Jim’s Mailbox

Posted at 3:45 AM (CST) by & filed under Jim's Mailbox.

CIGA Kevin regarding liquidity tightness.

Bill

  1. Factors Affecting Reserve Balances of Depository Institutions

Still on track Fed sold off about $7B of Treasuries and $7B Mortgages in latest week ending January 2- basically on track at $60B per month.

  1. Factors Affecting Reserve Balances of Depository Institutions (continued)

Reverse Repo’s of $14B sterilized the QT by putting cash back into banking system albeit on a short term basis. IMO the reverse repos in the latest week may have saved the equity market through January 2, but that didn’t last long. Not hard to see that both a shortage of cash and shortage of good collateral are both causing liquidity issues and are feeding on each other.

1A. Memorandum Items

And Securities held in custody for foreign official and international accounts declined by $7B in the week. Can’t imagine why that would occur seeing how the US dollar is such a safe haven and undervalued and so loved by our allies and trading partners- sarcasm intended.

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Jim,

Currency wars, trade wars, hot wars! This is not good, especially in light of China’s recent saber rattling regarding sinking an aircraft carrier.

Dave

In Landmark Speech, Xi Threatens Violence Against Taiwan, Demands ‘Peaceful Reunification’
January 2, 2018

With trade talks between the US an China finally ramping up, reviving hopes that a deal might end a slump in global equity markets that has carried into the New Year, one would think ‘Taiwan’ would be the last word any investor wanted to hear. But we’ve been hearing it with an alarming frequency lately. From a belligerent Chinese admiral and from President Xi Jinping.

And in a Wednesday speech to commemorate the fortieth anniversary of a landmark shift in China’s Taiwan policy, President Xi offered a vision of the future relationship between China and Taiwan that blatantly contradicts what Taiwan wants for itself – which is, more autonomy, if not outright independence, as the ruling pro-independence party has repeatedly insisted.

Instead, Xi insisted during his speech that China reserves the right to use force to bring Taiwan to heel – but that peaceful “reunification” would be Beijing’s goal. Xi has made resolving the “Taiwan issue” a priority.

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Happy Birthday JB!!!

Bill