Short Squeeze, Liquidity, Margin Debt and Deflation
Some things you CAN see coming, in life and certainly in finance. Quite a few things, actually. Once you understand we’re on a long term downward path, also both in life and in finance, and you’re not exclusively looking at short term gains, it all sort of falls into place. The only remaining issue then is that so many of you DO look at short term gains only. Thing is, there’s no way out of this thing but down, way down.
Yeah, stock markets went up quite a bit last week. Did that surprise you? If so, maybe you’re not in the right kind of game. You might be better off in Vegas. Better odds and all that. From where we’re sitting, amongst the entire crowd of its peers, this was a major flashing red alarm late last week, from Investment Research Dynamics:
September Liquidity Crisis Forced Fed Into Massive Reverse Repo Operation
Something occurred in the banking system in September that required a massive reverse repo operation in order to force the largest ever Treasury collateral injection into the repo market. Ordinarily the Fed might engage in routine reverse repos as a means of managing the Fed funds rate. However, as you can see from the graph below, there have been sudden spikes up in the amount of reverse repos that tend to correspond the some kind of crisis – the obvious one being the de facto collapse of the financial system in 2008. You can also see from this graph that the size of the “spike” occurrences in reverse repo operations has significantly increased since 2014 relative to the spike up in 2008. In fact, the latest two-week spike is by far the largest reverse repo operation on record.
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