TruthArchive.ai - Tweets Saved By @AllVentured

AllVentured
Posted - February 15, 2023 at 3:23 PM
Saved - February 17, 2023 at 7:27 AM
reSee.it AI Summary
The recent stock rally was fueled by liquidity injections from BOJ, PBOC, and TGA drawdowns. However, BOJ and TGA are tapped out, leaving PBOC as the wildcard. The debt ceiling in the US will be raised in August or September, leading to massive liquidity withdrawal and a liquidity cliff. The Fed may intervene, but the higher the markets go, the more violent the liquidity cliff will be. Be cautious and aware of what you're buying.

@AllVentured - AllThingsVentured

1/ The rally in stocks since October has been made possible by massive liquidity injections by the BOJ, PBOC, and TGA drawdowns. Let's look at these liquidity sources going forward: BOJ - This liquidity is tapped out. They can't buy more JGBs if they already own them all. https://t.co/umRym2VJWW

@AllVentured - AllThingsVentured

2/ TGA is the next easiest and totally calculable. ~$300B more of drawdowns (liquidity injections) due to debt ceiling then also tapped out. https://t.co/kporfv4Eou

@AllVentured - AllThingsVentured

3/ PBOC is the wildcard and likes to go against the grain. Could they continue this unprecedented pace of injection? Possibly. Are they likely to? I tend to agree with the mean reversionists: https://t.co/Odiehvjcwd

@AllVentured - AllThingsVentured

4/ What does this all mean for risk assets? Hard to say before a the debt ceiling gets raised in the US as the TGA drawdown is a massive injection and could offset a likely fall off in injections from BOJ and PBOC, but there is a bookend to this source: https://t.co/Uc3O6TNQ9k

@AllVentured - AllThingsVentured

5/ So come August or September (at the latest) the debt ceiling will get raised and the treasury will come out with massive issuance which is a massive liquidity withdrawal on top of the Feds $95B/m of QT. This is going to be a MAJOR problem for asset prices. #liquiditycliff

@AllVentured - AllThingsVentured

6/ This is a public service announcement to know what you are buying here. Yes, the tape looks amazing, and yes inflation has softened, but you are also buying an embedded assumption that the Fed cancels QT and comes in concurrent with the #liquiditycliff to monetize the debt.

@AllVentured - AllThingsVentured

7/ Otherwise we are going to get to test out what unprecedented liquidity drain does to asset prices. Will the FED and other central bankers eventually step in? ABSOLUTELY. Will they intervene before the crash in asset prices? You decide.

@AllVentured - AllThingsVentured

8/ But remember, price drives narratives. Especially if this market levitates higher, talking heads will make up all kinds of reasons to explain it when it's really just TGA liquidity. In this scenario, VIX drops lower, and the Fed has no cover to proactively pivot to QE.

@AllVentured - AllThingsVentured

9/ The higher markets go and the more participants are lulled into complacency and higher leverage by a falling VIX and the "new bull market" or even "new paradigm" narrative, the more violent the #liquiditycliff will be when it hits.

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