The new Bank Term Funding Program is likely to expand Fed's balance sheet by $100-200Bn in short order. This is effectively a one-shot QE program that will be wound down in one year.

This sudden injection of liquidity is likely to be very positive for stonks in the short term. And its addition will make the trajectory of QT very interesting in the next few weeks. Most likely QT will continue, and the Fed could potentially continue to hike rates after the market stabilizes.

Fed is going to meet on Monday 1130am to decide on any emergency measure on their discount window (emergency lending facility to commercial banks)
federalreserve.gov/aboutthefed/bo… They probably need to do a little more than just tweaking the discount window, since $SIVB collapse is getting close to the scale of Bear Stearns, when it collapsed during the week of March 14 2008.

When BSC collapsed, it had $11Bn of equity supporting $395Bn in assets.

Covid lockdown in Shanghai is going into its 5th week, but the case count is still climbing almost exponentially.

Chinese vaccines are working (icu admission and death numbers near 0), but it has also made early detection extremely hard. Political rhetoric is starting to get in the way for the government to accurately identify and rectify what has NOT been working in this covid wave in Shanghai.

Lockdown is likely to continue for another 2-3 weeks.

Some self-terminating QT coming.

1. a 3-month period to ramp up from 0 to $60Bn/m UST+$35Bn/m MBS. 2. monthly MBS roll-off will be less than $35Bn very soon. (only $38Bn when 30Y rate was still <5%) So we may never hit the MBS monthly cap any way. So a 2nd shoe will drop when the Fed releases the plan of MBS sales in Sept/Oct?

An example to illustrate the extent of real-estate overweighting for a typical Chinese city resident, and why Chinese government is trying to pull off a soft-landing for their property market:

some random 30yo in Shanghai whined about her "poor" life on Sept 5,2021. The rough translation: her family owns 5 condos in Shanghai: 4 paid off, 1 with a mortgage. her parents live in 2, and 3 are rented out to pay for the mortgage. Her husband's family owns 3 condos in Shanghai, all paid off.

8 properties are worth ¥100MM in total

1/ Evergrande "crisis": a controlled demolition of a toxic asset producer.

would there be contagion or not? probably not 2/ What is evergrande? It's a highly leveraged property developer, that also moonlights as a commercial bank (Shengjing Bank), a private equity firm running a bunch of fake buzzword companies, and a quasi-investment bank issuing wealth-management products.

What I am doing to deal with covid (esp. Delta)?

1. Booster shot (mid-july)

Antibody level increased by 20x at least. 2. Run Antigen tests if infection suspected.

Do we need a booster shot of COVID vaccine every year for the rest of our life?

Probably not. (it is physically impossible to have 4-year data for a virus emerged 1.5 year ago, but I can make an educated guess). A few considerations:

Vaccines on a 0-1-6 month schedule in theory generate much longer-lasting immunity than the same one on 0-1 month schedule.

Extrapolating from common-cold beta-coronaviruses, it takes 2 years for them to genetically drift into immune escape.

There is a black swan event no one is discussing yet.

Extrapolating from the Israeli data, Joe Biden's covid antibody level is likely to dip below protection threshold pretty soon.

He got his first shot on Dec 21st. He is 78 years old (diminishing B cell and T cell activity) If they don't monitor his antibody titer level (cdc said no), and if they are not being proactive in administrating him with a booster shot soon, his risk of getting sick with covid will be growing exponentially in a month or two.

1/ Paycheck Protection Grants - stuff you wish you don't know.

Right now, treasury is giving out $3-4Bn a day(!) in SBA PPP grants, free money for "small" business.

"" used, because Mnuchin allowed some mega churches to be paid via SBA. payment amount has grown since.... 2/ so not sure who qualifies as small business any more.

so much free money is given out right now that Fiscal year to date SBA spending is the 2nd *largest expenditure* category (only behind social security).

1/ RRP analysis that you won't get elsewhere

EOQ is the window dressing time for EU/Japanese banks, because how their Basal III compliance is put in place.

End-of-quarter balance-sheet composition very important for GSIBs in those areas. 2/ They don't want to hold bank reserve at EOQ, so the fastest way is to quit doing Repos (taking in bank reserve and lend out UST/MBS etc)

EU/Japanese Banks do a lot of repos with money-market funds. And they will stop on 3/31, 6/30, 9/30 and 12/31 every quarter, for ONE day.

1/ Talked with a CVS minute-clinic nurse practitioner at Austin today.

She mentioned that lately nearly than 50% of the COVID positive tests are coming from fully-vaccinated folks (asymptomatic or mildly symptomatic, e.g. a sore throat), who are accompanying a sick relative. 2/ The underlying dynamic is potentially that one unvaccinated person gets COVID, and then turns every vaccinated persons in the household asymptomatic spreaders for a couple of days.

Was today THE LOTTO day of the year? Some of the stuff I noticed.

Best gap open lotto: NKE, 40 bagger before 845am.
Best intraday lotto: EXPR, 100 bagger at noon time
Best HLOD lotto: SPCE, 190 bagger (if bot near the close yesterday) at expiration.

1/ CBDC vs crypto = commercial banking system vs. shadowing banking system.

There are two somewhat decoupled bank systems, where money/credit creation are somewhat independent. 2/ We have the commercial banks that issue loans to household, business & government

money creation is mostly done via term loans, and its supply affects consumer price inflation in goods & services.

CBDC is in this realm.

Thursdays will be the day of the week to see the biggest rise in RRP balance.

We are going to see $25+Bn increase today. Wait for it. This trend should continue into the week of June 29th, when Tuesdays would have a chance to exceed Thursdays (according to Treasury's current pattern).

Bot 2-year worth of fish oil today at Costco to hedge against the Japanese release of Tritium-rich Fukushima waste water into the Pacific.

Data and reasoning in a blog post later.. fish oil in the shop today is probably made 2-3 months ago from salmons caught 4-5 months ago... so it's still relatively safe.

after 2-3 years, the released tritium should be spread over the world, either being diluted enough to be safe, and/or there is nowhere to hide anyway

$AMC high so far was near $73 because that was where the highest strike was this morning. if all the calls were ITM, there is nothing left to squeeze.

All that is left is to take profits.

2020 SOMA annual report is worth the wait!!!

so good These people's productivity increased by 200% once they started to work from home . 🤣

70% chance that we are going to see another wave of COVID in parts of US in mid June through late July.

1. we are importing the Indian variant at full speed.
5 direct flights a day are still operating (4x UAL: DEL-EWR/SFO/ORD and BOM-EWR; 1x AIC: DEL-EWR) The "travel ban" only applies to non-US residents.

Even newly admitted Indian students seem to be waived from the ban:

timesofindia.indiatimes.com/world/us/quali…

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.

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.