$1 Trillion In Liquidity Is Leaving: "This Will Be The Market's First Crash-Test In 10 Years"

Tyler Durden's picture

In his latest presentation, Francesco Filia of Fasanara Capital discusses how years of monumental liquidity injections by major Central Banks ($15 trillion since 2009) successfully avoided a circuit break after the Global Financial Crisis, but failed to deliver on the core promise of economic growth through the 'wealth effect', which instead became an 'inequality effect', exacerbating populism and representing a constant threat to the status quo.

Fasanara discusses how elusive, over-fitting economic narratives are used ex-post to legitimize the "fake markets" - as defined previously by the hedge fund - induced by artificial flows. Meanwhile, as an unintended consequence, such money flows produced a dangerous market structure, dominated by both passive-aggressive investment vehicles and a high-beta long-only momentum community ($8 trn and rising rapidly), oftentimes under the commercial disguise of brands such as behavioral Alternative Risk Premia, factor investing, risk parity funds, low vol / short vol vehicles, trend-chasing algos, machine learning.

However as Filia, and many others before him, writes, only when the tide goes out, will we discover who has been swimming naked, and how big of a momentum/crowding trap was built up in the process. The undoing of loose monetary policies (NIRP, ZIRP), and the transitioning from 'Peak Quantitative Easing' to Quantitative Tightening, will create a liquidity withdrawal of over $1 trillion in 2018 alone. The reaction of the passive community will determine the speed of the adjustment in the pricing for both safe and risk assets.

And, echoing what Deutsche Bank said last week, when it warned that central bank liquiidty injections will collapse from $2 trillion now to 0 in 12 months, a "most worrying" turn of events, Fasanara doubles down that "such liquidity withdrawal will represent the first real crash-test for markets in 10 years." 

Filia concludes that "the big opportunity in today's markets is to position for such moment of adjustment, as it is totally priced out despite its potential for severe disruption, thus offering the most pronounced asymmetric profile."

Below are the key slides from Fasanara's presentation:


The full, must read presentation is below (link):

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Raffie's picture

Its coming .....

Rapunzal's picture

Wait and see, plz no comments about how dumb central bankers are.
This is all a very well organized and controlled demolition of our society.

The central bankers control everything, the politicians, courts, attorneys, press, Hollywood, music and entertainment, sports.

Nothing is a coincidence, I know it sounds crazy. But easy to understand when you see and understand the pyramid. Everything is top down.

Five Star's picture

Everyone forgets about the $2 trillion in excess bank reserves that never existed before...


BullyBearish's picture

in the crash of 2007/8 all you heard was $trillions of dollars in lost value...what you didn't hear will be the same thing you won't hear this time:


I T  W A S   N E V E R  T H E R E   I N  T H E   F I R S T   P L A C E 

Perimetr's picture

The Fed and Central Banksters already have a simple solution!


see, problem solved.

Antifaschistische's picture

So...the Fed unwinds Treasuries at the same time the Chinese trade a ship load of treasuries for Aramco.  Perfect timing.

Thinkpad's picture

FED owns about 45% in treasuries the rest in mortgages agency debt and other. China consortium offered cash for a 5% interest in Aramco which makes sense for a massive country that has no oil. No decision has been reached


Two senior industry sources said Riyadh was keen on China, its biggest buyer of oil, becoming a cornerstone investor in Aramco. But no decision has yet been taken on whether to accept China’s offer, or how much stock could be offered to cornerstone investors, the sources said.

China is creating a consortium made up of state-owned oil firms, banks and its sovereign wealth fund to act as a cornerstone investor in the IPO, people with knowledge of the discussions told Reuters in April.

Sources told Reuters on Friday that Saudi Aramco was now evaluating a private placement of shares to a Chinese investor as a precursor to an international IPO, which could be delayed beyond 2018.

But allowing China to buy 5 percent 

Bokkenrijder's picture

Nothing will happen, the vacuum tubes will take care of it. BTFATH! 

Stroke's picture

Same Ol'...Same Ol'......Somewhere on the planet a bird will fart & cause a avalanche..'till then,

get out the lawn chair & some popcorn & watch the show

abyssinian's picture

Yellen and the central scammers printing $2 trillions and they are flooding back to the market!  What crash? the crash every experts been saying for that last 6 years? good luck with that. 

BennyBoy's picture


This whole shit storm should have collapsed in 2008.

Bad economy for 2 years then true growth, and Blankfein et al in jail for 20 years.

toady's picture

Yes. Double down a few trillion times.... it'll only get a quadrillion times worse!

Antifaschistische's picture

okay...so China dumps Treasuries for cash, at the same time the Fed unwinds...and delivers a boat load of cash to the Saudi's.  Either way...I don't think it helps to paint a rosey picture for the unwind.

HRClinton's picture

Likewise the Stock Market Trillions ARE NOT REAL either, UNTIL they are CASHED IN for FRN Cash.

It's all Electronic Money, Electronic Credit issued to Banks. One Big Casino Ponzi, where they crank out electronic Chips all day long.

What a racket!

More Kool-Aid(K)?  It's (K)osher.

any_mouse's picture

This is why Gates, Zuchface, Bezosbulb, et al. are not really billionaires unless they liquidate at current valuations.

The real wealth is not in paper.

silverserfer's picture

well the flow of gold to private vaults by those behind the curtian of the central banks is kind of what a lot of this is about also. 

jaxville's picture

  Actually central banks bought assets (liabilities) to create liquidity.  That move also served to suppress interest rates. At some point those dubious assets would have to be taken off the books.

  Do you know what a normalization of interest rates will look like to our economies in the years ahead? People say that the Fed or other central banks can't raise rates.  It is no longer a matter of choice.

SeuMadruga's picture

Excess reserves which accrue FFR interests to the banks since the aftermath of 2008 !


Jesus fuck - it's like Graham Summers and Reggie Middleton mated, and their offspring is posting on the Zero. 

More fucking chart porn and hyperbole than 10 other articles combined.

Must be a few free copies of his news letter flopping around here as well.  

FL_Conservative's picture

You're right. Central bankers (like Central Planners) aren't necessarily dumb. They're ARROGANT! And, unfortunately, most people will never connect the dots that would enable those arrogant pricks to be held accountable for what they will have done to the markets, economy and financial solvency of most Americans.

HardAssets's picture

The article is more 'blah, blah, blah'

The bankster shysters print (or keystroke) debt 'money'. That creates asset bubbles that they benefit from.
Later they crash the bubbles by reducing the debt 'money' in their system. They use those times to grab real wealth from those who can not pay the 'debt' they conjured up outta thin air.

All the rest is obfuscation. Their objective is to put everyone as deep into their made up 'debt' as possible. Any politicians who don't go to this heart of the matter are frauds.

HRClinton's picture

You mean it's a Controlled Financial Demolition?

Unlike the collapse of the Twins Towers or WTC7, which were -- we are told -- Spontaneous collapses of highrise steel, due to jet fule (kerosene) and office furniture, and caused everything to turn to ash and collapse into its own footprint at freefall?



InflammatoryResponse's picture

Good God Stupidity should be more painful.


go read how the towers were constructed.  A central load bearing core.  the planes took out that core.


have a buddy shoot you in the knees,  see how well you stand after that.


post the video on youtube!


Arrow4Truth's picture

Never built anything have you... idjut.

Thinkpad's picture

Collateral damage due to the intense heat of the twin towers and burning debris. Videos can now be seen due to freedom of information act of Bldg 7 infrastructure melting a reporter was standing in front until he had to bolt because it was collapsing.

Madcow Kaczynski's picture

The buildings were subjected to fire tests at 2400° F for 36 hours.

Then some jet fuel, burning at 900°, on the hundredth floor, turned the skyscraper into powder. Twice. Before noon. 

Fuck you.

Arrow4Truth's picture

Forgive the troll. He know not what he says.

Thinkpad's picture

Freedom of information act in 2011 a video was released showing WTC7 melting due to the heat and it wasn't spontaneous that coupled with friends of mine that were in the building confirms beyond doubt it wasn't deliberately demolished by the US Govt and what ever multi alphabet agency contrary to your long disclaimed conspiracy theory

moonshadow's picture

LOL yeah right and all tall buildings have explosives installed and ready to go just in case 'they' need to "pull it". You, my friend, took the blue pill

wise_owl_says...'s picture

all that fake confetti ponzi fiat crap has to go somewhere. ok, i have a shiny one ounce silver coin for sale... only $5000.00 USD  (another evil 3 letter acronym) or 1 billion digital XXX tokens. no, there is no discount! forget that, i think i will keep my shiny silver coin to buy something useful.

Diatom's picture

For we are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covert means for expanding its sphere of influence, on infiltration instead of invasion, on subversion instead of elections, on intimidation instead of free choice, on guerrillas by night instead of armies by day.


It is a system which has conscripted vast human and material resources into the building of a tightly knit highly efficient machine that combines military, diplomatic, intelligence, economic, scientific and political operations. Its preparations are concealed, not published. It’s mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no rumor is printed, no secret is revealed.

JFK lives...

Quivering Lip's picture

Everyone say it with me!! Centralized Confiscation and Consolidation through Counterfeiting.

Thinkpad's picture

No let's not say it all together. I'm not into new age religions

Justin Case's picture

The central bankers control everything and Germany again.

earleflorida's picture

With a 7.6 Billion world population, ...--- $1 Trillion Dollars is fairy-dust that will be absorb like an early morning doo.

total BS!!!

NugginFuts's picture

You sure? I'm getting impatient.

JohnGaltUk's picture

News on the street is that there has been a large sell off of Spanish bonds since Catalan and it seems that Euro bonds are not that liquid.

Mario will have to keep buying to infinity and beyond until confidence totally collapses and then it is game over.

I personally hope they give Mario the Musillini treatment.

Ajax-1's picture

Hey Starsky, who is your street informant, Huggy Bear? "I know a guy who knows a banker, who knows some hedge fund managers, who stole some shit".

1033eruth's picture

They've  been talking about it for a LOOOOOOONG time.  Maybe it will be like Brexit and they'l talk about it for 2 or 3 years?  

But IF it ever DOES happen, well then, it should make a significant impact in various asset classes.  

DesScorp's picture

Maybe. My question is, would lowering corporate tax rates, as Trump wants to do to bring back all those dollars parked in foreign accounts... would that help prevent money leaving these shores from the tightening QE policies?

peterk's picture

nothings coming

they will just repump the  system  AGAIN.



WHy the hell would they  deleverage the system???... they wont

Only one thing will geleverage the system, a  Market crash  bringing about

debt default, and that wil FORCE deleverageing in the system.


What wont occurr is  self enduced  deleverageing by the FED and Co.

gatorengineer's picture

Its been comming..... one trillion, I wonder how that compares to how much there is in annual buybacks....  All that buyback money that is printed when the money is borrowed, would go a long way to offset this.  not entirely but I bet globablly it s 500 billion a year.

HardAssets's picture

All fiat 'money' is 'loaned', that is keystroked, into existence from Nothing.

JohnGaltUk's picture

Stop looking at the stock market!!!!

The problem is in the bond markets. By law pension funds have to buy a certian % of sovereign bonds and now the baby boomers are retiring and will want to be cashed out, should get interesting throughout the WHOLE west.

Look what happened in Houston when there were rumours that they were going to limit lump sum payouts.

gatorengineer's picture

They can print more bonds just as easily as they can cash, probably even easier....Belgium seems to have a strong appetite.... Want evidence of this, then its as simple as looking at Chicongo Municipal bonds, or Illinois state bonds.  They should be trading at a Penny on the dollar, but magically they aint.

1033eruth's picture

By law?  I'd like to see that law?  I thought it was up to each individual pension fund as to the asset allocation.  

Thinkpad's picture

Ditto what the F are you talking about? There is no law regarding asset allocations. After 32 years in debt capital markets I think I know what I'm talking and I know you don't

Consuelo's picture





Buy FASB-157.

Hey wait...