iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
19,772 Blog Posts

Report: QE4 Starts Next Week

Many thanks to the good folks at Zerohedge for compiling the data. We all knew QE4 was coming, after seeing the repo business. Now we have hard proof, in spite of the fact the Fed still won’t name it QE — it IS QE.

Also, and this comes at no grande surprise, Goldman seemed to have the playbook before the news was released.

Just one day after we laid out what Goldman’s revised forecast for the Fed’s “NOT A QE” will look like, which for those who missed it predicted that the Fed would announce “monthly purchases of about $60BN for four months, split across Treasury bills and short maturity coupon Treasuries, in order to replenish the roughly $200bn reserve shortfall and support the pace of growth in non-reserve liabilities”, the Fed has done just that and moments ago – well ahead of consensus expectations which saw the Fed making this announcement some time in November – the US central bank announced it would start purchasing $60BN in Bills per month starting October 15. This will be in addition to rolling over “all principal payments from the Federal Reserve’s holdings of Treasury securities and the continued reinvestment all principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities received during each calendar month.”

In short, the proposed schedule is virtually identical to the one Goldman “proposed” yesterday, one which sees the Fed purchase a grand total of $100BN or so in TSYs the near term, and one which is meant to “engineer a one-off level shift of roughly $200bn over the course of four months.”

But wait there’s more, because just as today’s surprising spike in repo use suggested, mere “NOT A QE” may not cut it, and just in case, in order to provide an “ample supply of reserves”, the Fed will continue with $75BN in overnight repos and $35 billion in term repos twice per week, “at least through January of next year.”

Where the Fed’s announcement differs from Goldman’s proposed POMO schedule, is that this appears to be a far more aggressive form of “NOT A QE” because as the Fed notes it will continue well into the second quarter of 2020, meaning it will last beyond the 4 months proposed by Goldman, to wit: “in light of recent and expected increases in the Federal Reserve’s non-reserve liabilities, the Federal Reserve will purchase Treasury bills at least into the second quarter of next year in order to maintain over time ample reserve balances at or above the level that prevailed in early September 2019.”

The Fed’s proposal indicates that between the continuation of repo operations, and the net $60BN balance sheet expansion, the Fed’s balance sheet will reach roughly $4.2-$4.3 trillion some time in Q2 2020.


NOT QE QE

The Fed’s statement.

In light of recent and expected increases in the Federal Reserve’s non-reserve liabilities, the Federal Open Market Committee (FOMC) directed the Desk, effective October 15, 2019, to purchase Treasury bills at least into the second quarter of next year to maintain over time ample reserve balances at or above the level that prevailed in early September 2019. The Committee also directed the Desk to conduct term and overnight repurchase agreement operations (repos) at least through January of next year to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation.

In accordance with this directive, the Desk plans to purchase Treasury bills at an initial pace of approximately $60 billion per month, starting with the period from mid-October to mid-November. These reserve management purchases of Treasury bills will be in addition to the Desk’s ongoing purchases of Treasury securities related to the reinvestment of principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities. Detailed information on the schedule for reserve management purchases of Treasury bills will be announced on or around the 9th business day of each month on the Treasury Securities Operational Details site.

Consistent with this directive, the Desk will roll over at auction all principal payments from the Federal Reserve’s holdings of Treasury securities. As Treasury bill holdings mature, the principal payments will be rolled into new Treasury bill securities.

In addition, at least through January of next year, the Desk will conduct overnight and term repo operations to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures. Term repo operations will generally be conducted twice per week, initially in an offering amount of at least $35 billion per operation. Overnight repo operations will be conducted daily, initially in an offering amount of at least $75 billion per operation. Detailed information on the schedule of term and overnight repurchase agreement operations will be announced on or around the 9th business day of each month on the Repurchase Agreement Operational Details site.

In all, present Fed intervention stands at around $175b-210b per mo.

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Trump’s Trade War Yields Another Monstrous Rally

Rinse and repeat.

Modus operandi

Create theatre for the masses via bold statements and outlandish events.
Create a foil and an enemy to distract the plebs from their moribund lives at slave factories.
Leak information, providing heartfelt warmth and comfort to an otherwise abused class of citizenry.
Delay and re-create new drama and theatre, upping angst.
Off conciliatory comments to feign weakness, show flaws that permit the Third Estate to fribble away at you during water cooler chats. Again, more theatre.
Pivot dramatically, catching everyone off guard — make things “more interesting.”
Again, leak news and release statements promising great progress.
Repeat cycle.

News of Trump’s China deal going really well this time has caused another gigantic rally. Yields are shooting higher and gold is plunging. I had a short position against gold that I covered, selling DUST for +7%. I am not selling any longs just yet, but feel this rally might be a bit much, given the lack of actual news associated to it. Nevertheless, markets enjoy going higher. It’s what they do best.

“Warmer feelings than in recent past, more like the Old Days,” Trump tweets.

“I will be meeting with the Vice Premier today. All would like to see something significant happen!” Trump adds.

The two countries could agree to a partial agreement on issues such as currency and agriculture buying.

I’ll be holding off on any new buys until after 3pm.

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BEWARE OF MORE NOTHING

While markets are smoking cocks on the hopes that Trump could somehow figure out a way to strike a deal with China, the likelihood of that happening is next to zero. There is significant headline risk in this tape now. However, and this goes without saying, I don’t fucking know what to do with that information.

Day 1: +2%

Day 2: -2%

Day 3: +2%

You’d have to posses a Joker like mentality to trade this fucking tape, or be stubborn to the point of only one way. Traders are getting eaten up and beat the fuck out, rightly so.

I sold FRAN for a +14.6% gain, a much needed profit following a spate of poorly executed trades. I am leaning towards fading this rally.

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FALSE ALARM: More Nothing

Futures have recovered and now we’re jimmy-rigging towards a flat open. Trump’s big beautiful stock market is intact, as well as his Presidency. Turkey is menacing Europe with 3.5m refugees if they don’t SHUT THE FUCK UP about their invasion.

And…more nothing.

Happy Thursday.

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China Delivers the Death Knell to Trump’s Presidency: Trade Talks End Without Progress

NO ONE KNOWS WHAT THE FUCK IS GOING ON HEREWH says SCMP report is inaccurate. Spox Judd Deere tells me: “We are not aware of a change in the Vice Premier’s travel plans at this time.” Senior admin official says Liu still scheduled to depart Friday evening, and dinner is on for the delegation Thursday evening in DC.

This is why we can’t have good things here. As soon as shit started to look good, BAM! — the fucking Chinese come in and fuck us. It’s bad enough Turkey has been let loose to genocide the Kurds, now we have to deal with the fucking Chinese. Jesus Christ.

Source: ZH
“They have made no progress,” said another source familiar with the talks, adding that the Chinese side had not made headway in persuading US negotiators to consider a freeze on tariff increases, a main priority for Beijing.

And confirming that the week’s entire negotiation was a fiasco from the start, the SCMP reports that the Chinese delegation is planning to leave Washington on Thursday – one day early – and after just one day of principal-level talks, the SCMP source noted. Beijing’s negotiating team, headed by Vice-Premier Liu He, had previously planned to leave Washington late on Friday, allowing for up to two full days of talks.

I only lament severely because I am long, having sold out from my TVIX position today — thinking Trump had his shit together. But I was wrong.

Nasdaq futures are down 30, Dow 70. The futures were down a whole lot more earlier, more than 300. The folks at CNBC were speedily jerking off to that news and now they’re stuck with flaccid cocks and stupid headlines, whereas I have a glorious headline and a stomach filled with mushroom risotto, made by my own hand.

In related news, Trump is finished!

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FOMO

Traders got their faces boxed the fuck in today, coming in short, in heavy cash, fucked sideways and out. No one expected this to happen, +100 Nasdaqs, Kurds BTFO, Trump’s China deal unimportant — more fucking craziness.

One could make a strong argument for ignoring any and all news. Granted, it might make you woefully ignorant and a dullard bore at cocked tail parties, but you’ll be happier and richer for it.

I just partook in a spate of poorly executed trades. I had recently broken a miserable trading streak with a dozen solid gains and now I’m right back where I started — mired in mediocrity.

My last 10 trades.

TQQQ +1.85%
(ROKU -3.5%)
MU +2.3%
JNUG +3.9%
SPLK — wash
(TNA -5.9%)
(KEYS -6.4%)
(CREE -9.8%)
(SEDG -1.5%)
(TVIX -5.2%)

Of course as soon as I sold TVIX the market dumped out 60 points and TVIX leapt higher; but that’s the nature of this business isn’t it? We’re constantly second guessing, strong arming opinions, acting on impulses and/or attempting to find a holy grail. Truthfully, and this goes without saying, you’ll never get rich trading. Write it down and post it on your fucking wall. Your gains, over time, will be had via long term cap growth, the old boring method of having an S&P like structure, yielding 10% in gains, 2% in divvies. You do that over 30 years and you’ll be financially secure.

But that’s boring you none of you read me for that. You want Fly out there in the City Square cutting dicks off with his dick guillotine, beheading people for looking at me sideways. I can do both, and will do both, believe me.

Into the bell, I’m bullish, positioned in SAAS and other indelible names — working thru the bad streak and optimistic for the future.

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Pro-Tip: Fuck Gold

There’s a lot to be said about a man, such as myself, who is malleable to the point of maddening flexibility. One minute I am a gold insect, the next I am this sort of lunatic selling short the metal. I am, after it’s all said and done, a slave to the trends.

We do not have an accommodative tape for gold presently. The metal has shined wonderfully the past year, but is now BOGGED down in a sideways pattern that is bound to shake out weak kneed faggots. As such, you might see a divergence between the metal and the miners, with the latter getting smacked cold, as rates reflate upwards.

There is a good correlation between rates and gold. You might not be paying close attention, but I am.

That being said, and until further instruction: fuck gold.

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Stocks Jump on More Chinese Trade War Bullshit

This is the sort of news flow that could drive anyone crazy.Yesterday China was leaving early and Trump was kicking out their officials. Today, MEH, maybe they’re open to the idea of a trade deal.

You and I both know, if talking between two gents at a cigar lounge, none of this shit is happening. Trump will never cut a trade deal with Xi, especially with the elections and impeachment in the air. Who in their fucking right minds would cut a deal?

That being said, I’d argue this rally is in danger of dissipating and then dissolving into the sewers.

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STOCKS OBLITERATED INTO THE CLOSE

Trump’s trade war took a dark turn for the worse. More than that, QE4 is getting people nervous. More than that, impeachment is just around the bend. More than that, we’re in October — the month designed by the simulators to crash markets.

I took three losses today and added a bunch of stocks to the mix. Cash is 25% without any real hedges. My only counter equity position is a leveraged bond ETF. Frankly, I’m spit-balling into a volatile wind from the east.

Should I give up and go short?

BAD MOVE.

QE4 is ultimately bullish.

Nevertheless, we’re in a mood now and most of you will just have to ride it out. I’ve had poor experience shorting into the hole, so I am refraining from doing so. As for gold, it looks good, but not great.

Better luck tomorrow.

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Trump Ups Ante — Imposes Visa Bans on Chinese Officials

Markets were recovering until this came out — more bullshit by Trump by way of Chinese trade war.

This ends, naturally, with Trump forcing out all Chinese students from American Universities — and China banning and/or liquidating their Treasuries.

Meanwhile, QE4 is unofficially underway.

As jarring as this all seems, judging by recent history, Fed intervention should be bullish for stocks. It’s unhealthy and morally wrong, but asset prices will be jimmy jacked the fuck higher. As for the China trade war business, not good.

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