Loading ...FYI
The truth about repos—do u know this? So the FED isn’t really floating stocks up on a sea of liquidity??
https://wolfstreet.com/2020/01/10/the-wall-street-journal-and-other-media-should-stop-lying-about-repos/
The Wall Street Journal (and Other Media) Should Stop Lying About Repos
by Wolf Richter • Jan 10, 2020• 104 Comments
My patience has been exhausted.
By Wolf Richter for WOLF STREET.
On January 9, the Wall Street Journal ran an article about the Fed’s repo operations with this headline: “Fed Adds $83.1 Billion in Short-term Money to Markets.” This is what the headline looks like:he article then said that the New York Fed “added $83.1 billion in temporary liquidity to financial markets Thursday….” And: “The liquidity came in two parts. There was an overnight repurchase agreement, or repo, that totaled $48.8 billion, and a $34.3 billion 14-day repo intervention.”
It said that this $83.1 billion that the Fed “added” on Thursday was up from $46.6 billion it had “added” on Wednesday (so $129.7 billion in two days???).
The WSJ and other media have published similar articles with similar headlines before. It’s part of a larger pattern.
But this WSJ headline & article are a lie about repos.
Neither in the headline nor anywhere in the body of the article does it explain that repos are in-and-out transactions. The headline and the text of the article only mention the “in,” but willfully ignore the “out.”
Here is the “in” of a repurchase agreement: The Fed buys securities (mostly Treasury securities and some agency mortgage-backed securities) in exchange for cash. This adds liquidity to the market.
Here is the “out” of a repurchase agreement: Every repo matures on a set date when the counterparties are obligated to buy the securities back from the Fed at a set price. At this point, the repo unwinds, and it drains liquidityfrom the market.
All repos are by definition in-and-out transactions. When a repo matures, the net goes back to zero (except for a tiny interest payment).
The Fed’s repos fall into two categories: “overnight” repos that mature the next business day; and “term” repos that mature on a specified date further in the future, such as 14 days.
Every business day, the previous day’s “overnight” repo matures. In a week without holidays, five overnight repos mature. Each time one of these repos matures, the original transaction unwinds, the Fed sells the securities back to the counterparties, and takes back in the cash it handed out, and this drains liquidity from the money market.
It ain’t over till it’s over….
US-Iran crisis threatens all-out war in Iraq, Mideast, world – Iraqi PM
“I hope this will be a memorable lesson for America,” said Iranian Defense Minister Amir Hatami;
Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis, along with at least 10 other people, were killed in a US air strike in Baghdad last week. Ali Shamkhani, secretary of Iran’s Supreme National Security Council, has said that 13 “revenge scenarios” were being considered, Fars news agency reported. Even the weakest option would prove “a historic nightmare for the Americans,” he said.
Iranian President Hassan Rouhani told the United States on Wednesday that Washington might have “cut off the arm” of General Qasem Soleimani but America’s “leg” in the region would be cut off in response.
Bit Coin
bit coin up 6.87 % ..leads the way when theres trouble brewing !
Trader Talk tonight=20 measures of over-evaluation are as high as they were in 2000-AKA-why I keep pecking away at VXX
FilledBuy to Open280VXX Jan 17 2020 16.0 CallLimit0.09—-15:10:14 01/10/20
FilledBuy to Open120VXX Jan 17 2020 16.0 CallLimit0.09—-15:10:14 01/10/20
“I do think the growth in the balance sheet is having some impact on the financial markets and on the valuation of risk assets…I want to be cognizant of not adding more fuel that could help create further excesses and imbalances.”
“Some”. Cute. How about all as the correlation has been well established and the Fed is recognized as the only game in town. But at least it’s an admission and a recognition that excesses and imbalances are being created and are already in place.
Last night’s discussion on CNBC Fast Money by all participants shows how pervasive this recognition is, that the Fed is driving everything, it’s not just yours truly that keeps highlighting this point:
In party like it’s 1999 I made the point that the action by the Fed is similar to what it did in the run up to Y2K. Once that was over Greenspan withdrew liquidity and markets crashed.
Already the Fed is backpedaling on reducing liquidity knowing full well it would cause trouble in equity markets:
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All the historic bullish extremes-in sentiment and valuation–are setting up a once in a lifetime long vol trade–like the 2018 short vol one day implosion…hence-I judiciously keep dipping my beak–today was a day to take a shot–not every day is…I simply can’t imagine what could cause any serious downside for this mkt…so far my attempts have cost me only lunch money…
FYI
The Commitment of Traders Report
Silver
*The large specs increased their long positions by 2,914 contracts and increased their shorts by 5,389 contracts.
*The commercials increased their longs by 1,936 contracts and reduced their shorts by 3,542 contracts.
*The small specs reduced their longs by 813 contracts and increased their shorts by 2,190 contracts.
The commercial net short position was reduced to 91,174 contracts.
Gold
*The large specs increased their long positions by 1,860 contracts and increased their shorts by 7,494 contracts.
*The commercials reduced their longs by 473 contracts and decreased their shorts by 10,883 contracts.
*The small specs decreased their longs by 448 contracts and increased their shorts by 4,328 contracts.
The commercial net short position was reduced to 356,081 contracts.
Mildly friendly report.
FYI
My best performer is MUX
Who would’ve thought? The old dog is barking on light volume.
My worst performer should be one of the safest bets – WPM. I guess ya can’t win em’ all.
The shares should have some room to bounce, silver too. Gold – maybe not so much.
Here’s your COT’s – Looks like the funds are getting a little nervous, but it’s still heavily skewed for the banksters.
Buygold
HUI looking good. Let the healing begin! 🙂
Ipso – yep
I see WBLMF at $.67 x.67.5 now. Maybe I’m thinking of another stock.
I’d love to see the HUI get beack to 235 to close the week.
Looks like we have a fair shot at holding our gains.
RGLD and WPM won’t scream to the upside either but hopefully if this correction gets deeper they won’t hurt me too much. I’ve got minimal gains so far. I’d like to see WPM react a little better to the silver price today….
SM looks a little nervous going into the weekend – maybe it just has to do with the round number of 29K
Fake Un-Adjusted Unemployment rate same at 3.5%
From 1945 to 1975 only one spouse working, the unemployment rate was 50% and we had a very high living standard. The living standards are half what they used to be, so the adjusted rate to reflect that means we have a “real” unemployment of 50%.
Buygold
WLBMF Ameritrade has bid ask quotes currently .66 and .68. Nothing at all wrong with WPM and RGLD you bought. Certainly a lot safer than the midgets.
All in all I’m with you. I think we’re looking very good in the metals right now.
Buygold
Yes, when this thing blows…it will blow big.
New highs coming for the metals which should eventually send the shares higher.
They might suffer initially if stocks get hurt bad of course.
Cheers
Hey Ipso
I don’t have a good feel for Wallbridge, whether technical or fundamental and when I’ve put in bids with TD, I don’t get a bid/ask so I’m guessing.
I’ve mentioned what I’ve bought on the pullback, some large caps – RGLD and WPM – trying not to take the huge % hits if I’m wrong and so far it’s worked out.
We’re doing OK today if things hold up. Glad to see silver above $18, and gold continuing to hold $1550. I would’ve expected gold to be approaching $1500 already.
Very likely with the Iranians examining the black boxes they will be “too damaged” to recover any information. Supposedly they are bulldozing the crash site.
Iran to analyze black box after missile blamed for crash
Buygold
Skeena has been doing great. Up 13% yesterday … but today giving back a big chunk. Ouch 🙂
I’m still looking to pick up some more Wallbridge at some point. Sitting about flat with what I picked up before. Oops it’s up even more now …
Pompeo and Mnunchin on FOX
Announcing more sanctions both on Iran, countries and Iranian individuals.
That appears to be giving gold and silver a lift right now.
Sanctions are better than war.
Morning Captain, Ipso
Thanks for checking in!
Thought I would hit the gym, which I will do, but stepping into the garage in 13 degree weather woke me up a little too quick. 🙂
Captain – gotcha on Wallbridge, it’s been dead in the water for a week or so and correcting. The new high flyer is Ipo’s Skeena, although it’s down today, it’s been on a tear. I’m bummed to hear we have to correct for 4-8 weeks, especially in the shares. Gold is pretty overbought so that makes some sense, but the shares got hit fast and hard. Would’ve liked to see the HUI hold above 235. Silver back above $18 today is encouraging, good to hear you think the scum will fail, but the silver shares aren’t reacting as strongly as they should be IMHO.
Regardless, I still think we’re looking at a great year, war will only add fuel to the fire and I hope it doesn’t happen.
Buygold
Back on the flipside.
Re: Walbridge – Unless Uncle Eric is losing his marbles he must know something behind the scenes nobody else does. Thusly, he might be losing his marbles for pumping WM up like that because if you look at the results they dont have the gold to justify the current price.
Gold and silver just put in 5 wave bullish impulses but need to correct now for 4 to 8 weeks before resuming up trends. The thing to realize now is the COT situation will become less important moving forward. As Jeffrey Christain recent pointed out, investment demand for silver is down 95% from 2011 levels. So every 5% recovery of previous levels means a doubling of demand.
I don’t see how the bankers survive this one no matter how much paper they throw at it.
Captain out.
As I remember Ecuador is taking a massive cut of this operation
Lundin’s Fruta del Norte produced 28,678 oz gold in 2019
Lundin Gold (TSX: LUG) reported Thursday afternoon that ramp-up to commercial production is on schedule and on budget at its Fruta del Norte gold project in southeast Ecuador, the country’s largest. A total of 28,678 ounces of gold were produced by the end of 2019.
Of the total production at Fruta del Norte which kicked off production in November 2019, 3,411 ounces of gold were produced in the form of doré and 25,267 ounces were produced as concentrate. Approximately 3,400 tonnes of concentrate were produced, of which 2,676 tonnes were shipped to a smelter in Finland by year-end.
Well, scratch my last
maybe we don’t need the SM to go down to have a decent bounce.
Shares are looking better, nothing crazy but HUI back above 230 – beats the alternative.
I’m sure we’ll face a few attacks in the next few hours in both the shares and metals because we always do.
This is my 5th straight post while all you Oasis Dwellers are snoozin’ so I’m going to go hit the gym. We are 13 degrees with snow here in lovely Idaho. Geesh…
Looks like
if our pm’s are going to have a chance to move higher we’re going to need a weak SM
Pretty amazing the DOW is set to bust 29K
Scum reversed the meager gains like nuttin’
We were up $5, now down $3 – so could be a normal jobs report day after all.
Or to give a silly example: it’s like every morning I go to an ATM, withdraw all of the money in checking account ($1000) and redeposit it back at the branch in the afternoon.
In a year, I have “deposited” $260,000 (260 business days +/- fees/interest) but that would be meaningless as I didn’t count the withdrawals and my account balance would still only show ~ $1,000