Why Did The Fed Inject Banks With A Record Amount Of "Other" Cash In The Past Week?

For all its obscurity, the Fed's balance sheet is relatively simple: on the right there are the liabilities such as currency in circulation (which is relatively flat at around $1.1 trillion but rising slowly (for now) every week), and excess reserves, at $1.5 trillion, or the money that is "parked" with banks and is the topic of so much consternation: will it ever spill out into the broader economy, won't it, and if not why not, and if yes, will it cause hyperinflation, and other such tangential ruminations. Then on the left we have the assets, or the "stuff" that backs the currency in circulation and excess reserves, such as Treasurys and MBS, which total $2.6 trillion, and which are the primary variable in every Large Scale Asset Purchase episode also known as Quantitative Easing: should the Fed "print", or said otherwise, "purchase" assets, then the excess reserve number goes up first, with a hope that it will slowly spill over into currency in circulation and other broader monetary aggregates. Lastly, there is also the Fed's capital account or "shareholder equity" for purists, but since the Fed can never in theory be undercapitalized by conventional definitions, this is merely a placeholder. Another broad way of looking at the Fed's assets is "factors that supply reserve funds" or "source of cash", and liabilities as "factors that absorb reserve funds" which is, logically, "use of cash." The key assets and liabilities noted above are the major components of the "flow" - they move glacially up and down, and are priced in well in advance of such moves. It is the marginal, or far small number that matter, and that fluctuate materially from week to week, that are not priced in, and are thus market moving. One such curious liability which we pointed out recently is the Fed's reverse repo agreements with foreign banks: in the week following the MF Global bankruptcy these soared to a record $124.5 billion. Basically, foreign banks scrambled to procure a record amount of US Dollars while repoing Treasurys and who knows what else with the Fed, an indication that other conventional liquidity conduits had frozen in the days following the Halloween MF massacre. Since then the Fed's Reverse Repo balance has moderated to more normal levels as Treasurys have gone out of repo with the Fed. Yet something more troubling has just been spotted. In today's one-day delayed issue of the Fed's H.4.1, literally the very last number on the very last subpage in the weekly update reveals something quite disturbing. Namely the Fed's "other" non-reserve based factors absorbing liquidity. And specifically, the actual number, which rose by an unprecedented $88 billion in one week to an all time high of $115 billion for the week ended November 23! We wonder: in this day and age of trillions in fungible excess reserves, and discount window stigmata, just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?

Despite inflation, Europe and U.S. will monetize debt, Davies tells KWN

Weekly Bull/Bear Recap: Thanksgiving Edition, 2011

Risk markets are losing their patience.  The Eurozone situation is approaching a major climax.  This is by far the most important story to follow in the coming days and weeks.  U.S. Economic data has been quite encouraging and the economy remains muddling along.  If Europe took care of business quickly, global stock markets would rally sharply.  The S&P 500 could possibly make a run at the bull market highs. Unfortunately, there is a major ongoing political crisis in the region.  There are 3 options. Still, a Eurozone blowup would undoubtably sink the U.S. recovery.  The ball's in Europe's court and they need to take action.  If they act now, it may still be on time to avert a Chinese hard-landing.  The bulls would end up as winners and risk assets would make a comeback.  It has really all come down to this binary variable in the short-term.  Government officials wanted Globalization, well they've got it.

Presenting The Latest Hedge Fund Hotel: These Are The Most Beloved Stocks By Hedge Funds At September 30

Every quarter, Goldman's David Kostin conveniently compiles a list of the 50 stock that "matter the most" to hedge funds, which is simply a polite way to define the "hedge fund hotel", or the companies which are expected to generate the most alpha. As the name implies these are the names that more so than the S&P 500, or the Nasdaq, determine the fate of Wall Street's richest, because while bankers may comprise the 0.1%, hedge funders constitute the 0.0001%. Why is this list significant? Because just like gold has a liquidation threat associated to it each and every day as it is the item to be sold when the margin calls start, at some point even the gold runs out, and funds will be forced to sell their paper winners, the bulk of which can be found in the top ten places on the list below. Which is why, like last quarter, we caution anyone still long AAPL, GOOG and MSFT. When the trapdoor opens, it is the top 3 stocks on this list that will get hit the most as those who were first, become last.

Guest Post: Are There Any Disadvantages To A Second Passport?

The advantages of having a second passport are extraordinary– more freedom, more opportunity, more options; most of all, it’s a great insurance policy against sovereign calamity. Most North Americans and Western Europeans are blind to these advantages. They don’t understand why they’d ever need another passport because they already live in the pinnacle of civilization… or so they think. Russians, Chinese, Argentines… these sorts of folks have personally experienced the ramrod fist of government. And they’re not taking chances. Slowly, the developed West will begin to understand that their home government is their greatest threat. Unfortunately most of the second passport opportunities will be closed by then. To address ‘disadvantages’, there may be some depending on the country. For example, if you obtain US citizenship as your second passport, you’re signing up for taxation on your worldwide income. Congratulations.

Jim’s Mailbox

November 25, 2011, at 1:53 pm
by Jim Sinclair 

Jim,

This is probably going to end routing some USD from trade with Canada / Australia.
CIGA Ro


China allows yuan trading with loonie Reuters  Nov 24, 2011 – 9:36 AM ET
By Lu Jianxin and Jacqueline Wong
SHANGHAI — China’s domestic foreign exchange market announced on Thursday that it would launch trading of the yuan against the Australian dollar and Canadian dollar next Monday, the latest currency pairs to be introduced as part of Beijing’s efforts to promote the use of its currency.
The announcement by the China Foreign Exchange Trade System (CFETS) confirmed a Reuters’ report earlier this week based on foreign bank trading sources.
The move is part of Beijing’s efforts to expand the use of the Chinese currency for trade and investment, as a way of reducing reliance on the dollar and thereby simplifying the settlement of trade in everything from energy to manufactured goods.
Traders said China needed to add direct yuan trading against the Aussie because of increasing deals between China and Australia, in particular, in the mining sector.
Adding the Canadian dollar appeared to be a move to acknowledge the importance of one of the Group of Seven economies as well as being part of China’s efforts to gradually have trading in all major currencies versus the yuan, traders said.
More…

Roubini criticizes Rickards' book without bothering to read it

Chavez says Venezuela's first repatriated gold arrives today

 

 

Crowds greet Venezuela's gold as it begins trickling home

 

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