Mayday -- Arthur Hayes
Arthur goes over his thought process of what the next quarter will look like from a macro liquidity standpoint.
QT Taper = QE
The government can’t implement QE with explicit money printing (people get mad)
This time around, they have chosen to slow down their QT program by reducing the monthly rate of QT from 95 to 60B
This is effectively adding 35B of monthly liquidity into the system
“‘High rates, which require the Fed and US Treasury to hand out interest payment stimmies to rich folks, coupled with reduction in QT, are even more stimulative.”
US Treasury QRA
QRA is a guide to quantify the quantity + type of debt necessary to fund the gov
Arthur asks + answers the following questions:
Would Yellen be borrowing more or less than last quarter and why?
243B is expected to be borrowed during Q2 (which is 41B higher than Jan 2024)
More treasury supply to hit the market (meaning higher rates) which could aggravate the bond market
What is maturity profile of debt to be issued?
Debt will skew towards short term (long term would be too detrimental for banks)
More t-bills will drain the reverse repo (RRP), ultimately adding more liquidity
RRP is a program where the Fed sells treasuries and buys them back later. If the gov is issuing t-bills there’s an increased supply (if there’s a relatively fixed demand for debt, there will be less participation in the RRP, therefore “draining” it)
What would be the target TGA balance?
TGA target balance is 850B by end of Sept
Currently TGA is at 941B so there will be roughly 90B of liquidity to spill
The conclusion is:
There should be a mild amount of positive dollar liquidity (not as powerful as the Nov ‘23 up only price action)
Republic First Bank
Fulton Bank agreed to purchase Republic First (after their bankruptcy) if and only if the FDIC helped
FDIC gave Fulton 667M to make all Republic first holders whole
Why is the insurance fund being used for ALL deposits when some deposits weren’t actually insured?
If this wasn’t the case, we would see bank runs for any non too big to fail bank
This is a way to guarantee deposits (6.7T of uninsured deposits)
FDIC doesn’t actually have 6.7T which means $$ printing if necessary
Buy in May and go away
All these stealth QE methods will dampen any downside volatility
Crypto probably wont go up immediately but should chop then being a grind up (through the summer months)
Arthur is bidding, and likes Solana + dog coins + pendle (DCA through May)
Arthur’s specific predictions
