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Tricky Tuesday – Fed Funds Fake EOQ

Posted on the 01 July 2014 by Phil's Stock World @philstockworld

6-30-2014 6-10-45 PM Fixed RateThank you Fed may we have another?

And, by another, I mean another $340Bn that the Fed paid out to their Bankster buddies in "Reverse Repo" purchases at the end of the month.  That's right, the Fed essentially bought THE ENTIRE STOCK MARKET (in terms of transaction value) from the banks over the last few days of June and THAT injection of cash is how they kept the rally going into the end of the quarter.  

As you can see from the NY Fed's own chart (via Dave Fry and Zero Hedge), this kind of charity buying isn't unusual for the Fed – more like Standard Operating Procedure to inflate equity prices into the end of each quarter.  Does it work?  Sure, look at the results:

Tricky Tuesday – Fed Funds Fake EOQ
As you can see - as the market gets more and more expensive, it takes more and more money to push it higher.  Also note the Fed tweaked (hopefully not twerked – there's an image of Yellen I don't want burned in my mind!) their timing to move it close and closer to the very last day, to maximize their bang for the buck.  

SPX WEEKLY
UNFORTUNATELY, as you can see from the S&P chart above, these effects are short-term and demand a correction in the not too distant future. 

What's very interesting is that our stimulus theory is still holding up.  We developed this back in 2012, through observation of the effect of Central Banksters market meddling on Global Equities and it turns out that $10Bn per quarter buys 1 S&P point.  Look how perfectly that aligns on the chart!  

Bill Dudley, New York Fed president, warned last month that if use of the repo facility were to grow too quickly it might “result in a large amount of disintermediation out of banks through money market funds and other financial intermediaries into the facility. This could encourage further enlargement of the shadow banking system.”

Hey, a little enlargement of the Shadow Banking system never hurt anyone, did it China?  China, in fact, also pitched in with more stimulus of their own by changing the…


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Tags: CHINA, Fed, Reserve Ratios, Reverse Repo, SPX

This entry was posted on Tuesday, July 1st, 2014 at 7:50 am and is filed under Uncategorized. You can leave a response, or trackback from your own site.

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