Nasdaq has risen by more than 2% in an all out green day as a new acronym enters the lexicon: Buy The Effing Pivot (BTFP).
The official one is called the bank term funding program (BTFP) by the Federal Reserve Banks, otherwise known as not-QE.
In explaining not-QE, that is giving out loans to commercial banks without considering losses in the collateral’s value, the chairman of the Federal Reserve Banks said it is not QE because their aim is not to lower borrowing rates.
The intention of launching quantitative easing through borrowing bonds was to lower their interest rates and thus the lending rates of commercial banks to get the liquidity going again, he said.
BTFP instead is loans, he said, and so it is not QE, but everyone else thinks it is because loans at the end of the day are basically money printing as that’s how fiat works, and loans that value your house at $1 million when the market says it is worth $100,000, is money printing on margins to potentially insolvent entities, in which case Fed won’t get their money back to make it taxpayer printing.
Thankfully we can see just how much they are printing, though delayed because this is the paper system and we have to trust them they are telling the truth because there have been no audits of the Fed and they don’t have a blockchain where we do the audits.
They lent out $300 billion last week. The data for how much they’ve lent since will be out later today at 4:30 PM EST as Fed releases its balance sheet when we can see just how much not-QE has been added.
The market may also be repricing a different sort of pivot. Powell said they expect interest rates to be at 5.1% at the end of the year if the economy grows – or doesn’t grow – as projected.
Interest rates are currently at 5%, so the rate hikes are over. Maybe they’ll increase it a bit more by 10 basis points, but the hike, hike, hike we have had for months on end now is in the past.
Powell also said no rate cuts this year, but they expect interest rates to be 4.3% next year, so rate cuts are coming, and even lower to 3% the year after.
As markets like to look forward, the big question is whether we have had the recession in the assets space, even though the economy is yet to have it and might well do soon.
Whether assets are not catapulting, but have been frontrunning, and so we have to consider what the situation will be in 9 months, not now, after the economy ends the whole recession, if it has one.
That’s the pricing in theory, that the potential for recession has been known and so stocks fell, but for months there has been a debate on when Fed will stop and them saying they will is new, something that might have not been priced in.
That’s one potential explanation for today’s moves with bitcoin’s rise to almost touch $29,000 again after dipping below $27,000 showing some strength as the crypto sits just below $30,000.
Some now expect it to hit $50,000, though maybe briefly, and some are even saying it might hit a new all time high – the latter being analysts at trading houses.
That would be very surprising, $50,000 wouldn’t, but bitcoin is back in the game and plenty are happy with just that.