by Lee Adler, Wall Street Examiner
Gap City Rollers Target SPX 2125
New York prices are gapping and reversing daily. It’s madness if you don’t stay up all night trading the futures.
Nine days ago I told Lindsay Williams that there were dead bodies in the market that hadn’t floated to the surface yet. I said we don’t know who they are, but they’re dead, and they’ve taken their bankers with them. And I said the Fed would have to fill the grave, or some other stupid analogy. I was at a loss for analogies that day.
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Although the dead have yet to be identified, the proof is now out there. On top of the trillion a week in term repo offerings, the Fed announced yesterday that it would offer another trillion in daily overnight repo. It also dusted off and restarted a couple of old Great Financial Crisis programs – the PDCF, Primary Dealer Credit Facility and a direct Commercial Paper program for smaller industrial companies.
If that was the Great Financial Crisis, then this is the GREATEST. It’s the Muhammed Ali of financial crises.
Dead bodies have floated to the surface. And some of them are Primary Dealers. My guess is that all of them are dead, because all of them use most of the 90% or more leverage available to them. Their equity has been destroyed 3 times over. There’s no more cash and no more capital.
The Fed reopened the PDCF because the dealers need Payday signature loans. They have no collateral for repo. Proof is that they took only $140 billion of yesterday’s first repo auction of $500 billion. And in the afternoon operation, the dealers took only $10 billion of the $500 billion offered.
The collateral is all pledged and repledged. They now need to borrow on the mere promise to repay.
Which they can’t.
We’re screwed.
Published originally at The Wall Street Examiner 18 March 2020.
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