Short Squeeze, Liquidity, Margin Debt and Deflation

l linked to Lee Adler’s explaination of the Feds reverse repo operation last week but it needs repeating.

“There has been so much misinformation and gnashing of teeth in the financial blogosphere about the spike in the Fed’s RRPs outstanding last week, that I must set the record straight. The RRP spike is a non-event.

The spike in RRPs is not evidence of a mushrooming financial catastrophe and crisis under way. It’s not that there isn’t a mushrooming financial crisis under way. There is. It’s just that last week’s RRP spike has absolutely nothing to do with it. It has to do with a Fed stupid parlor trick and the temporary shortage of short term T-bills along with the resulting excess of cash.”

https://wallstreetexaminer.com/wp-content/uploads/2015/10/Capture1.png

Those spikes have been happening at the end of quarters. It’s a stupid trick to help banks dress up their balance sheets. It was exaggerated last month because of one time factors. The number crashed on Oct. 1st.

The Fed’s Stupid Parlor Trick Silly Putty Reverse Repo Game

One heck of a bearish article, and most difficult to ignore.

Found it sobering and it caused me to do some lightening up.

There are some facts you just cannot ignore. The repos are beyond me as to meaning, but that margin debt chart is clear, concise, and most alarming.

Time to get out of Dodge me thinks.

Thanks Ilargi, too much vodka in the punch bowl, someone has to sober us up.