NECRO'd: FED having to put money into the overnight repo market?

[FromMyColdDeadHand]

UPDATE 11/21
Posted here for historical data and references. I think that big money knew about COVID in mid Sept 19. THe Virology institute took their data base off line on Sept 12, the overnight fed funds rate and market went GOOOFY soon after- like they were worried about a Black Swan event. The best explanation of this is that some people knew about COVID and the high probability of a global pandemic. It would be interesting to look at shorts positions.


***** Update ******
Someone had another thread about the FED intervention in the overnight market. As you can see from this thread, this is nothing new- but it a recent phenomena, and by phenomena, I mean there isn't a widely agreed upon reason for it, except since Corona when everything is goofy.

I hope this gives some background and understanding.

****** ************






https://www.breitbart.com/economy/20...-system-again/

Here’s how it works. Traders at the big Wall Street firms put in bids to borrow cash overnight and cash investors accept bids, typically striking deals by 10 a.m. The bids are promises to pay an interest rate and a pledge to post securities as collateral. After the market closes at the end of the day, the securities get allocated to the cash investors. The following day, at 8:30 in the morning, the repos get unwound. The cash investors get their cash back and the Wall Street banks get their securities back. Then it starts all over again.

At the start of the week, the repo rate unexpectedly jumped higher, indicating that there was a shortage of dollars compared with demand. On Tuesday, the Fed stepped into the market by supplying $53 billion of cash in exchange for securities. On Wednesday, the Fed supplied $75 billion of cash–and said it had bids for an additional $5 billion of repos. On Thursday, the Fed supplied $75 billion again and said this time the facility was oversubscribed by nearly $9 billion.

What the heck is going on here? Not looking for an anti-FED punchfest. Looking for why something like this is going sideways. This money flows like the tides- in and out, like a metronome.

Buddy has a degree in finance and he is scratching his head too.

Is this like all the water rushing out when you are at the beach? We know what that means.

[SomeOtherGuy]

Usually Zerohedge has some insight, but not much for this issue:

https://www.zerohedge.com/markets/fe...ing-rates-ease

Mish is usually a good commentator, but I don't see anything on the repos:

https://moneymaven.io/mishtalk/

Karl Denninger is an interesting loose cannon - he definitely says what he really thinks, and has some insights but a lot of hyperbole. He has two interesting posts on the repo issue:

https://market-ticker.org/akcs-www?post=236871
https://market-ticker.org/akcs-www?post=236872

My 2 cents - there are three different things all going on:
1) There is some real economic problem out there festering away.
2) There is a cold war between Trump and the Fed, and this is a move by the TBTF banks to bolster the Fed's position.
3) But most importantly, TBTF banks and Wall Street are predatory and got away with the greatest theft of all time in 2008-09, and they are setting the stage to do it again. An artificial crisis is being designed and manufactured right now, and will hit at exactly the right time to hurt Trump's re-election bid - probably around March 2020 - and to get away with another brazen theft of trillions of dollars.

[SomeOtherGuy]

And it's getting worse, fast:

https://www.zerohedge.com/markets/li...ces-term-repos

Still not sure what's happening but it definitely isn't good. I suspect the festering economic problem is one or more BIG debtors that have quietly postponed scheduled payments, freaking out the TBTF banks - but quietly to avoid a wider panic. I also suspect that there are strong pressures for deflation that the Fed is trying to fight off.

[The_War_Wagon]

What the heck is going on here? Not looking for an anti-FED punchfest.

Oh... well... OK then!

[thepatriot2705]

So I’ve been watching some movies related to the 08 crash lately. The crap banks did is unbelievable. Before the crash, they all said everything is fine. Look how that turned out....

Car repos are jumping. $1.6 trillion in student loan debt. $15 trillion in corporate debt. $500 billion in corporate cash. $1 trillion credit card debt. Trillions of mortgage debt. It’s a house of card.

Back in 08, banks were leveraged 30x, 60x, 1000x....etc... there were bets upon bets upon bets via Collaterlized debt obligations. $1 in MBS security rolled into a CDO could have $60 in bets on it. I don’t know if any suspect areas have quite that leverage now, but red flags are flashing big time. Something is up and we are not being told the truth. Take what I have to say with a grain of salt as the products being traded in 08 were incredibly complex and no one even knew how to price them.

So my theory going forward...retail has around $400 billion in debt. $100 billion of that is below investment grade (source: Capital IQ). Out of those companies, 1 million people are employed. Assuming their is a liquidity problem combined with decreased spending, these companies go bankrupt. These job losses will cascade as it will slow down the economy. The auto industry will get Destroyed as car repo rates skyrocket. Ford has $200 billion in car loans IIRC. If one or two car manufacturers go bankrupt, it will trigger turmoil in the supply chain causing even more job losses.

Now let’s say that happens, in a free market, we would enter a recession or depression and everything associated with it. But with the intervention from the feds, free market economics is out the window. Do they bail out these companies? If they do, will the debt be monetized.



TLDR: I might sound like a complete idiot but it’s a house of ******* cards and when, not if, it crashes, it will be bad. Hopefully I’m wrong


Edit: just looked...1 in 20 US Jobs is related to the auto industry. If the auto industry goes belly up, hello Great Depression part 2. The feds will understandably intervene. Precious medals is the play.

[pinzgauer]

If the auto industry goes belly up, hello Great Depression part 2. The feds will understandably intervene. Precious medals is the play.

So how exactly do you make that play? Most peoples "wealth" is in the form of 401Ks or IRAs other than property and businesses.

Which for most need to appreciate to meet retirement goals. Metals at best are an inflation hedge. OK to try to maintain value relative to a inflationary currency.

Moving most of your liquid savings into precious metals to "protect it" puts you at risk to the ever varying speculative nature of the metals pricing.

You can't pay bills with precious metals in most cases... You looking ahead to trading junk silver coins for toilet paper?

Gold does not appreciate if you look at it over a long window. It only appears to do so because currencies depreciate due to constant printing of money.

This is not too hard to confirm, just for fun recently I plotted the price of a base Ford F-150/100/1 in ounces of gold going back from the 50s to now. There is some short-term variation due to the price of gold and currency but overall is relatively constant. This is the modern analogy I came up with to the "an ounce of gold buys a well-made suit in London".

Just curious how you plan to execute that strategy with 6 or 7 figure investments.

The above doesn't mean that I don't think the banks deliberately made a killing at our expense. And would happily do it again. While some argue with the movie "The big Short", the core facts are pretty accurate.

[FromMyColdDeadHand]

That's funny Patriot, I've been watching clips of The Big Short and Margin Call on Youtube. Almost wonder if the google brain is signalling something....

The modern economy is a moving, breathing entity based on assumptions and continued growth. That doesn't make it flawed, but the level of stupid that goes into that needs to have repercussions when people guess wrong. And we need to make sure that the most pain is on the people making the stupidest decisions. But there is the old updated joke that if you owe the bank a billiom, they have you by the shorts. Owe them a trillion, and you have them by the shorts.

Add in people more than willing to go full socialist, even when things are going well- and when things get dark next time, say goodbye to your 'excess capital'.

I'm really just trying to figure out what exactly the issue is with the overnight market.

[THCDDM4]

That's funny Patriot, I've been watching clips of The Big Short and Margin Call on Youtube. Almost wonder if the google brain is signalling something....

The modern economy is a moving, breathing entity based on assumptions and continued growth. That doesn't make it flawed, but the level of stupid that goes into that needs to have repercussions when people guess wrong. And we need to make sure that the most pain is on the people making the stupidest decisions. But there is the old updated joke that if you owe the bank a billiom, they have you by the shorts. Owe them a trillion, and you have them by the shorts.

Add in people more than willing to go full socialist, even when things are going well- and when things get dark next time, say goodbye to your 'excess capital'.

I'm really just trying to figure out what exactly the issue is with the overnight market.

http://www.shadowstats.com

A good place to view now and then regarding the economy and stats.

I'd say that we are in our "Weekend at Bernies" phase. Bernie's dead. But no one wants him to be dead. I mean he throws such great parties with cocaine and margaritas flowing like water, who'd want to stop the party, right?

Dress him up, traps him around and ensure everyone he is just fine.

He's rotting from he inside out.

Keep the charade going for as long as possible.

The Fed is like the witch/voodoo doctor in "Weekend at Bernies 2". Use some magic to get things dancing around for a bit, push off the inevitable.

[6933]

Precious metals should average 5-15% of a portfolio with multiple factors going into the decision of asset allocation. Advice without an in-depth knowledge of the individuals circumstances should be circumspect. Metals are used as a hedge against inflation and currency debasement. Also keep in mind that the IRS considers metals to be collectibles.

An increase in monetary supply does not necessarily lead to an increase in prices. Money isn't distributed evenly in the economy. IF the economy is going to take a hit, as in 2008, in won't be this year and probably not 2020. Ups and downs as always, but not 2008 event. Feds dropping interest rates, which will happen again before year is out, will help keep economy moving along despite slowing job growth. We hit an inverted yield curve recently so a recession is highly likely. However, same old-same old. Market is cyclical. If close to retirement, adjust stock to bond ratio accordingly with a thought towards recession probability. America didn't implode in '29-'33, '81'-'82, '07-'09, or during any of the other multiple recessions. Recessions are a part of the business cycle.

[pinzgauer]

There was a decent Forbes or Fortune article on this yesterday. Explained it without fear-mongering.

Also points out that any easing (money printing) is quickly offset by tightening (absorption). so it's not like the large-scale quantitative-easing, but does temporarily increase the money supply to keep things flowing.

The anomaly is that some banks are willing to pay way higher interest than you would expect. Which implies something is wrong.

The assumption is that some very large banks are under capitalized, with some evidence.

Also it points out the weirdness of those financial transactions in general because at any given time that money is technically owned by two or more entities. Could be as high as 3.