Three and a half days trading this week, which may be a good thing since the Dow index is down 2.3% since the Fed raised a quarter point. Futures on Monday morning suggest a dead-cat bounce of 100 points, but let’s see where it closes as many trading desks this week are mostly empty chairs.
On last Thursday and Friday the Fed drained $143B in the reverse repo market, to get the Fed Funds Rate to 0.20%. The Fed wants to see the effective rate at 0.3% or so.
In the reverse repo market the Fed is exchanging assets (Treasuries bills and notes) for the bank’s cash and paying interest — 0.25% — on that to the banks. This is how the liquidity drain is accomplished.
Yellen & Co expect to sop up close to a trillion dollars in the next few months off the banks balance sheets and place it at the Fed where it will collect interest.
By the way, did you notice that within minutes of the Fed’s announcement Wednesday, banks nationwide raised rates on loans for borrowers. But the deposit rates given to savers have not adjusted to higher rates after the increase. It’s like gas prices, they fall very slowly, but rise very quickly.
But what should that matter, the new “Star Wars” movie made $238M over its first weekend.
This is just a quick hit for now. I’m intrigued by copper prices. They are down more than 40% over the last three years. China’s building slowdown is the primary cause, but there are other factors as well. It’s trading Monday at $2.12 per a futures contract at the Comex in Chicago.
I am hearing that there will be a new application for copper that will make the industrial metal climb over the next decade. I need to look into this some more and see if there is a better play than buying metal contracts. Stay tuned.