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  • The Fed's Reverse Repo Actions In 2014 Means QE Effectively Ended In December But They Forgot To Tell Us [View article]
    How is the average reverse repo of $80B the same as withdrawing $80B per month? If the reverse repo is only good for a day or so, then the cumulative effect of all those daily $80B repos is about the same as withdrawing $80B _total_ from the system. It is a rounding error. They can sure use this mechanism in the future in lue of having to sell bond holdings outright, but right now with $80B in average size this is not the same as completely eliminating QE. (Not that QE matters much though).
    Mar 19 02:44 AM | Likes Like |Link to Comment
  • Understanding The Schizophrenic Fed's Risk-On / Risk-Off Messages  [View instapost]

    Excellent analysis! I first stumbled upon your articles here a few weeks back, have read pretty much all of them from the last few months and it is such a great feeling that I am not alone in thinking that all this recent Fed rhetoric is obviously intended to just impact sentiment of stock investors in light of the parabolic rise in prices vs. to imply and communicate any real possibility (let along timeline) of QE tapering.

    This said, the correlation between the size of Fed balance sheet and stock prices, while very close to 1.0, does not automatically imply direct or indirect manipulation by the Fed. It is sufficient that the sentiment exists that while Fed is doing QE the stocks are bound to go up because <insert your favorable reason here>. And then one ends up having a perfect correlation between 2 straight lines. So the Fed does not _have_ to mess with direct manipulation. This is just an observation. It does not really contradict the rest of your analysis.

    I am too skeptical that they will be able to talk the stock market precisely where they want it to be. At some point the market will either get really scared or it will decide it is all just talk.
    Jun 29 06:10 AM | Likes Like |Link to Comment
  • A Mindless Way To Beat The S&P 500 [View article]
    What a stupid idea! You sold At-The-Money calls for a 9% premium, and the market went up 50%. Guess what, you just lost 40% of your money. A mindless way indeed.
    Aug 26 11:35 AM | Likes Like |Link to Comment