Monday, February 5, 2018

Is the Plunge Protection Team Ready to Step In? If So, It's Unlikely They Will Be Able to Step Back Out!

As futures were crashing in after market trading, the question of who will step in to turn the market around should be pretty obvious.  I'm betting on a buyer with unlimited access to new funds and a buyer unconcerned with profit motive.  That the PPT or Plunge Protection Team would be deployed soon seems pretty likely. 

The big problem with the PPT buying here is that with all the money creation engines now going in reverse (hiking interest rates, QE unwind, minimal relative deficit spending as a % of GDP coupled with record leverage and minimal savings)...if the PPT steps in here...there is unlikely to be anyone for the PPT to roll these "assets" over to.  The PPT will essentially own the market and be the market unless and/or until the spigots of money creation currently going in reverse are turned back into the "on" mode.

I explain why the market is tanking HERE...and that without a wholesale turnaround by the federal government but particularly the Federal Reserve...the Fed will be "the market" and "the market" will essentially cease to have any meaningful function.

Of course, there is a caveat...The $2+ trillion in digitally conjured QE excess bank reserves and the structure of IOER's.  If the Fed suddenly makes changes here ($ caps, interest rate caps, etc.) to begin flushing out this money, this would at least temporarily be a game changer.