😱 OH SH*T: Something JUST BROKE in the $11.9T Repo Market!

Over the past five days, banks have borrowed more than $80 billion from the Fed's Emergency Overnight Lending Facility. And to make matters worse, just yesterday, the Fed ended its inflation busting program they call Quantitative Tightening that's designed to drain liquidity out of the financial system. And on that same day, banks grabbed $26 billion in cash. And I want you to understand just how serious this is. Because bank reserves right now are down to a razor-thin $2.9 I know this sounds like a lot, but it's causing repo markets to seize up. And that $26 billion they grabbed yesterday, it's the second-highest spike since COVID. And today, they grabbed over $10 billion. What you're seeing in real-time is the plumbing of the financial system is clogged, liquidity is evaporating, and what's worse, the Fed has no answers. Because rate cuts and QT were supposed to fix things, and they're not. The risks are high because if liquidity seizes up, we're talking a spike in layoffs, a massive correction in the stock market, and a spike in interest rates. Stick with me because we're going to unpack what's going on deep inside the financial system and show you exactly what you need to do before it breaks. You may remember that silver trade we put back out to our CTA Timer Pro subscribers last Tuesday? It's now up 12.82% and heading even higher. If you want to start making big returns like that, grab those links in the description below and use the coupon code for your free 30-day trial. Stay tuned to the end of the show for more information. Now, I want you to see this chart because over the last 5 days, banks have grabbed over $80 billion in emergency cash from the Fed. And this morning, they were back again. And keep in mind, this was after quantitative tightening stopped. They still borrowed over $10 billion today. And I want you to understand again how serious this is because it's a sign that the financial system is running out of money and this should not be happening. Let's flash back to October. You may remember, the Fed cut rates by a quarter basis point and announced the end of QT for December 1st. And what was the reason behind QT? It was to drain hundreds of billions, trillions of dollars out of the financial system and it did it. The idea behind this was if there were fewer dollars chasing goods, the inflationary effects would be muted or even dissipate. But that didn't happen. In fact, inflation now is starting to head higher. And based on what we're seeing from all of these regional Fed surveys from the ISM and S&P Global, it's about to go up a whole lot more. And just like the next chart shows, we went from ample liquidity. When banks lend, stock prices rise and the economy keeps humming along. That means there's plenty of money in the financial system and now we're in a situation of scarce liquidity. It's slowing the economy. And this is causing the banks to tighten lending standards and hoard money. It's pushing the delinquency rate higher. It's putting upper pressure on interest rates. And if things persist, it's going to pull the plug on the stock market and send everything crashing. We're talking stocks, gold, crypto. I'm going to show you even why bonds could get hammered here. Now let's dive in because I want you to see that the biggest risk for the economy and markets right now is what's happening in the repo markets and the plumbing of the financial system. Because when liquidity goes, well, as you're about to see, everything unwinds. Now Goldman Sachs is already calling for the resumption of quantitative easing in January. But get this, they're not going to call it QE. You see, the Fed said there's this minimum number of bank reserves that the financial system needs. But here's a dirty little secret that the Fed will never admit out loud. There's no magic formula, no published number, no congressional mandate, and even better, there's just nothing about this number. It's just the Fed's feeling of what they think is right. And again, they literally make this up as they go. The problem is liquidity is getting tight. And right now the market's saying, we're not waiting for the Fed's feelings here to change their mind. Because this chart of reserves and depository institutions, check it out. That blue line, it crossed that green line. That's the $3 trillion threshold for minimum number of reserves. And again, it broke that psychological zone. And look what happened. Repo, it exploded. Banks started dashing for cash. And those that had money said, we don't want to lend it. And you can clearly see on the repo chart that back in October, banks started rushing for emergency funds, and they didn't stop until the Fed cut rates. But it didn't stop the bleeding. In fact, the problem is, it's going to continue to get worse month after month. Because the Fed's balance sheet, get this, it's not static. It just doesn't stay in a certain place. The Treasury, agency, mortgage-backed securities, well, they all have maturity dates. And that's to tune of about $20 billion per month. Meaning bank reserves are going to keep falling. But there's another problem. All the interest is a factor too. So this is why Goldman believes that the Fed's going to announce in their December meeting that they're going to begin something called reserve management purchases to the tune of $40 billion a month in tree bells. Now the goal, obviously, the Fed's going to tell you, look, we've got to bring reserves back up to $3 trillion. Things are getting a little light. And our target is going to be somewhere around, say, mid-2026. But hold on. If you're saying, wait a minute here, Steve, this is just QE, but they're calling it a different name. And it is. Now why, if you're the Fed, would you rebrand this thing? Because remember, back during the global financial crisis, what did the Fed convince the world? The QE? Well, it's a money printer. Of course, we know it doesn't. We know it's not money printing. But they said, look, it causes inflation. And they can't go back and admit that they were wrong without looking like clowns. Remember, they already kind of look like that. And right now, just think of the public response. The Fed comes out and says, look, we've got to do a bunch of QE. What is everybody going to assume? It means inflation is going to turn back up. Problem is, inflation already is turning back up. But what if I told you that by May, the Fed's going to be back doing full-blown QE no matter where inflation is at? Well, here's why. Let's take a look at that chart from earlier. See that in the green? That's excess liquidity. And the Fed has drained it down from $2.6 trillion to nothing. And right now, every dollar the Fed drains, it's going to hit bank reserve. So let's fast forward to April. It's about four months away. And what happens during tax season? Well, liquidity gets crushed. It's going to drop on average somewhere between $300 to $400 billion. And that's how we get to some chaos. We saw this happen back in 2019. It caused stocks to drop 10% in a month. But it could be a whole lot worse. And I'm going to show you why. Because this is just the beginning. When you start losing liquidity, well, a lot of other things start to go wrong. And in December, on the 19th, well, I'm going to show you why. The Bank of Japan is going to light a liquidity firestorm. It's going to blow up the biggest carry trade in history. What you're going to see is everyone's going to scramble for cash. And the banks, they're going to tighten up faster than you can imagine. Because the Bank of Japan is suddenly worried about inflation. They're seeing wage growth hitting. And that means rate hike odds for December 19th just exploded to under 60%, as you can see in this chart. And what that's done, it sent the long end of the JGB, the Japanese government bonds. That yield curve is soaring as traders are front running the BOJ. And you can't blame them. Because when central banks are hiking, well, you want to be short the bond market. Now, you're wondering, how can this torch stocks, gold and crypto, Steve, those things are great. And they're really immune. You just got to buy the dip. But it's simple. Let me explain what's going on here in Japan. It's something called the carry trade. Now, what happened here is investors would go out and they'd buy these zero yielding JGBs. Then they'd borrow against them for a negligible cost. This is effectively the freest money you can get in the financial system. You know what they did with that money? They took it and bought US equities. They bought gold, they bought crypto, and they bought a lot of it on leverage too. And this is why you see that every time JGB yields pop, Bitcoin drops. Because you got to sell the most liquid thing you've got. And what happens if that doesn't work? Then you see tech get hit and then gold. But they're not the only ones. Because right now, we're seeing all that leverage. It was fueled by cheap loans. And if the BOJ raises rates, and this is what the market's expecting right now, the short end of the curve where a lot of these loans are taking place, they're going to rise. And when that means the banks are going to trigger some margin calls, they're going to say, hey, we need some cash here. And the next thing you know, this is what causes that for selling. Investors are going to sell. Now, do you see why this all comes back to the repo market? Why this is one of the most important things in the financial system that nobody pays attention to? Because when liquidity dries up, those with money, they worry about getting it back, even on an overnight basis. And that's why banks are running the Fed's emergency window, because that's the only place to get cash. Now, here's the other part of the story. It's not just JGB yields that could soar. It's Treasury yields. Because even though the Fed's likely to come back and do QE, and there's going to be a shortage of T-bills, it doesn't mean we can't see this hammer the Treasury market. Because there's another space here that you're not seeing. It's hedge funds, and they're one of the biggest borrowers of treasuries on the planet. And guess what they use to get their money? Well, they go to the repo markets and borrow it. Repo markets are a key source of financing for a variety of hedge fund strategies, including the basis trade. It simply involves a hedge fund using leverage from the repo market to purchase a bond in order to profit from the small price difference between the Now, if you guessed right, what this means is the hedge fund, they're buying the longest treasuries they can get their hands on. And they're doing it with leverage, massive amounts of leverage. And so this is why when liquidity dries up, and we've seen this before, long rates jump. Because when you can't go to the repo market and borrow money, you've got to unwind your trades and fast. And when you trade with leverage, things come plunging straight down. So now you can see why when banks start to grab cash from the Fed, and the amount they take steadily increases, that it could set off a cascading unwind of not just stocks, but bonds, gold, and even crypto, plunging liquidity. My friends, it takes no prisoners, and it only leaves devastation in its wake. So where does this leave us? Well, the Fed is cornered. So you have to think by May 2026, and you can bet I would say this is a likely chance they're going to be full blown QE and they're not even going to apologize about it. We're talking 80 to 100 billion a month because anything less and the system breaks. But here's the good news. You don't have to be a victim. Now, right now you can lock in 4.6, 4.8% in T-bill ladders. You can lock in your money market funds while they last. But let's talk about your broad portfolio. Why have we been talking about cutting some of your tech positions? Because tech gets wiped out when liquidity drains. What do you want to do? Look to rotate some of those gains. We're talking some safe harbors like utilities, consumer staples. You want to buy gold. And here's the thing to keep in mind. If you're overweight in gold, you may want to hedge your downside risk. And you want to even consider money in cash. Remember the bond king, Jeff Gundlach, what did he just tell us? He said 20% of your portfolio in cash. Now, this wasn't a mistake because he sees what's going on. He knows exactly what's happening with these hedge funds and how they're borrowing on leverage in the repo market. He knows about the carry trade, and he sees what's going on in the repo space. He knows liquidity is drying up. And what he's suggesting here is if all this goes and you start to see those systematic machines start to sell and everything unwind, it's going to create a tremendous opportunity. And to do that, you got to have cash. Now, you may want to even consider taking your cash and being long the US dollar. Because remember, when everyone's scrambling for the dollar, you want to be the one that has it. And if you take these steps, you will just survive this liquidity crunch. You're going to come out richer than ever. Another step you can take is we nailed that call on silver up 12.8% in just five trading days. Now, how did we do this? How did we know that was a trade to be? We saw it show up on a report with an expected win rate of 63%, because we fully optimize and backtest every one of our signals. Now, how does our CTA Timer Pro report work? Very simple. We look at the broad equity, bond, currency, commodity markets each and every day. And what we're looking for is for when machines are going to come in with a huge buying wave, because we want to position our subscribers ahead of that, and then get them out before they sell. Now, what you don't know is these machines, they trade based on threshold levels. But we've gone through, we backtested them, we've optimized them, we know which of those thresholds are the biggest winners and put the most money in your pocket. And that's a big advantage of having a fully optimized strategy. Now, here's how easy it is. All you have to do is just log into our system. After you sign up for your 30-day free trial, you scroll down to the latest report. And what are you going to find? You're going to find all the updates on our trades, all of our new recommended trades, and all the optimized trades generated that day. So here's the thing, you get all the tradable signals, you get my opinion on the best trades, I give you risk control levels, a full tracking of all open trades and returns, a weekly update. And again, here's the best part, we're going to give you a 30-day free trial. So whether you're brand new to trading, you're an experienced trader, we're going to show you why our report is better. And it's one of the reasons right now, today, we're sitting on a 92% win rate with our open trades. It's incredible. We want you, Joyce, we want you to make money right alongside us. And with that, all you got to do, grab those links in the description below, use a coupon code for your free 30-day trial. With that, I'm Steve Ammeter. Thanks for watching. Thanks for being fans. Bye now.