RRP and IORB = Billions/Month in Interest

MEGACAPS continue to climb

With $5.3 Trillion dollars gaining interest each day with the FRBs RRP and IORB programs it is safe to say that this stealth QE, which is done via RAISING RATES is now the defacto underlying pretenses for the largest consolidated spread trade ever. First let’s quantify this amount shall we.

The current RRP rate is 5.05% and $2.2T are taking advantage of that, so that is:

$304.3 Mn/day, $9.25 Bn/mth which is equal to $111.1 Bn/yr.

As far as IORB that is 5.15% on $3.1T so that is

$437.4 Mn/day, $13.3 Bn/mth which is equal to $159.7 Bn/yr.

With both programs, the levered investment community with ZERO RISK mind you is getting paid from the Federal Reserve a whopping:

$741.7 Million dollars every single day

$22.55 Billion dollars every single month

$270.8 Billion dollars every year!

*This is how you mask quantitative easing, this is how you destroy organic economics and this is how you devise the most comprehensive and distinct economic wealth transfer out of the majorities hands and into a very select few of oligarchs of economic equity empowerment.

This is why the current interest rate hike regime is not to combat overall inflation, but rather devised to continue stealth QE and levered zero risk, excessive risk taking and asset price appreciation.

Everyone seems to think that inflation is running high and the Federal Reserve needs to continue to raise rates to combat it. NO, we do not care about PCE any longer, rather Magnelibra is proposing that the FRB is raising rates to increase inflation of the assets that it has continued to prop up year after year, decade after decade all the while turning economics firmly upside down, from a multiple distributive profile to a more heavily right fat tailed one dominated by wealth inequality firmly in favor of the top 1%. This is the standard Marx model whereby Capitalism moves to Socialism…this is how you do it.

We see so many traditional economists, talking heads in media claiming that the central banks need to hike, hike, hike to stop this incessant inflation, when in reality, the FRB should be moving in the other direction and it should be drastically reducing rates and simultaneously reducing its balance sheet. It is theoretically doing the latter but at a miniscule pace at best.

In reality the FRB should move to a 50bp per meeting cut and move the balance sheet reduction pace to $125Bn per month till we get to $6 trillion or less in overall FRB assets.

The complacency at the Federal Reserve has led the 0.1% crowd to put on the largest ever spread trade we have seen and it is becoming more obvious and selfulfilling by the day…this trade is simple, LONG the top 8 MEGACAPS and short the SPY, the RTY, US Treasuries, the Yen and to some extent the Yuan. You can add short SPY puts to this mix and long NQ calls if you want, but basically this is the set up.

If the FRB wants runaway asset inflation to continue, which they might, then we shall see either a 25bp hike in June and July or a pause at best if they are beginning to see what we see. When reality sets in and this trade gets even that more obvious and the Nasdaq is >$16k then we may see the real pivot as the FRB cuts maybe 100bp initially.

Once this point comes, you will then see the unwind, the massive convexity bid in US Treasuries and a complete reversal of the biggest bubble in economic history!

Until then we are going to track this MEGACAP phenomenon, bring it to you daily to prove that this is our new reality, blame it on AI all you want, but this is firmly in the hands of the non zero sum playing Federal Reserve who is knowingly and willingly back stopping the 1% by handing out $270.8 Billion dollars a year in interest, risk free!

So when you are scratching your head and can’t figure out how you missed the boat or how this is overvalued, you know the truth, value is subjective and your misguided perception does not change the reality of how our monetary system works!

Here is the tracker for yesterday and its even up more so today, which we will post later this weekend! Enjoy yourselves, share this post, it is important others know what is going on and when the pause finally comes and the rate cuts commence, you can rest assure we will tell you and then when it pops this bubble, you can bet the Nasdaq will be sawed in half or more from its pinnacle, it happened in 2000, it happened in 2009 and it will happen again! History is the proxy and one cannot change that willingly.

Happy Memorial Day and we dedicate this note to all our veterans who have so selflessly given their lives to protect a vision of our forefathers long ago, a vision of ideals, morals and ideals that are not simply given but earned, that must be continually fought for and for that we are eternally grateful. Not everyone has the conviction of fighting for what they believe in, for risking their life for the greater good, but we are certainly glad that those that have come and gone before us had the courage to protect what so many simply take for granted. We do not take anything for granted, we thank God for every single day that we have and you should too.

DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of, or from the author Michael Agne owner of Magnelibra Capital Advisors. Magnelibra the CTA and its Global Futures Benchmark Program may hold long and or short positions in the various futures and markets that Magnelibra covers. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, we make no warranty, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed.

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