The forum is not allowing comments to your other link.......nothing you did wrong and wonderful topic.
Can you please restart that conversation?
Fed starting a trend??
Started by wglassfo - June 20, 2020, 10:46 a.m.
This week the Fed reduced it's balance sheet
Does the Fed think the stk market is now healthy enough that the Fed can start to reduce it's balance sheet
Or is this just a one off week and nothing like a Fed balance sheet trend
One wonders if the Fed plans to continue increasing it's balance sheet to infinity. That would seem impossible
Thus I think this may be the start of a trend
Small beginning but a trend
I guess I am wondering if the Fed might reduce it's balance sheet starting some time between now and election day
Does Powell want to be responsible for helping to re-elect Trump
I know he can't perform miracles but if the stk market isn't strong that is tough sledding for Trump
If the Fed even keeps the balance sheet the same this removes the up side pressure from robin hood traders, feeding at the trough of Fed liquidity. I think Fed liquidity has stayed the same the last few days, but then the Fed/treasury has to sell bonds so I am not sure what is happening, except stk liquidity does not seem to increase [I could be wrong as there is conflicting information, or I don't understand one from another].
If robin hood traders are close to maxed out to the upside, buying dips as this has proven profitable before, then robin hood traders will continue to buy the dips
But all it takes is a mistake in buying pricey stk and then get caught holding the bag, so to speak. As margin calls equal or exceed portfolio value then liquidation can happen really fast and down goes the market, if enough get caught holding the bag. Nothing changed except the greater fool theory caught robin hood traders in a down market with out enough margin
As we now know robin hood traders have been a large segment of the buying of stks, but these same traders may not under stand the down side risk, as one trader committed suicide, leaving a note that he did not understand what he was trading.
This is all speculation and this week saw much net buying but does some body see a trend happening in the near future, by foreign investment. Small but possible loss of confidence in market values
Personally I find it hard to think the Fed will back stop the market from now until the election
Some thing usually happens