rwitre wrote:slick wrote:FED TO NOW BUY COMMERCIAL PAPER WHERE THE MARKET HAD FROZEN UP
slick wrote:slick wrote:US COMMERCIAL PAPER MARKET FREEZES UP!!
Two weeks ago the corporate bond market froze up.Treasuries had record bid/ask prices with the 30 year auction nearly failing last week needing a Fed intervention.Now the commercial paper market has frozen up needing a Fed bailout.
https://www.ft.com/conte...-11ea-a3c9-1fe6fedcca75
It just keeps getting worse.The Fed will just have to buy everything.Now US banks wont be engaging in share buybacks putting even more pressure on stocks
Wow everyday new twists and records.The Dow Jones Industrial Average and S&P 500 had their worst day since the “Black Monday” crash of 1987, falling 12.93% and 11.98%, respectively. Also all the 3 indices recorded their biggest point drops ever.The Nasdaq Composite had its biggest one-day percentage plunge ever, tumbling 12.32%.
All this carnage despite the Fed cutting rates by 1% to Fed funds rate being between 0-0.25% and launching 700 billion of QE and undertaking 500 billion of overnight repos and 45 billion of 2 week repos.Just getting too insane.
Now futures market are up with Dow futures up 700 points when Trump indicated a bailout is coming.Looks very tempting to short that dead cat bounce.So where will the bailout cash come from?Simple.The Fed will just print the money as always.
As widely expected,Fed has launched a commercial paper facility to buy this market that has been frozen under distress for the last few days.Intention is to buy at least 1 trillion of commercial paper


Should our CBK have bought Nakumatt's commercial paper also to save it from collapse and prevent the distress in Amana Capital also?
"
Cash is trash." Ray Dalio
Even Warren Buffet's $128 billion cash pile is about to become worth less value than it was 2 weeks ago- but he has probably used a huge chunk to buy stock during the recent dip.
Fundamentally cash is trash considering the trillions of dollars the Fed is printing daily in even larger schemes to pump up markets but psychologically the US Dollar is king.Despite the trillions being pumped daily,the USD rose and has been remarkably stable.How is this possible?The US Dollar is the world's reserve currency backed by the US superpower status and petrodollar system.Most central bank reserves and most global trade is in USD and lots of debt especially in the emerging and frontier markets are USD denominated debt.This creates a massive constant massive demand for dollars.The current implosion of markets is creating a deflationary spiral making the USD even more sought after despite the trillions being printed.Foreign markets especially European banks are USD strapped thus Fed has setup currency swap lines with European Central Bank to reliquify the European banks with dollars.There is at least 11 trillion of USD denominated foreign debt where interest and principal payments have to still be made so there foreign nations are desperately seeking dollars to make their debt payments.Mainstream investors panicking put of asset classes like stocks are reverting to cash making the demand of dollars even stronger.Investors see no alternative to put their money in USD since the other major currencies facing even more dire straits.Would you park your money in the Euro,Yen when the Eurozone and Japan have negative central bank rates and negative yielding bonds?The British Pound is too small a market and the Chinese also printing money in droves and would you park your cash in a Communist dictatorship where the Yuan isnt a fully convertible currency?Thus in the short term the USD remains King but long term this money printing shenanigans will result in massive decline in the greenback.
As it now the norm,everyday the markets create a new twist.Apart from the massive repos and QE liquidity injections now running at at least a trillion a day,the Fed will print an least an extra 1 trillion to bailout the commercial paper market.Above this,there is now fiscal stimulus.Trump and Treasury Secretary Mnuchin announced sweeping bailout measures that will incur over 1 trillion

An administration official said the package could include:
$500 billion to $550 billion in direct payments or tax cuts
$200 billion to $300 billion in small business assistance
$50 billion to $100 billion in airline and industry relief
Every American (except millionaires and billionaires) will each get 1,000 USD each immediately

They are also deffering tax payments by 90 days

So where are all these trillions for bailouts coming from.Simple the Fed will just create the money from nothing (keystrokes in computer screens to credit the commercial bank and corporate accounts)
Stock market closed higher yesterday due to these massive money printing packages but now open lower with futures yet again hitting limit down and futures trading is halted

WOOOOI!!
Contrarian Investor and Trader.Advocate of free markets,limited government interference in the economy and sound money