Author: Tim McPartland

As some of you may have read, or maybe I am the only one watching, the FED has announced giant sized REPO moves for the balance of the year.

I have been watching since September and the FED has done overnight repurchase agreements in the $50 to $75 billion area mostly–tossing in $15-$25 billion in 14 day repurchases agreements every 2 weeks.

Of course this is to provide liquidity to the banking system after a ‘blow out’ overnight lending rate spike of near 10% on September 15th.

Now we are 90 days later and the FED has announced they will be taking the the overnight operation to at least $150 billion. Yikes!!

I am of the thought now that this is all out on the table we will likely avert major issue—BUT there is a chance of a misstep–in particular in light of the fact that no one really seems to fully understand the market workings (certainly I don’t under stand it).

The point being is that we could see disruptions in the next 3 weeks–through the end of the year and no one should be surprised it something “breaks”.

The FED Statement of operations for the next month can be read here.

It is always disappointing to me to see the silliness of the marketplace in reaction to potential deals–such as trade deals.

We don’t do politics, at all, on the website, but for once I would like to see both stocks and bonds trade on fundamentals.

We have so-called ‘trade deals’ which move the markets and we have a FED that is being controlled by short term market movements. Then we have algorithms moving the market based on whatever key words are in the news

Early this morning we had a quiet market–both interest rates and stocks were off just a bit–nice and quiet just like we prefer. Then a tweet and a meeting at the Whitehouse on China sends market sharply higher. Stocks up 1% and interest rates up 7 basis points (9 basis points higher from earlier levels) on the day.

Now in the end it doesn’t matter too much to me–holding what I hold there isn’t much movement, but I do worry about movements in markets getting out of control–irrational exuberance–as these things eventually (who knows when) come home to roost with movements in the opposite direction.

Oh well I guess I should get used to it–it certainly seems like the new norm.