Wall Street May Get $40 Billion Reprieve From Trump Regulators

Video commentary for September 17th 2019

Eoin Treacy’s view

A link to today’s video commentary is posted in the Subscriber’s Area. 

Some of the topics discusesd include: Fed had to intervene to provide liquidity in the report market, expansion of the balance sheet is no longer a choice, stock markets steady, oil pulls back, precious metals steady gold shares rally, China weak, Europe steady, UK mid caps break out, Pound firm, Dollar eases. 

Unhinged Money Markets Trigger Fed Action to Alleviate Stress

This article by Liz Capo McCormick and Alexandra Harris Bloomberg may be of interest to subscribers. Here is a section:

“There’s been a sea change in markets, and it’s one the Fed needed to respond to,” said Lou Crandall of Wrightson ICAP. “In the current market environment, there is just not enough elasticity in the repo market to handle the big seasonal swings of the banking system. The Fed needed to come in now and alleviate the immediate problem, while it is also working on long-term solutions.”

The Fed has considered introducing a new tool, an overnight repo facility, that could be utilized when needed to reduce pressure on key money market rates, but no decisions have been announced.

The New York Fed declined to comment on the events of this week.

Actions like the Fed took Tuesday were once commonplace, but stopped being so when the central bank expanded its balance sheet and started using a range of rates to implement its policy in the aftermath of Lehman Brothers’ 2008 collapse.

Securities eligible for collateral in the Fed operation include Treasuries, agency debt and mortgage-backed securities. In an overnight system repo, the Fed lends cash to primary dealers against Treasury securities or other collateral.

Eoin Treacy’s view

Bank balance sheets are not what they used to be. One of the primary results of the heavier regulations imposed on the sector since the financial crisis has been to cut the primary investment banks out of risk taking. That is impeding their ability to provide liquidity when the market needs it and is likely to result in the Federal Reserve intervening more often to assist.

Wall Street May Get $40 Billion Reprieve From Trump Regulators

This article by Jesse Hamilton for Bloomberg may be of interest to subscribers. Here is a section:

The margin demand, implemented in 2015, has tied up $39.4 billion, according to industry estimates. That’s prompted major swap dealers, such as Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc., to make the rule’s elimination a lobbying priority.

It would likely be months before regulators scrap the margin requirement. That’s because once the FDIC and other agencies issue their proposals, the public will have an opportunity to submit comments before a final rule could be put in place.

Republican lawmakers have supported banks on the issue. Some House Democrats have also backed the change, telling regulators in a June letter that they should allow lenders to free up the “large and increasing amount of unusable, locked-up collateral.”

Eoin Treacy’s view

In the aftermath of a crisis, regulations are tightening because of the vindictive wish to punish wrong doing but also to ensure the same mistakes are not repeated. However, the result is less risk taking. That does not have much of an effect in the early stages of a recovery because opportunities are plentiful. However, as an expansion matures it depends on the availability of ever more capital and credit to sustain itself. That leads to quite reasonable requests to relax strictures that are now deemed to be overly onerous. Leverage therefore increases, greater risks are taken and the trend persists for a while longer.

China Stocks Fall, Yuan Weakens as Central Bank Holds Loan Rate

This article from Bloomberg news may be of interest to subscribers. Here is a section:

China’s central bank drained funds from the financial system and kept the one-year rate on medium-term loans steady on Tuesday morning, a move analysts said shows it’s sticking with its prudent approach to stimulus. That’s even after data Monday signaled the economy slowed in August, with industrial output, retail sales and fixed-asset investment rising less than anticipated.

“Investors now realize the central bank won’t ease its monetary policy as aggressively,” Zhang Gang, a strategist with Central China Securities Co. “The market was due for a pullback after the Shanghai index climbed above 3,000-point level. Turnover failed to keep up.”

Eoin Treacy’s view

China’s government is more worried about a property bubble than a growth slowdown. it would be tempting to think they have reached the conclusion that massive money printing only helps to inflate asset prices and does not deliver quality growth which is capable of sustaining the economy during tough times. On the other hand perhaps they have an inflationary problem and don’t want to exacerbate it. 

Eoin’s personal portfolio precious metal trading position profit taken September 5th 2019

Eoin Treacy’s view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I’ll change the title to the date of publication of new details so you will know when the information was provided.

2019: The 50th year of The Chart Seminar

Eoin Treacy’s view

The London Philharmonic Orchestra is holding a concert in David’s memory on October 5th October at the Royal Festival Hall. There is a reception between 5.30 and 6.45 in the Foyle Pavilion, Level 3, Green Side and subscribers are well to join David’s family there for light refreshments. Following the reception, we will move to the Beecham Bar, Blue Side, Level 5 for a short talk by Tim Walker, Chairman of the LPO. 

If you wish to attend the concert as well, which includes a performance of Elgar’s Cello Concerto by the Young Musician of the Year, it begins at 7.30 and you may book tickets (£67) by telephone on 020 7840 4242 quoting the code Fuller Concert.

Since this is the 50th year of The Chart Seminar we will be conducting the event on October 3rd and 4th to coincide with the memorial on the Saturday.

In the meantime, if you have any questions, would like to attend, or have a suggestion for another venue please feel to reach out to Sarah at [email protected].  

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non-EU residents are not liable for VAT). Annual subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

Story by ProactiveInvestors