WALCL trade ideas
FED Balance Sheet Expansion: Asset Purchases to Continues?In this chart analysis, i'm exploring the potential trajectory of the Federal Reserve's balance sheet, considering the possibility that asset purchases will continue until reaching the $13T-$16T range. Historical events like the 2008 financial crisis and the 2020 pandemic have demonstrated the central bank's willingness to expand its balance sheet to support the economy.
Starting with the 2008 financial crisis, the Fed implemented several rounds of quantitative easing (QE) to inject liquidity into the financial system and stabilize markets. This caused a significant expansion of the balance sheet from around $1T to approximately $4.5T by late 2014.
Fast-forward to the 2020 pandemic, the Fed employed a similar approach, launching aggressive asset purchase programs in response to the unprecedented economic shock. This led to another massive surge in the balance sheet, which currently stands at over $8T.
The chart indicates a steady upward trajectory in the Fed's balance sheet, with the possibility of reaching the $13T-$16T range in the medium to long term. This scenario assumes that the central bank will continue to buy assets in response to economic uncertainties, inflationary pressures, or future crises.
For traders, this ongoing balance sheet expansion may have implications for various asset classes, including equities, bonds, and commodities.
A continuously expanding balance sheet could support risk assets and suppress interest rates in the short term. However, concerns over inflation and potential policy tightening may create headwinds over the long term.
In conclusion, the Fed's balance sheet growth highlights its active role in managing the economy during turbulent times.
Traders should monitor the central bank's policy decisions and anticipate potential market reactions to shifts in the balance sheet trajectory.
Cheers!
Kripti.
FED Printer Hello Friends,
The FED printer has been turned on? Check what happened in the past when we got close to my MA lines.
Most probably we are going to see on the next FOMC meeting,21/22 March 2023, a 0 or 25bps rate hike.
Let's see how this develops.
cheers,
Kripti.
The Fed's Pivot - What to Expect in the Months Ahead In this video, I explain what to expect in the months ahead, following the Fed's pivot back to monetary easing.
Also, I wanted to make several notes:
When I said that it's almost never better to own derivatives than holding an asset outright, I do realize the importance that derivatives can play with leverage and risk management.
When I said that fear is always highest at the +2 standard deviation of the log-linear regression channel, this was confusing because typically fear is highest when price reaches the -2 standard deviation. In this particular ratio chart, fear over the Grayscale Bitcoin Trust was highest when Bitcoin outperformed it enough for the BTC/GBTC ratio to reach the +2 standard deviation.
When I said that the log-linear regression channel is one of the best indicators, I do realize that compared to other statistical methods, this indicator is quite rudimentary. Nonetheless, I find it to be quite useful.
I apologize for the poor audio, this seems to be a matter of how TradingView is uploading my audio. On my end, my audio is very clear.
Important Disclaimer
Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
230117 - Who's Tapering and Who's Not. I have to re-visit this. I am struggling to get 2 charts on the screen. Sorry for the dealy.
If the sell-off on Dow Jones, or the rally on Gold have anything to do with tapering the Central Banks' Balance sheets, they have a lot to talk about in Davos.
Notice the Difference between the M3 and Central Banks' Balances.
BOTH IS RELATIVE AND REAL TERMS.
Tapering is nigh impossible
QT is QTClear as day that the SP is controlled not by earnings but by the government, assuming they keep up with their amounts so far, down we go.
10yr/3mo & fed balance sheetWill they do it? Or will will chicken out and provide relief..Personally, I think Powell is gonna bring the pain.
They are still light on QT, by ~200B from upper end targets. I expect November will bring some more drastic movement.
Will this make history? Or will we set the pen down and leave the problems for later?
liquidity number v2 from Arthur Hayeson bloomberg machine: FARBAST Index - (RRPQTOON Index * 1000) - CERBTGAN Index + NYRPVOA Index - FARWFOIA Index + FESLTOTL Index
units of those metrics have been updated
source tweet: twitter.com
Market Analysis based on QT & FED Liquidity TrackerThis is intended to be an analysis and comparison of the effect that the FED's interest rates + QT have had on the stock market during the first half of 2022, in an attempt to forecast the the impact doubling QT will have over the 2nd half and into 2023.
I am still very new to both Technical Analysis, as well as the deeply interconnected workings of the financial market, so I am sharing this with the wider community in hopes of receiving and growing through feedback and even correction - so please feel free to share (I'd rather learn and grow than be right).
Thanks!
FED Balance Sheet vs M2, GDP, CPI, USCPR, and SPXCreated this in response to a Twitter debate to illustrate US Corporate Profits don't look so grand once you adjust for inflation (USCPR/M2).
liquidity number from Arthur Hayessimulate following on bloomburg terminal:
FARBAST Index - (RRPQTOON Index * 1000) - CERBTGAN Index + NYRPVOA Index
Arthur Hayes's Liquidity Index comparing to SPX, NDX & BTCUSD liquidity conditions are comprised of three parts:
The size of the Fed’s balance sheet.
FRED:WALCL The Fed credits member banks’ Fed accounts with money, and in return, banks sell the Fed US Treasuries and/or US Mortgage-Backed Securities. This is how the Fed “prints” money to juice the financial system.
The size of Reverse Repo (RRP) balances held at the NY Fed. FRED:RRPONTSYD The NY Fed allows eligible counterparties to deposit USD and earn a rate of return. The deposited funds become dead money once they enter the Fed’s account. It is dead money because the Fed does not use the deposited funds to make commercial loans. If it did, it would increase the supply of credit money in the financial system. In effect, the money multiplier for RRP balances at the NY Fed is 0x, vs. a non-zero multiple when deposited with any other financial intermediary. (Pre-pandemic, the reserve ratio requirement hovered between 3% to 10% – resulting in a 33x to 10x money multiplier for US commercial banks – but the Fed has since slashed it to 0%, meaning that commercial banks can lend out 100% of the deposits they receive with no obligations to hold any of those deposits as a safety net). Money market funds (MMF) are funds in which retail and institutions place cash to earn short-term yield. In my brokerage account, any spare cash I have is deposited in an MMF, and I can get my cash back within one business day. MMFs can deposit funds in the RRP, and a variety of other low-risk short-term credit instruments (e.g. US Treasury bonds, AAA-rated US corporate commercial paper). Leaving money with the Fed is the least risky option, and pays about the same as the other two options, which do carry some risk. Therefore, MMFs prefer to park money with the Fed, if they can, rather than in the leveraged financial economy.
The US Treasury General Account (TGA) balances with the NY Fed. FRED:WTREGEN This is the US Treasury’s checking account. When it decreases, it means the US Treasury is injecting money into the economy directly and creating activity. When it increases, it means the US Treasury is saving money and not stimulating economic activity. The TGA also increases when the Treasury sells bonds. This action removes liquidity from the market as buyers must pay for their bonds with dollars.
USD Liquidity Conditions Index = (The Fed’s Balance Sheet) – (NY Fed Total Amount of Accepted Reverse Repo Bids) – (US Treasury General Account Balance Held at NY Fed)
Man Behind The CurtainThe FED's monetary policy is a lot like that scene in the Wizard of Oz where they think they are communicating with a great and supremely powerful wizard, but Dorothy's dog incidentally pulls back the curtain while sniffing his leg. To the disdain of Dorothy, Tin and Straw man, it's just some goofy looking guy pulling levers and talking through a loudspeaker while pressing buttons to release fire and smoke. Dorothy proclaims "You are a very bad man!", and the wizard says "No, I'm just a very bad wizard."
Look it up if you haven't seen it. Highly recommended!
This is exactly what's happening to the FED. Lots of fire, smoke, ego stroking going on among the board members who think they are all powerful, supreme beings. Oh and don't forget about the insider trading and general theft of what is supposed to be the public's money supply. In GOD we trust? More like, In SMOKE we trust. Eventually, the curtain will be revealed and the irrational belief of the wizard will be no more.
If you look at ONLY junk bonds (orange), which is what this idea is about, as opposed to other facets which the FED is able to "bail out" the economy, you can see that the market was beginning to signal in 2008 that investors should avoid risk. Yields were going up, bond prices were declining. An economy with such conditions where people save and preserve wealth is blasphemous behavior in the church of the FED and WILL NOT BE TOLERATED. Bonds were quickly bailed out over the next few years while rates were suppressed and the entire market was coerced into the FED's vision.
If you adjust the junk bond index in real terms and simply divide by the money supply (teal line), you can see that with the 2020 bailout, the current purchasing power of bonds has been eroded to the 2008 level, right at the point where people were beginning to save money. Other things have been bailed out as well via the money supply this time around, so we're certainly looking at a skewed metric here. But in junk bond terms, It looks like we would need even more stimulus to stop a deflationary spiral beyond what was seen in 2008-2010 if bond investors are looking at real M2 adjusted terms. The money supply ALWAYS speaks the truth, historically speaking.
Now, contrast this with the current outlook of the FED where they are soon going to be selling "assets" off their balance sheet at a maximum of about 90 billion per month. How are WE, the general public, supposed to believe that a deflationary spiral is avoidable if real bond valuations are already at a level where a bailout was "necessary" to these "wizards" in 2008, while at the same time, they haven't even begun offloading these "assets" which they have recently accumulated, which someone is suddenly supposed to want to buy at a record pace not seen before??
Maybe they will finally raise rates and will buy all junk bonds? I mean who else is buying junk bonds, seriously? If something has to be labelled as "high yield", we should probably be skeptical beyond the point of being able to be persuaded UNTIL the market speaks otherwise. But at the same time, they cannot raise rates very far, at least not to the point which is necessary or was necessary in 1980, for example.
Just something to think about.
In my opinion, there is NO WAY the M2 can ever be contracted, at least not by the amount the FED wants. You pretty much need exponential expansion forever. And at this point, why would anyone believe them? In 2018 they released a projection that their balance sheet would be down to 2T by 2022. Their credibility and foresight is awful. A randomized monte carlo simulation was more accurate than their predictions, so why should we believe in a delirious vision? As far as I'm concerned, until the FED lets their 7T bag of crap rot, we've got a communist monetary policy where the government owns a stake of everything. Just think of how many businesses are backed directly or indirectly by mortgage backed securities and junk bonds, which the FED has purchased using the wealth of the public. I couldn't think of a more pure definition of communism. Those "assets" were paid for with stolen wealth and these actions are a repellent to any free market economy or dynamics. In a free market, bankruptcy is allowed and malinvestment is left to crash and burn and is NOT ABLE to bring the rest of the economy down with it. We don't have that.
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How I got the values in the chart:
Pay no attention to the actual values in the chart other than M2. The other values are purely to make a side by side comparison that looks decent on a log scale chart.
520W(10 year) MA of M2 = 4845136
520W(10 year) MA of HYG = 87.68
M2 is in millions, HYG is not, but we can ignore this because we are adjusting for relative averages.
4845136 / 87.68 = 55259
Now we simply chart HYG*55259, and now HYG in 10 YR terms is charted relative to the 10 YR MA of the M2.
In order to chart HYG/WM2NS, I simply stuck a multiplier at the front, and added zeroes until it looked good on the chart.
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Thank you for reading! I really do appreciate your time and I hope my perspective was somehow useful to you. Don't forget to hedge your bets! :)
Fed total assets vs. TSLA (% change)November 2010 - November 2012
WALCL ~ +20%
TSLA ~ +100%
November 2012 - November 2015
WALCL ~ +60%
TSLA ~ +600%
November 2015 - November 2020
WALCL ~ +60%
TSLA ~ +600%
November 2020 -
WALCL ~ +24% (ATH)
TSLA ~ +240% (ATH)
...
Input 1
Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level
WALCL
Input 2
Tesla Motors, Inc
TSLA
Fed total assets vs. TSLA (2010-2022)Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level
WALCL/100000000
versus
Tesla Motors, Inc
TSLA/1000
Let the fed tapering beginBeautiful thing about TV is you can set alerts when events happen like fed tapering to begin.
One way Ticket TOTAL Assets expand 10X off prior Crisis while...No tickie, No laundry.
Simple really,.
Where has it left us, this historical Credit Cycle?
Here:
A collapse in Global Economic Activity.
The Highest ROC for Inflation in History.
The greatest unwind of Consumer Confidence in History.
The sharpest declines for Both M1/M2 Velocities in History.
The Lowest percentage of Employed Workers in History.
The Highest Homeless Population in History.
_____________________________________________________
Dissention @ the FED with ONE EXCEPTION - there was complete
and total agreement among the Fed BOG Voting Members and
Non-Voting Members - ASSET PRICES ARE EXTREMELY ELEVATED.
Simply read the Minutes - it's there in Black and White.
Carlo lays it all out, concerns surrounding VX Curve on Short End
of UST Curve, Asset VX, Asset Elevation, Inflation Target Remedy
and on and on it devolves.
They are engineering a Correction, period.
As Wave 4 Due South sets up, the Degenerate Gamblers and those
ignorant and unaware will be caught as the Tide is permitted to
go out for what will be the shortest Taper in recorded History.
A bluff, and then...
Well, that is frankly akin to asking a Shark what's for Dinner.
A renewed push by the Federal Reserve at unimaginable levels
of Shadow Banking Expansions.
