Central Banks = Trading Derivatives At The CME?

Headlines:
It Sure Seems Like it.

Why Else Produce A Specific Pricing Sheet?

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As if Printing Money, and Stimulating the Global Economy at the rate of almost 40% of Global GDP in Calendar ’16, was not satisfying enough…

GLOBAL CENTRAL BANKS = RECKLESS & UNCHECKED

…apparently some of the Centrally Printed Currencies are either being LEVERED or HEDGED [presumes existing positions] at the CME [Chicago Mercantile Exchange]…into a diverse group of DERIVATIVES including:

1. Agriculture Futures
2. Foreign Exchange Futures
3. Equity Options +Futures
4. Eurodollar Options + Futures
5. Treasury Futures
6. Interest Rate Swaps
7. Energy Contracts
8. Metals Futures

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The CME’s Central Bank Incentive Program [CBIP] also allows for exceptional trading discounts…https://www.cmegroup.com/company/membership/files/CBIPFAQ.pdf…as detailed in their Jan ’17 Pricing Sheet.

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Many [if not most] Of These Products = Not Typically Associated With Central Banks.

The U.S. Federal Reserve’s most recently published, BUT NOT AUDITED AND NOT WISHING TO BE AUDITED, Balance Sheet [click below] demonstrates:

So If Not The Fed…Then Which Foreign Central Banks Are Actually Trading Equity Index Options + Futures at the CME?

GLOBAL CENTRAL BANKS = RECKLESS & UNCHECKED

Headlines:
No Palatable Exit Strategy For Bloated Central Bank Balance Sheets After Epic Money Printing/Asset Acquisition Binge.

Allowing Bond Holdings To Simply Mature = Inevitable Upward Influence On Interest Rates, Ceteris Paribus, As Biggest Buyer Exits Market…While Public/Private Debt Diet = Steady/Up.

New/Private Buyers Will Be More Price Sensitive [require higher coupons/yields] Than Price Insensitive/Intentionally Overpaying [to optimally depress interest rates] Central Banks.

Higher Rates = Greater Discounting of Future Cash Flows…Applied To Richly Valued Equities = Less Dispersion/Greater Correlation = Heightened Volatility.

“Crowded”/Value Agnostic Black Box Passives [i.e. ETF’s] = Exceptionally Vulnerable.

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BACKGROUND:

1. Federal Reserve = Owned By Member Banks…Not Federal Government.
2. Prints Money, Without Quantitative Limitation, To Execute Dual Mandate [Employment + Inflation].
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1. Federal Reserve Balance Sheet [U.S. Treasuries + MBS] = $4.5T = 118% of Annual Federal Budget.
2. Current Status = Money Print On-Hold While Balance Sheet Value Sustained At Record Levels. “Jawboning” Balance Sheet Taper.
3. Interest Payments on Securities [Calendar ’16 = $100B+] Remitted Back To U.S. Treasury = Non-Stakeholders …Thereby Reducing Annual Federal Budget Deficit By 15%.

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MORE BACKGROUND:

In 2009 U.S. Federal Reserve Initiates M1 Liquidity “Super-Nova” = 7+ Year Money Print = Termed QE [Quantitative Easing].

Global Central Banks Replicate Federal Reserve Strategy.
Global Assets Portfolio > $18T = Almost 40% of Global GDP.
Global Assets = Sovereign Debt + Corporate Bonds + Equities.


 
QE Ignites Asset Price Inflation But Does Not Transmit To: Traditional Inflation Measures [considered by The Fed]…

Or Meaningful GDP Growth.

Thus…Lower/Inverted [in many cases] Interest Rates Are Initiated To Further Stimulate Insufficient Economic Growth.

 
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Stimulus Strategy = Failure As Printed Dollars Crowd-Out Earned Dollars In Global Capital Markets.

Income Generated By Printed Dollars Remitted To Sovereign Treasuries…Indirectly Reducing Sovereign Interest Costs Even Further…

At The Expense Of…

Income Generated By Earned Dollars Remitted To Private Sector…Which Otherwise…Would Directly Increase Private Wealth.

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FORTHCOMING:

To Thwart Central Banks’ Limitless Money Creation Authority…A Catalyst Is Required.

The Catalyst = Likely…Broad/Persistent Capital Market Tumult/Volatility Caused By Balance Sheet Taper…Devaluing Global Central Bank Securities Portfolios.

Central Banks ONLY Defense of Balance Sheet Value Deterioration = SHARP POLICY REVERSAL = PRINT MORE MONEY TO FUND ADDITIONAL ASSET PURCHASES.

Likely/Necessarily Stiff Political Resistance…Central Bank Powers Stripped Citing Massive Investment Losses + Breach of Moral Hazard Doctrine.

Repugnant Disposition = Biggest Issue For Lying U.S. President

Headline:
Unlike-able Donny T. = National Humiliation

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Right out of college my first boss told me one of the greatest truism’s about business and client acquisition…“If They Like You…They’ll Engage In Business With You and Our Company. If They Don’t Like You…They Won’t…No Matter How Technically Competent The Company.”

Therein lies the problem with Donny T.

He is just NOT VERY LIKE-ABLE. So much so that even his “Trophy-Wife” has opportunistically elected to avoid him…preferring to live on Manhattan’s 5th Avenue rather than DC’s Pennsylvania Avenue…with Donny T.

Frankly…He Is VERY EASY TO DISLIKE…that is…beyond his most loyal supporters.

However these supporters are NOT ENOUGH to deliver his legislative agenda.

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So What Does He Do To Cajole His Opponents?

He Criticizes Them [Democrats].
He Lies To Them [Wire-Tapping].
He Threatens Them [Healthcare Repeal].
He Yells At Them [Media].

NONE OF THIS = GOING TO WORK.

Then…How Does He Communicate To U.S. Sovereign Allies?

He Criticizes Them [Germany].
He Lies About Them [British Intelligence]
He Threatens Them [Mexico].
He Yells At Them [Australia].

NONE OF THIS = GOING TO WORK.

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Of course you cannot just ignore the U.S. President.
When Summoned…You Obey…I Suppose.

Yet when forcefully engaged with Donny T…MOST Business Leaders/Diplomats/Politicians Do Seem To Be Collectively “HOLDING THEIR NOSES”.

Ironically…All The While…“Pinocchio Donny’s” Nose Continually E-L-O-N-G-A-T-E-S…as he routinely LIES…HUMILIATING BOTH THE U.S.A.…and himself.

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So…in order to move his agenda forward he’ll have to Modify His Abrasive Personality …which we all realize WILL NEVER HAPPEN.

Therefore…DONNY T. WILL FAIL…BIG TIME.

Not because of his divisive agenda but SIMPLY because…He Is VERY EASY TO DISLIKE.

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That first boss of mine was full of more wisdom…here is another valuable nugget…“PLAYING THE VICTIM DOES NOT PLAY WELL.”

“The Sympathy Points Initially Gained, If Persisted Upon, Eventually Morph The Victim Into A Pathetic Whiner and Can Also Self-Emasculate” which = precisely where we are at with Donny T…who has “Played the Victim Card” much too early in his term & much too often.

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The Combative Personality that Donny T. So Believes = HIS GREATEST ASSET = Paradoxically…HIS GREATEST LIABILITY.

And the Personality Defects DO NOT ACCIDENTALLY CLOAK AN INTELLIGENT & PASSIONATE Defender of His Political Beliefs… Rather…THEY PURPOSELY EXPOSE A DULL-WITTED & FRIGID Attacker of His Political Opponents.

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Politically, Trump DOES NOT HAVE WHAT IT TAKES…primarily because it is tough to Legislatively Achieve When The Majority [Democrats + Republicans] View HIS DISPOSITION AS REPUGNANT And, Naturally …DO NOT RESPECT HIM.