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Barton Profile picture
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12 May, 4 tweets, 1 min read
Hey Twitter, I am back, and SICO seems to be back too!

Analysis and projection here: fed.tips/outlook2021051…
I had to take more days off per doctor's orders last weekend. :( But largely recovered now.

There are a ton to write about with all the new data.

so expect daily notes (a blend of premium and free articles) on fed.tips in the next couple of weeks.
The point of this chart is that we are in a $460Bn-forced-feeding period (ending tomorrow), which is finally causing "indigestion" problems and forced deleveraging (it seems).
and bipolar whipsaws after tomorrow. potentially amazing couple of weeks for swing trades.

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More from @Barton_options

Barton Profile picture
7 May
Details emerged from Treasury's refunding meeting this week has been quite surprising and inconsistent. The implication for stonks for the next 4-5 months could be surprising as well.

Treasury declared its TGA target for July 31st at $450Bn, while slowing down T-bill reduction.
Plugging in the current USG spending model along with EOQ TGA target of $800Bn, I ended up with this:

Not much spending until July when TGA nose-dives from $950Bn to $450Bn in 4 weeks.
A few things have happened in the past 2 weeks.
1. Tax receipts have been very strong (the economy is almost overheating from payroll data)
2. Stimulus spending has dropped to almost nothing.
3. Treasury's TGA reduction plan will have to change course in July as a result
Read 5 tweets
Barton Profile picture
22 Apr
Saw this chart making rounds on Twitter.

The biggest flaw here is that if one follows the conservative approach evident in claiming all experimental antivirals are ineffective, tylenol (paracetamol) would be equally counter-productive, since it depletes glutathione
Glutathione is need in lung for uninfected cells to survive oxidative stress induced by hyperactive immune response, and for sputum clearance

NAC is essential for glutathione synthesis.
Recently a surgical technician died of suspected tylenol overdose after taking the 2nd dose of covid vaccines.

The risk of an acute covid patient overdosing on tylenol should not be neglected

Read 5 tweets
Barton Profile picture
20 Apr
Overnight Reverse Repo at NY Fed is taking off.

Ignoring the window-dressing spike on 3/31, this sustained increase signals that the offloading of bank reserves from big banks to government money market funds has finally started.
This is a short-term relief valve for their balance sheet pressure.

Last time this happened, QE stopped 10 months after (Oct 2014)
This time, Fed may need to continue on at least with some twisting (buying 10Y-30Y bonds, while selling Tbills) for yield control purposes, as net interest expense would skyrocket otherwise.

Pressure on bank's balance sheet is likely to continue on at least into 2022.
Read 4 tweets
Barton Profile picture
16 Apr
The weekly liquidity outlook has just been sent!

No change in my positions/outlook.

The interesting part is a longer-range forecast, 6 weeks all the way into the end of May. something on the horizon that you should know about.

fed.tips/outlook2021041…
Also discussed is the latest bank B/S outlook including data from MS this morning.

It's a very long update for a slow week, and thus the delay.
Now that I am back in town with a lot more data, time to finish up the SICO series and review what happened in Feb/March. Stay tuned for many articles to be released this weekend on fed.tips.
Read 4 tweets
Barton Profile picture
15 Apr
Done catching up on the data after the trip. Some data dump tonight and tomorrow.

First up, from the Q1 earning data of US GSIBs, they are running closer to SLR limit than they admit, but they are still room in their balance sheet. So they will extend cheap leverage for fees.
And freak out later (2H of Q2)..
GS for example will prefer debt underwriting (leveraged finance) with a 60+% ROE to reserves with 2% ROE at best (20x 10bps IOR).

But we are at the beginning of a new quarter, so they will make money first (extending leverage), and worry about the balance sheet later.
Read 4 tweets
Barton Profile picture
24 Mar
1/ Stimulus Indigestion & Crowding-out: 1. Big picture

This is the total balance sheet size of bankcos in the US.

The big jump in March 2020 ($18Tn to $19.5Tn) forced Fed to suspend SLR. corporate bonds among other things were at risk to be crowded out, if no action were taken
2/ Now we are at $21Tn on 3/10/2021 (pre-stimulus check), this year we would have the following to be added to banks' balance sheet
1. $1Tn TGA balance
2. $3Tn deficit (pre-infrastructure bill)
3. $1Tn from infrastructure bill

Banks need to raise $250Bn to accommodate that.
3/ Context: 2019 they did about $125Bn buyback.

Now they need to raise 2x of that. so understandably, they are not happy.

let's talk about the indigestion next time
Read 7 tweets

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