Thursday 12 March 2020

The cavalry have shown up

Well assuming they cut rates next week, buy the dip.

>$1.5Tn in repo to the primary dealers if the curve steepens is pretty much free money to them.

Jap and EU banks only bought $4Tn or so from the Treasury in the last 11 years and the Fed has just thrown over half of that at the Primary Dealers to buy those Treasuries and hold them with positive carry.

VIX is at 64, lets see where it is in a month, about 15%?

Remember 2007, the banks nearly went under in December and the Fed threw liqudiity at them, and some markets made all time highs in June 2008.

But I think the rally can be narrow and core assets only.

Trump wont be allowed a stimulus before the election.

And it will take a few months for the oil capex brick wall to ripple out.

Q3 will be cruicial to see if we are heading into a recession or not.

My guess is yes, but this Fed liqudiity pump will buy time for risk assets.

Short term we also need Corona virus scare to blow over as the temperatures warm up.

There is not much upside resistance until about 3000-3050...

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