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This Is Where Today's Buying Deluge Came From
Many are scratching their heads wondering how it is possible that with all of today's economic data misses the stock market not only ignored all the relentless bad data, as it has for the past 5 years (yes, yes, the weather, we know) but managed to surge to a new all time high. Not us: we forecast precisely what would happen yesterday when we brought our readers' attention to what was a record Fed-assisted window dressing operation in the form of some $242 billion in revere repoed Treasurys being provided to dealer banks in order to make their books look attractive for quarter end. Specifically we noted yesterday that "one should consider that tomorrow - with their books well padded for the March 31 daily security "holdings" - the banks will almost certainly unwind over $100 billion if not more of today's reverse repo, an amount that is now equal to nearly two full months of QE. Where that money will go, only the (NY) Fed and a few bank CEOs know."
Today we know not only where that money went as was implied, it went in risky assets i.e., the S&P500, but more importantly we also got the number right: today's reverse repo was amounted to just $113 billion, a $130 billion liquidity release from the Fed's reverse repo operation in one day!
So while QE may have tapered to a "measly" 55 billion per month, on just the first day of April risk assets experienced the additional benefit of over two full months of QE injected into the stock market in one single day!
And now you know where today's buying deluge came from.
The flipside, the easy money for the month of April, which as we also noted previously has historically been the best performing month of the year, has now been used up.
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What happens when they reallocate?
The phoney phuckers...
Maybe some of the money will flow into silver now that it's grossly oversold...
ZH---Tell us this shit yesterday so we can trade it.....like your constant correct pumping of stocks and blocking out the noise of the debbie downers
They did.
Specifically we noted yesterday that "one should consider that tomorrow - with their books well padded for the March 31 daily security "holdings" -the banks will almost certainly unwind over $100 billion if not more of today's reverse repo, an amount that is now equal to nearly two full months of QE. Where that money will go, only the (NY) Fed and a few bank CEOs know."
And the best part is, we will keep having it the first day of every quarter from now to infinity. THis is the new reverse repo program, separate and apart from QE.
Who needs QE when you have this?
.gov needs it.
The good news is that pretty soon the Fed and the Chinese will own everything except south Florida which will be shared by the Russians and Cubans. Oh, and the southwest, let the Mexicans have the desert.
The communists are buying the rope from us with which they mean to hang us.
And having asked yourself this question; and noted that the ES now forms a perfect triple top; wouldn't you like to go short right now ? If not now, when? Yes, folks, it's short time again. NOt for me; I;m already busy in Oil, and British Pounds and Silver; no gottee monies in the accounts. but really; does anyone believe this is anything but a spike hanging in mid air?
buy the dip!
Sell the avalanche.
I'm afraid I don't understand something here. Wasn't the reverse repo yesterday of $242b noted as a reason for the market's advance for quarter-end? And now unwinding that is reason for advance again?
I get that no matter what, no matter when, it's bullish, but both directions on reverse repo can't both be equivalent to injecting money into risk assets, can they?
Yesterday's reverse repo was noted as the reason for dealer bank window dressing and nothing more. And as cited here, it also noted that the unwind of said reverse repo would provide an implicit liquidity injection of over $100 billion. It turned out to be $130 billion.
Thanks
So let me get this straight... banks give fed cash in exchange for treasuries, then banks trade treasuries back for cash? I get the part where the additional collateral makes them look good (or at least not as shitty) on the books but the part that baffles me is how this translates into higher stock prices? Are they levering up the new collateral? If not how does exchanging two things of supposed equal value make for a liquidity injection? The Jargon and nomenclature surrounding finance often seems like so much smoke and mirrors to distract from the simple bullshit it usually amounts to. If you can't dazzle them with brilliance...
You can't buy stocks with Treasuries. You need cash.
Banks get cash to reverse repo Treasuries to make their quarter end books (which are a snapshot of quarter end, not an average over the quarter) look good. Holding Treasuries looks a lot better than holding stocks (or cash) as far as collateral and other financial ratios go. Next day, they go get the cash back to spend on the coke and hookers... I mean stocks.
But.. but.. but... didn't they have that cash 2 days before in order to reverse-repo those Treasuries in the first place?? Maybe. Maybe NOT.
You don't know how long they were accumulating that cash over the course of the quarter to do that reverse repo, or what assets they were tapping to build that cash pile.
But come the first day of the new quarter, they don't need the reverse repo Treasuries clogging up their balance sheet any more- it's window dressing purpose has been served and they don't need them on the balance sheet any more. Off to the races.
God what a mess huh? The way these assholes dance around the rules and requirements is enough to make you dizzy. I still don't fully get the methods of madness but that clears it up a bit Thanks.
Putting lipstick on the pig is what banks do. Always have. They tap dance around their quarterly statements like walking between the rain drops without getting wet. They just have a lot more tools to do it than they used to. This latest one- a guaranteed, no-risk reverse-repo counterparty facility from their good buddies (The Fed) is just the latest gizmo to be added to the bag of tricks.
It makes one wonder just how seriously jammed up things must have gotten in late 2008 when the wheels came off that even these incredible sleight-of-hand tricks couldn't stem the tide. Fortunately, there is an answer to that:
There is one and ONLY one thing that will topple a TBTF bank- when the rehypothecation chain collapses (the promises the bank has made to counterparties, based on the promises they have been given by others). When the things that they are owed, especially short-term stuff like this changes from 'money-good' to 'money-not-available', things break. It's the institutional-level equivalent of a "bank run". Not on deposits (which is slow by comparison), but by other counter-parties that are relying on getting their money back in a short timeframe, but can't, even if only for a few days. One good sized broken promise breaks 5 more downstream and so on until it becomes a cascade of failure throughout the entire banking system, worldwide.
That's what happened when Lehman went bust. That's what, one day, will happen again.
$130B for a whopping 13 spx points? not much "bang for the buck".
Guess you were not watching the NDX gap up 20 and run another 40 higher....
Go long, sell the top, short the downside. Easy to do when the insiders know when to buy and sell.
Remember LIBOR.
They were skimmed by the HFT's, it is rigged you know!
Yes and you as a taxpayer were just skimmed by the banks, again. It is rigged.
In reply to comment:
Diminishing returns.
Dear Lord Tyler, I need a Fed primer. I think I understand a repo - a kind of collateralized overnight loan to a bank at a tiny interest rate. The bank gives the Fed some AAA securities (I suspect they also take lesser quality securities) as collateral for overnight liquidity. The bank then buys back its collateral the next day, plus a few shekels of interest. OK, so is a reverse repo the PDs selling Treasuries back to the Fed, or what? If I have this right, the Fed is choking down U.S. debt even faster than it did at the height of QE, which makes the taper a huge joke. I assume most folks here are traders and understand the lingo. I struggle - in part because we've entered the theater of the absurd. Its all Jaberwocky to me.
I'm not the one to answer your question being a learner on this topic myself but this much seems evident. The FED is paying a tiny bit of interest which means it is probably just printing it so it is inflation by definition. The FED does not benefit. The taxpayer does not benefit. So why do they do it? The banks are the only party getting something out of this and they are the ones who actually need these transactions to begin with.
Imagine if you could go to the bank and get a currency loan and have the bank pay you interest in currency when you get your collateral back while you keep the currency that was loaned to you in the first place. Reverse repo is a fancy term for screw the people.
Efficient markets FTW!!!
As near as I can tell, it's basically like wiping your ass with a $1,000 bill, then flipping it over and using the other side too. I don't know.
It makes great economic sense. By using both sides of the $1,000 bill you save $1,000, or get a free ass wiping.
Personally I prefer to wipe my ass with Euros. Euro is the softer currency.
I think it's more like wiping your ass with the bill and then telling the FED your bill is no good anymore and they replace all your shitty bills with new bills.
Echoes of Paul Harvey....
How can any bank be investigated, and more importantly prosecuted, when the USA central bank is pulling all the strings?
Fuck The FED's Queen!
"Fuck The FED's Queen! "
i'm not touching that fucking pig.
There are plenty of S&M tools to use without any skin to skin involvement, so I agree with you about my personal tool.
April Fools Day! Right? right? ....righ....oh fucking no.
USS Rigged Casino Damage control ... fire up the pumps and prop the bulkheads.
...and one more time for exhaustive clarity: THE MARKET IS RIGGED.
Ahem....your winnings, sir.
Tyler, this may be a stupid question, but why didn't these banks use this infused money to write down some of their bad debt? Isn't clearing some of the trash out as important to their financial wellbeing as the propped up value of the stock market? I fail to see why they don't just truly fix their books with all this money flodding in.
I would bet they get the money along with their marching orders. Paying down debt would look too much like they are controlled by the payouts. My guess. It looks like shit regardless, I think it would look even shittier if they used the money for internal needs.
Why fix books that are already fixed ? I don't get it.
Didn't think of that, but that a damn fine point!
Isn't clearing some of the trash out as important to their financial wellbeing as the propped up value of the stock market?
No, no way these guys can square their books just gotta keep the dance going.
http://www.zerohedge.com/news/2012-12-24/1000x-systemic-leverage-600-tri...
The FED has already bought most of their crap MBS and all other stuff from their TBTF family and friends.
Reverse Repo is the way the FED keeps on giving. See how nice it would have been if your mother had magical blood? You could be a primary dealer.
Even bad investments can be leveraged 10x ? In part thats how my sister is able to be a squatter in her former now forclosed home for 3 plus years ? just a guess.
"Fuck The FED's Queen!"
You go ahead. Catch some disease from that money whore.
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
the market is a policy tool now and nothing more
Any questions????It's a price fixing table.
+1 ... A price processor of sorts. If this, then that. Who do we blame, after HFT?
Look------> Syria!
yes, the no billionaire left behind policy
Subliminal sublimation for the masses, we are now fully programmed 'taraxias'.
Exactly what are U trying to say?
No doubt they are TOOLS.
Thanks for the explanation. I was watching the e mini NASDAQ 100 futures, and there seemed to be more going on than the normal post-bad-news pop. Those have actually not had much in the way of legs lately. There was high volume, systematic buying that hit throughout the day (time off for lunch).
I thought that it had to be more than just the usual "bad is good" reaction.
So then the fed is perpetrating yet another fraud upon investors.
Yep, using QE money to buy stocks. It''s a no-loss for long buyers.
A command economy trying to boost inflation.
isn't it really a shell game to get garbage off the banks books? so then financial firms earnings are a farce and their books are a fraud? also it reeks of non compliance of some of the laws enacted by congress of late. great system we have.
By George they are doing God's work!
President's Working Group on Financial Markets:
http://www.archives.gov/federal-register/codification/executive-order/12...
I think you nailed it, at least they're still pretending like the books matter...pretty soon they won't even bother as the Fed and the market become even more synonymous. No risk or investor backlash to worry about when buyer and seller are the same.
Soon even the so called small retail investors will fully realise that the "market" is the FEDs Price Fixing table and go all in with fully leveraged portfolios. That's the moment when USA goes FULL ALBANIA, we're already there of course but it might be even worse
Beware the Calends of April.
So I wonder what crap they bought; Chipotle, Tesla, Apple, Farcebook?
BTW, sell Darden (Olive Garden/Red Lobster), it's being set up for a short.
This is just brilliant work Tyler(s)!
We are truly entering the Twilight Zone
I'm thinking stocks will still be cheap with a forward P/E of 673.00. No?
When EVERYTHING is rigged, you'd better play real strong Defense:
Hold a mix of Cash and PM Bullion, and real assets for Troubled Times.
Treat the market the same way you'd treat a trip to Vegas or Macau: bet only what you can afford to lose. And make sure your losses (of liquid assets) involve a happy ending.
I liked one arm bandits when coins poured out of them. The new system with paper certificates is a real bore and I don't gamble now. The same thing applies to the rigged economy.
I'm wondering where tomorrow's buying deluge will come from.
And PMs taking in a steady down trend. FED helicopter money -> PM price suppression. After all what's a few 1000 gold contracts when you're creating $100 billion?
New highs on anemic volume!! This market reminds me of the SNL skit or parody of 60 Minutes, with Martin Short as Nathan Thurm. Every bobble head at the FED is channeling him. "Bubbles?? What Bubbles?? I don't see any bubbles, I mean what is a bubble?? We won't know a bubble till a bubble pops, so until then I don't see any BUBBLES!! What's that old saying Da Nile is more than just a river.
in between the frantic buying sessions the market barely had a pulse.
I've thought ever since we broke every technical pattern known that a perfect top would be 1888. Exactly 1222 from the bottom. That's the kind of parlor game these clowns like to play
Whats scaring me with all this stealth inflation is that pipefitters wielders and anybody with any mechanical or electrical skills is making some big bucks now, especially if they work in am energy related or ancillary field.
My income as a doctor is flat with high chance of dropping.
It is a new era. Revenge of the votech kids. There are just too many of us college boys nowdays and demand is flat.
Stealth inflation rebalances things with the least people noticing.
I AM NOTICING! bitchez
Basel Tier-1 Basel Tier-1 Tier-1 Tier-1 Tier-1 Tier-1 Tier-1 Tier-1 Tier-1 Tier-1
While half world refuses the dollar... Lets see if the fascist corps are going to keep the country poor for the soldiers to defend offense IMF hegemony..... Bow to the order of Queen FED Queen of the IMF. princes of the World bank All hail the literally going Greek on the world without Vaseline.
Sorry to the heros in Greece going Greek is an indium for jamming something up your a$$..
Notice POTUS goes right to Saudi Arabia because it is about freedom...
LIBOR FX equities, Bonds austerity austerity austerity austerity
USA USA USA.... democracy as long as austerity democracy as long as austerity
USA USA USA coming home to all our neighborhoods....
USA USA USA USA USA USA USA USA USA
terror terror terror terror
Exsqueeze me, but who exactly admitted that even one femto-cent of this fed money went into equities? As the prophet said, "but that would be wrong". Investing repo money in equities in general, would be wrong. It would have to be other money with capital support via repos and the fed, if at all. Or something like that.
its funny, all my friends working at investment houses are telling ppl to max out their contributions ... remember when the fed took skewed the risk in housing securities, just as now they skewed the risk in equities ...i am sure that will end really well. the inevitable crash, when it happens. will affect more ppl, as there are more 401k accounts then ppl buying houses back in 07. also a sneak peak on #obama 's plans:
top #2 problems:
problem 1: unfunded social secruity:
solution: pass immigration, then pass min wage (both wil produce higher earning tax payers who will not collect aid), then make the path to citizen ship extremely difficult (therefore you get a bunch of ppl pay in, but never collect ..i.e the new slavery)
problem 2: high unemployment rate among young ppl
solution: why not fight a world war and have a draft ... (age cap at 35 ..)also decrease the number of ppl to collect social security in the future .. see problem #1
This is precisely why the LOSS OF LIFE on Wall St. will be EPIC...
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After 3-4 years of reading your web site, with lots of treks into investment dictionaries, I have a basic understanding of what this crap means.
(A nice piece would be a breakdown/step through of the above article, how this process works, for the layman.)
This is why I come here: For the analysis. Not the crap from places like MarketWatch or Bizyness Insideher.
Thanks Tyler!
•J•
V-V
PS. You scare the bat-snot out of me, that I understand what all this means and where we're heading.
??/WTF, You are not saying there will be no MOAR "wood" to Bang the Market with for all of April? This "Market" needs MOAR banging MOAR often than most realize. Say it ain't so, No way this "Market" can go a month with no training wheels...