Fed Cuts Rates Again — A New Crisis Emerges!

Zerohedge has once again been ahead of the curve on bourgeoning crisis — this time in regard to liquidity shortages.

20 minutes after today’s repo operation began, it concluded and there was some bad news in it: as we feared, yesterday’s take up of the Fed’s repo operation which peaked at $53.2 billion has expanded substantially, and according to the Fed, today there was a whopping $80.05BN in bids submitted, an increase of $27 billion, or 50% more than yesterday.

It also meant that since the operation – which is capped at $75BN – was oversubscribed by over $5BN, that there was one or more participants who did not get up to €5 billion in the critical liquidity they needed, and that the Fed will see a chorus of demands by everyone (because like with the discount window, nobody will dare to be singled out) to either expand the size of its operations, implement a fixed operation and/or – most likely as per the ICAP note yesterday – transition to permanent open market operations, i.e. QE

Today the Fed slashed rates again by 25bps, injecting liquidity into the system.

CNBC:

Federal Reserve officials responded to this week’s tumult in the short-term borrowing markets by sharply cutting the rate it pays on bank reserves.

The interest on excess reserves now stands at 1.8%, a 30 basis point cut compared to the 25 basis point reduction for the benchmark funds rate.

The IOER, as it is known, as a guardrail for the funds rate, which this week jumped beyond the previous 2% to 2.25% target range. That move came amid a funding crunch in the repo market, where banks to go exchange high-quality assets like Treasurys for the cash they need to conduction operations.

The Fed conducted two repo operations itself this week, the first which resulted in about $53 billion injected into markets, while the second involved $80 billion.

Setting the IOER is a routine part of Fed business, and the central bank has had to make two earlier technical adjustments to the rate when it rose to the high end of the target range.

In this most recent move, the policymaking Federal Open Market Committee explicitly stated it was adjusting the range to “foster trading in the federal funds market at rates well within the FOMC’s target range.” That language was added from previous implementation notes that the committee tags on the end of its main statement.

The committee, however, did not announce more aggressive measures to address the difficulties. Some market participants had expected the Fed might tip its hand to more aggressive rate cuts or expansion of its balance sheet, where it keeps the assets it purchases, such as Treasurys and mortgage-backed securities.

This week’s funding crunch came amid a reserve level that has dipped to its lowest level in eight years. The events pointed to the possibility that the Fed’s estimates of how much in reserves the banks need to operate comfortably is wrong.

Now the knee-jerk reaction is to get bearish AF — because new crisis demands lower prices and panic. However, one could argue that the Fed is addressing these concerns and the market reaction is somewhat milquetoast. Bear in mind, we’re all living on borrowed time and it is the job of the Fed to keep this carnivale going. I do not think, even for a second, we are near the end of our  ebullient and big breasted and beautiful bull market.

I went long DTEA late 2018 in the fleeting hopes the company, Canadian and poor, would come to their senses and sell drugs inside of their teas, specifically pot. But no, they’re too haughty for any of that and have repeatedly rebuffed market requests. As such, one day following their earnings report, I am exiting the stock for a profit of 45%.

Sure, it was a fun ride, but the time to sell — for me — is now. Normally the stock is illiquid, trading by appointment, always in the dumps shitting on shareholders. This is a rare opportunity to exit at an enriched price with volume.

Will the stock go higher from here?

Who the fuck knows? I am not emotionally attached to Dick Teas and can only suggest that you extricate yourselves from emotionally driven trades. This was a binary choice and I chose to close this indecorous chapter in my life.

On a related note, I sold CPE for 10% loss and ENPH for a wash. I am, quite honestly, the most inverse Captain of the oil fields to have ever lived. Whenever you see me trading oil, do the opposite and enjoy the profits with my compliments.

FDX warned of a massive global slowdown. Maybe it has something to do with the fact that Amazon fired their asses and they’re fucked like mailmen now. Trump is out there heightening sanctions on the economic powerhouse Iran and we’re over here starving in the streets, begging for brioche.

And now this, fresh off the shit presses of CNBC:

The Business Roundtable said its members forecast U.S. economic growth this year will clock in at 2.3%, down from last quarter’s estimate of 2.6%.

The group, whose chairman is J.P. Morgan CEO Jamie Dimon, blamed tension with China and the stalled free-trade agreement with Mexico and Canada for its members’ downbeat assessment.

This quarter’s survey asked members to rate the impact of the trade war on their businesses over the past year. More than half of executives reported a somewhat or very negative impact on sales.

Whoa, did you read that? “A downbeat assessment.” Whatever will we do?

The Nasdaq is down 27, but gold is higher. Crude is acting like nothing happened to HALF of Saudi Arabia’s oil production, so the only logical thing to do is to sell short — right? We’re fucked. Growth is fucked. Xmas is months away. October is right around the bend. You know market crashes always happen in October. So we’re completely and entirely fucked. Go grab your kids out from school and head for the mountain range to live off the land.

Markets did great — yada, yada, yada. I bought a bunch of shit that is doing to pop the fuck off tomorrow.

Now let’s talk about something really important.

Exodus 2.0, presently in late stages of development.

You’re familiar with our overbought and oversold algos right? If AAPL hits a score of 1.35 it has a 74% chance of going higher by 1.4% over the next 10 days. Pretty neat, but how about if I could show you this?

Apple has a present technical score of 3.07. Dating back to 1984, Apple has gone up 53% of the time from this score. Also, since everything is streaming in real time, so are the percentages of win. You can apply this intelligence to new portfolio functionality to demonstrate what Exodus believes your portfolio will do over the next 1-10 days.

Below is a rudimentary snippet of Exodus 2.0 RT data for AAPL.

All scores, algorithmic and price, will stream in real time. If markets plunge by 1,000 points over a 5 min time frame, we will now be able to pick up on possible mean reversion trades in RT. Also, our data set is no longer constricted to the lifetime of the software, but decades. There’s gonna be a lot of new upgrades and features, all which will make you walk around with a fully erect penis for weeks at a time. But this dynamic upgrade opens the door for intra-day, RT, algorithmic greatness that will be able to score stocks on an intra-day scale and spit out winning probabilities.

You’d think the new US Vegan Climate ETF (ticker: VEGN) — which seeks to track “Beyond Investing” (whatever the fuck that means) would at least have some BYND in it, and maybe some STZ to compensate for the sad fucking lives they all have for living without bleeding meat. But no — these assclowns stacked the ETF with faggotry from Silicon Valley and even Visa — because Vegans love their fucking debit cards.

Look at that shit. When I think vegan the last thing I think of is Bank of America —  those sustainable fucking assholes. Do you think At&t when you think of climate change? What in the fuck are these people smoking? This is false advertising and they should be sued. Not only should they be sued, they should have to pay a fine and also time in jail — fucking jail — for committing a great fraud on healthy unsuspecting vegan American.

This is a travesty. Write to your local Congressman.

I sold NUGT today, which was an overnight trade from yesterday — for a quick 6.5% gain. If you annualize that return, you could in fact become the richest man in America inside this decade. No big deal. Just another day at the office.

I also blew out of my last two vestiges of SHIT-STOCKS: MNK for a 12.5% ding and CCO for a 4.5% profit. It was a nice sojourn into the depths of depravity — but now it’s over.

What’s not over is the move in gold. We could be, very well, in the beginning stages of a GORILLA APE run higher. Look for lower yields to confirm this narrative.

We Work fashioned themselves to be a $47 billion company at the beginning of their IPO roadshow. The market told them to fuck off and signed a value of ~$10-15 billion. Even at that depressed -78% level, no one wanted it. Lo and behold, they announced yesterday their IPO was going to be delayed, to maybe October.

Reason being:

The CEO didn’t want to come public during the jewish holidays.

WSJ

We is now expected to wait until mid-October at the earliest to start its investor roadshow following the conclusion of the Jewish High Holidays, which Mr. Neumann observes.

The delay could also last longer and some existing investors, including SoftBank, have pushed the company to wait until next year to launch its IPO, The Wall Street Journal has reported.

Who the fuck do they think they’re kidding?

In other news, Saudi oil production, which was supposed to come online right away, might take months to resume.

Reuters:

Saudi Aramco’s full return to normal oil production volumes “may take months”, two sources briefed on the company’s operations said on Monday, after attacks on Saudi oil plants knocked out more than half of the country’s output.

“It is still bad,” one source said.

On Sunday, an industry source briefed on the developments told Reuters that Saudi Arabia’s oil exports will continue as normal this week as the kingdom taps into stocks from its large storage facilities, but that Aramco may have to cut exports later if the outage in output continued for long.

Futures are flat.

As I grow older and crankier, I often reflect upon my mistakes and cringe at the idea that I once thought a certain way. Having a diverse readership, filled with young punks, I should probably spend more time educating the youth about learned errors.

Someone in Exodus posted this passage from a book he recommended and I felt it was worthy of your attention. Absolutely perfect prose.

Wanderer by Sterling Hayden

“And in the worship of security we fling our lives beneath the wheels of routine – and before we know it our lives are gone. What does a man need – really need? A few pounds of food each day, heat and shelter, six feet to lie down in – and some form of working activity that will yield a sense of accomplishment. That’s all – in the material sense, and we know it. But we are brainwashed by our economic system until we end up in a tomb beneath a pyramid of time payments, mortgages, preposterous gadgetry, playthings that divert our attention for the sheer idiocy of the charade. The years thunder by, The dreams of youth grow dim where they lie caked in dust on the shelves of patience. Before we know it, the tomb is sealed. Where, then, lies the answer? In choice. Which shall it be: bankruptcy of purse or bankruptcy of life? ”

Compound your returns. Quit spending money on stupid shit. You’re not your fucking khakis.

I grew up in a black place of crude oil, one of the very few enclaves inside the inner pits of Brooklyn, NY where men still drilled for oil. Sometimes when the drills would break, they’d send small boys into the pits to dig with their hands, scratch and claw for that black gold. As a boy, I always walked upon the black earth of the Brooklyn oil fields, with petrol on my face and gold in my pockets.

Not much has changed from then until now. I speak to you today a proud and boisterous individual, long the black gold and the gold gold. I would provide you, the reader class, with my picks; but quite frankly, you wouldn’t know what to do with them if I did.

See, picks are exclusive for Exodus — the sort of thing that is shared between men of property and leisure. Sure, you have a few bucks in the market and you’ve had some ancillary success. But who hasn’t? We’re in a never-ending climb to death here, bunch of Eddie Barzoons running around shooting rockets at people from ships, borrowing money until our eyes bleed — fucking the poor every which way but loose.

As founder of this fine establishment, I do not require your money, only your understanding — to know that Le Fly is, and always has been, an oil man — ever since birth.

Where is oil heading next?

Sharply higher.

Why?

War, gentlemen. War.

Simple yes or no question. You’re all internet tough guys. You see the markets want higher.

Do you have the balls to buy crude up here, or will you fade it? There isn’t a right answer. It can go either way, obviously.

But I’d argue for higher prices, since the crisis hasn’t been resolved and Trump is talking greasy, as if they’re ready to donate American blood for the cause of protecting Saudi interests.

I’m having a later morning, so after I properly view markets I’ll offer my take.