture

If you equate equity bullishness with a description of the consequences of broken monetary policy, then yes.

JW n FL's picture

you are letting logic rule you Tyler... lets not be that one person who shits on the parade.. huh?


goldmiddelfinger's picture

Sometime soon a shitstorm will end this parade.

JW n FL's picture

not soon... but it is coming... to quote Tyler losely... given a long enough time line... or, if you sit by the river long enough you will see all of your enemies float by.. either or, its true in most cases. there are no absolutes in this world, when you sprinkle into the mix mass distortion.. well that just makes logic that much harder to follow...

for instance...

Dow up 1.31%... on news of terrorism.. on news of Ireland..

Gold down or the same.. on the same news, no flight to safety?

this is backwards... plainly.

Highrev's picture

Somebody's wrong.

Crude and gold?

Equities and the Euro?

What's behind door number 3?

EscapeKey's picture

Behind door no 3 is miners refusing to supply the Comex at the current prices, demanding a premium for physical.

CU1981's picture

++ Briliant !! :-)


We all knew it was coming.

In Fed We Trust's picture

And the next time(crash) the investing pubic wont have two weeks to play to the crash. You will be either locked into or out of the market.  The flash crash thingies are the biggest playerspractising who can run fastest to the exit. It won't be you.

walküre's picture

The coming currency and debt reform will not be announced 3 weeks before it happens.

It will be from one day to the next and the holders of Dollar denominated paper "assets" will not be made whole.

Simple as that.

Max pain unless you're holding physical.

goldmiddelfinger's picture

You'll be without 2 kidneys when QE ends holding that position.

SheepDog-One's picture

'Equity bullishness' is all that matters now, these fools will be dancing with glee as the DOW is at all time highs while $1 wont even buy you a single peanut.

Spitzer's picture

So the inflationist/Austrians are right.

Deflationists wrong

And dumb asses are right for the wrong reasons, as far as equity is concerned. Not allot has changed in the last 10 years, when you price stocks in gold.


goldmiddelfinger's picture

What happens to the gold play when QE is pulled?

Spalding_Smailes's picture

Accounting tweak could save Fed from losses

(Reuters) - Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on January 6.

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.


"Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."


The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

This enhances transparency by providing clearer, more frequent, snapshots of the central bank's finances, analysts say. The bonus: the number can now turn negative without affecting the central bank's underlying financial condition.

"Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.

"The timing of the change is not coincidental, as politicians and market participants alike have expressed concerns since the announcement (of a second round of asset buys) about the possibility of Fed 'insolvency' in a scenario where interest rates rise significantly," Smedley and his colleague Priya Misra wrote in a research note.


EscapeKey's picture

That's so last week. There already was a rebuttal on this site about it.

Not that there's anything dubious about the supposed backstop of the entire financial system resorting to Enron-style accounting tricks in order to stay in business.

A representative of the entire system... a system of fraud, that is.

Spitzer's picture

This kind of stuff is confirmation that the Fed is about to lose control.

reminds me of that Icelandic banker explaining to Max Kieser in 2007, how Iceland could never go broke

Spitzer's picture

Eventually the economy crashes, less and less revenue comes in to service the US debt and the dollar sells off, just like the Euro did when it had problems.

Salinger's picture

(I was going to add 'with caveats" but figured most would understand)  having said that Rosie is likely reading and he clearly has failed to understand the consequences of a broken monetary policy vis a vis equities. 

SamuelMaverick's picture

Thank you Tyler Durden. Yet again ZH provides info not to be found anywhere in the MSM.  Yours, Maverick

equity_momo's picture

Yet another sign of topping action! Complacency is rife. Realists are giving up one by one and hedging themselves with "expect a correction" type calls. Correction implies a pause in the trend however - i notice very few are actually calling an end to the bull market. Bull markets usually end in this way. Each correction the dumb dumbs will use to BTFD.  And before you know it , we are below 10k and all scratching our heads wondering how the bear returned.

EscapeKey's picture

More like growing expectation of severe/hyperinflation.

Turd Ferguson's picture

I wrote this a couple of weeks ago. It's appropriate here. Don't fight The Ben Bernank. You will lose.

walküre's picture

Turd, how did you like the shake down of longs with stops below $27 in silver today?

Can't have just anyone participate in the next leg up now can they?

It was a nice but short buying window. Most bullion dealers didn't even register the drop, just like they didn't register any drop since we're South of $29.

Recognized silver bullion is still over $33 / oz from a bullion dealer. Won't touch anything that's not recognized. The bid side.. well the bid side is going where the Comex says it should be but that doesn't get anything filled.

I'd like to see the Comex throw a hissy fit over their latest attempt at price surpression.

Houston, uhm Chicago ... we have a problem!

goldmiddelfinger's picture

Turd says don't fight Bernake but he is a hypocrite. The turd will sing a different song when Ben brings down the curtain on QE. Soon.

walküre's picture

The Bernank can't pull QE.

QE is his life blood. He and his shyster bank friends need QE because they don't have real jobs and never will work an honest job and get paid for their work.

The shysters live off us. They're parasites.

But we are flat ass broke and the Bernank and his shyster friends can't suck blood from a stone.

No more QE, followed by higher interest and higher taxes would get the revolution started.

The Bernank and his shyster friends now this. They're not that stupid.

You should spend some time outside the US and get an ear full of just how much hatred against the US is out there.

There's no love for the US or the US Dollar left anywhere in the world.

Unless the US eats crow and defaults on its debt that is a sign of sheer gluttony, there won't be any respect.

Default by the lenders will be forced upon the US if necessary.


cramers_tears's picture

I'm w/ Turd.  The Bernank is the Star Wars Force that permeates our earth.  If he drives DJIA to 15,000 by June, TPTB will be giving him a 20 year extension on his chaircreature gig!  Join the team and come in for the big score!  Even if you get out on the slide, you could still chap up a decent little return these next months, courtesy of The Bernank and broken monetary policy!  Keep your eyes on the BRIC, some accelerated decoupling or adverse moves on their part to the $USD sends me packing...  but the USD/EUO/GB are calling the shots right now with no end in sight.  China, who could really tube the west seems content to play along.  Who cares if the $USD falls like a rock?!  The Bernank is lovin' it.  Send the Hot Money to the BRIC, the carry trade will be creamin' all over themselves.  The Western Banks have The Bernank Put behind them and the pussy GOV INC behind that.  Watch BRIC/Developing Inflation soar (Food Prices off the charts).  Offsets the stone-like fall of the USD/EUO/GB as the BRIC/Developing try to keep up.  TPTB milk every last drop out of the populations for debt service!  And then when the inflation/flash-crash/rate-raise/military event finally occurs - everybody gets shiny new SDR's and The Rothschilds & Company plan their next move!  Oh the horror...  Don't ever understimate these fuckers.  They've got all the marbles and they can take yours in a heartbeat.  Of course we could all get some organized resistance and send them all packing!?!?!  Nah... WTF am I thinkin' about.  We've got TV Tonite! - The Biggest Loser @ 8 and then off to Beverly Hills Housewives while OBOT spiels his bullshit.  Synopsis: "Unforgivable"
Celebrating Taylor's birthday; Kim and Kyle go to blows; Camille learns that Kelsey wants to end the marriage.

digalert's picture

Hey CNBS, here comes DOW36,000$$$

In Fed We Trust's picture

Do a 3 for 1 split on every stock in the DOW, and poof.......

Dow = 36,000

Paging Chris Cox

In Fed We Trust's picture

Do a 3 for 1 split on every stock in the DOW, and poof.......

Dow = 36,000

Paging Chris Cox

plocequ1's picture

The new and long Mr Spock says , "Go long and prosper. Dont let Logic and math be a cork in the Asshole of prosperity."

Racer's picture

And the agonising death of many more innocents who suffer at the hand of the Fed

Spitzer's picture

Not allot is going into the gold mining sector. This is a tricky one, DOW up, gold miners down. What will the miners do when the DOW slides ?

Unlike bullion, the gold mining stock bear market ended in 2008, not 2001. Pullbacks are to be expected but Im not exited about having a double whammy if gold stocks fall further because the broader market falls.

Im going to stick with juniors here because they don't follow the broader market as much as the majors.


walküre's picture

If you have cash to spare, experiment with mining stocks.

DOW going up and commodities down cannot end well.

Producers will idle their mines if need be to force Comex out of business.

Spitzer's picture

If you have cash to spare, experiment with mining stocks.

This is the kind of talk you hear at the start of a bull market. For the record, I am more then 100% invested in mining stocks.

tmosley's picture

Paper will be manipulated.  This is why I prefer the real thing in my hand.

goldmiddelfinger's picture

You pumping something more personal now?

FunkyMonkeyBoy's picture

A handful of people creating the madness, millions suffering because of their actions, not to mention the millions of unborn who are yet to be exposed to this corrupt to the core system. There is no end to it, because the people have no will to end it.