Raoul’s Repo Deep Dive

Published on
February 8th, 2020
85 minutes

Raoul’s Repo Deep Dive

The Interview ·
Featuring Raoul Pal, George Selgin, George Goncalves, Scott E.D. Skyrm, & Dr. Z. Barton Wang

Published on: February 8th, 2020 • Duration: 85 minutes

Real Vision CEO, Raoul Pal, examines via Skype the recent turmoil with an international cadre of outspoken experts: monetary economist George Selgin, George Goncalves of The Bond Strategist, Scott Skyrm, executive vice president at Curvature Securities, and Dr. Z. Barton Wang of Barton Research. Join Raoul on this voyage of discovery as he discusses repo and more with some of the sharpest minds in finance. Filmed on January 31, 2020, in Grand Cayman.



  • DP
    Duane P.
    22 March 2020 @ 01:09
    This was incredibly good! Thank you!
  • JB
    James B.
    15 February 2020 @ 05:20
    "Repricing of assets" = systemic crash That is the reason the Fed is growing its balance sheet again. A long bond price that would fall from 130 to 100 if the Fed wasn't funding the surplus bonds in the repo market, is not an orderly repricing, imo. If you own a $1 million 30 year bond and lodge it with your futures broker, you can leverage up exposure to about $100 mio 30 year bonds. In the meantime, the price of your collateral has just improved due to your leveraged futures position. Works like a daisy chain dream until someone wants to actually call on the value stored in the bond (like you know maybe a huge economy that just had a major virus breakout and has lost its flow of USD to feed its own debt bubble). Then counterparty risk will again be all the rave. Leverage is a two edged sword.
  • IS
    Ian S.
    14 February 2020 @ 23:54
    Great stuff. Thank you! So today was the deadline for Q4 13F filings. Check out the filings for AMZN, AAPL, FB etc. Hedge funds are OUT. It looks like rather than hedge funds being the cause of the rally, they were selling into strength. By Dec 31st 2019 most hedge funds are out. The rally was seemingly retail trader led. Please I encourage all to look at the data themselves. One of the few key ETF component stocks I found than didn't see an exodus was XOM. I would love to hear others thoughts on this. Clearly the main question is are we about to see a major correction / crash.
  • WW
    William W.
    14 February 2020 @ 23:20
    Extremely informational and worthwhile content! Barton's commentary seems to be proof positive that a) the financing requirements of the U.S. budget have become the proverbial bus driver, and b) the Fed's lack of understanding of financial markets is making them more susceptible than ever to manipulation.
  • KS
    Kathleen S.
    14 February 2020 @ 16:50
    Buy Gold, Silver and Bitcoin.
  • TE
    Thomas E.
    13 February 2020 @ 20:16
    Great stuff. Not to many financial news networks talking about the repo market. What happened and why it happened and what are the consequences.
  • JS
    Joseph S.
    9 February 2020 @ 03:08
    In your previous video, I asked about your thoughts on the Fed and the Repo Market. You not only answered my question, you and your guests knocked it out of the park. Moving forward, I will buy bonds and Eurodollars, wear diamonds, and sleep like a baby. Thank you Raoul.
    • KF
      Karen F.
      13 February 2020 @ 15:55
      Already have calls on eurodollar futures. Bonds are new for me, any suggestion which bonds to buy? Or futures on bonds? Don't like ETF's, so TLT won't do :-)
  • DS
    David S.
    9 February 2020 @ 16:39
    Is the treasury actually doing it's own QE by issuing new bonds not needed for its cash flow? Is this why the administration is so confident that it can make the market go higher until the election? DLS
    • RA
      Robert A.
      11 February 2020 @ 21:51
      You read my mind David, but I’m so gun shy about anything that could be taken as Political I didn’t comment. So....we all know that this President lives and dies with the Stock Market and if he can keep it up he gets re elected......I didn’t get it until Barton spoke....all he’s got to do is walk down the hall from time to time and have a little chat with Mr. M.
    • AL
      Alex L.
      13 February 2020 @ 02:52
      No, you have it backwards - when the Treasury issues bonds, the market has to cough up money to buy them - and not money out of nowhere, like the Fed. Its a liquidity drain.
  • JD
    Joe D.
    12 February 2020 @ 23:07
    I have not ever heard who are the main players at the repo window and specifically what kind of trades they need to cover. Is that information available? It would help to understand this topic a lot better.
  • CD
    Christopher D.
    12 February 2020 @ 21:09
    @7:30 the interviewee says he agrees with the Fed that "not QE" is indeed not QE because rates do not change when the assets purchased have such short duration. There is no rates move, hence there is no explanation for rising risky assets. That isn't conventional wisdom on RV, and perhaps it isn't accurate either. Cash purchases of T-bills inject M1 (CB reserves, actual paper, checking deposit) & withdraw M2 (T bills, a.o.), possibly freshly issued M2. Isn't it that M1 is more liquid than M2 and therefore there is a net liquidity injection (at least of the repo haircut)? Public perception and the animal spirits does the rest, similarly to the ECB "Whatever it takes". Any expert view welcome.
  • EV
    Erik V.
    12 February 2020 @ 16:42
    Hey Raoul- please consider doing a follow up interview with Dr. Wang specifically on the topic of Mnuchin’s management of the Treasury General account. Wang’s assertion that the way the account is being managed is “unprecedented” is a big story and scandal that is not being covered anywhere.
  • JA
    John A.
    12 February 2020 @ 14:41
    In response to George Selgin, I can come up with theories as to how NotQE=QE. First, if the Fed buys securities, those are not available for the public to buy. That forces investors out the curve toward longer-dated bonds. Investors who would normally buy long-dated bonds are forced to find yield in the high yield market. Those who are starved of yield overall might looks at the juicy yields offered by stocks or real estate, or utilities. Also, the rumor was out there that in November, the Fed was facing multiple LTCMs. I find it interesting that after that rumor, the Fed floated the idea of doing repo transactions directly with hedge funds. REITS and hedge funds funding themselves in the repo market are OBVIOUSLY directly affecting investment markets. To say we that NotQE is pumping up markets takes only a small amount of imagination.
  • RY
    Roy Y.
    12 February 2020 @ 12:30
  • BT
    Brian T.
    11 February 2020 @ 12:35
    This is the single BEST RV interview EVER!!
    • ms
      mark s.
      12 February 2020 @ 07:31
      agree, excellent content, with the 4 perspectives. great stuff.
  • DG
    Dave G.
    8 February 2020 @ 14:21
    What I got from these interviews is that there is no such thing as a free market if there ever was. The level of manipulation has gone into overdrive and where does it end? Really what is the function of the fed and should they even be allowed to exist. How are they allowed to create money out of thin air that never needs to be paid back? Why can't any of us do that then? The financial system is a complete joke.
    • JO
      Jeffrey O.
      9 February 2020 @ 00:55
      Don't forget that the US Treasury is controlled by the Treasury secretary, a proxy for President Trump. One of the speakers mentioned that Treasury could flood the market with liquidity months before the US election, artificially inflating risk asset prices. I think the bond and equity markets will become increasingly volatile as we get closer to the US election in November. Throw in the increased probability of a global recession triggered by the corona virus and we have interesting times ahead. Option straddle strategies may pay well if implemented at the right times.
    • DS
      David S.
      12 February 2020 @ 04:50
      Under a normal dictator the Fed will be subsumed under the treasury. Now the treasury may try to keep the money printing growing in parallel with the Fed to keep the market up until the election. I just do not believe I can get out fast enough. I am playing tennis and going to the beach until something breaks. There are a few benefits to being old. DLS
  • gk
    garrison k.
    8 February 2020 @ 17:26
    Might not the real question be "will I get my money back tomorrow?" ... sure, there's possible and plausible technical explanation to market nervousness - REPO rate spikes, for example - but at the bottom of the barrel, abnormally low interest rates completely disconnected from transaction risk creates all sorts of opportunities for the inmates to run the asylum ... couple that with a multi-year central bank policy with no market-based penalty for the sinners and you've created a time bomb that's sure to stop the merry-go-round abruptly some day ... revisit the days leading up to Lehman and Bear and AIG and others and my lead-in question will hit home ... there were bodies buried everywhere then and the same thing now ...
    • DS
      David S.
      12 February 2020 @ 04:36
      The Fed can always print money to pay you back. Keep it short term for inflation reasons. DLS
  • MB
    Mimi B.
    10 February 2020 @ 08:05
    So it sounds like the Fed is just fighting too much debt in the system and the market being extremely optimistic about the ability of the Fed to "ignore so much debt in the system and, let's keep the party going." Trump just announced a $4.8 trillion budget today. Does this further increase the amount of debts treasury must issue which intern pressure Fed to continue it's repo operation and not "QE"?
    • DS
      David S.
      12 February 2020 @ 04:21
      Total household debt in the US past $14 trillion dollars at year end 2019. An all time high. DLS
  • CP
    Christopher P.
    11 February 2020 @ 17:49
    It seems that the FED is funding hedge funds in asset gathering. It would be interest to see liquidity vs. average account values over time.
    • MS
      Mark S.
      11 February 2020 @ 18:32
      Have you seen George Gammon's recent video in which Raoul's Repo Dive is further analysed. You may find this interesting re hedge fund involvement.
    • DS
      David S.
      12 February 2020 @ 04:10
      Are hedge funds just selling treasuries for cash in the morning and reverse in the evening? Or is more going on? DLS
  • wj
    wiktor j.
    11 February 2020 @ 11:58
    If the treasury is controlling the fed and the repo and hence the stock market with hedge funds, how will the stock market ever correct? Which hedge fund will ever short again? Unless they all do it in confluence before the elections. But none of them would want Bernie in the white house. Mean while the dollar is getting stronger because most of the dollars are floating into stockmarket and bond market. Even Deutsche bank is miraculously doing better. A stock rally and a 5-6b euro loss is always nice. Is the only threat to the stockmarket the Virus from China?
  • wj
    wiktor j.
    10 February 2020 @ 20:20
    You should have Jeffrey P. Snider from Alhambra investments on. He speaks often on macro voices on Eurodollar and repo. I believe his theory is correct.
    • JB
      Jason B.
      11 February 2020 @ 03:14
      He was on in November about repo
  • AP
    Adam P.
    11 February 2020 @ 01:54
    This is absolutely fantastic. Really well done.
  • EW
    Erik W.
    11 February 2020 @ 00:36
    Fantastic and I hope you quadruple down with a while repo week full of content which could possibly include the history or repo, explanation of interplay of repo rate/fed funds/IOER, a primer on rehypothecation and it’s relation to repo, dollar vs Eurodollar, and how regulations affect all of this.
  • JE
    J E.
    10 February 2020 @ 16:11
    Are the Fed and treasury talking..... ya think?!?!
  • TB
    Thibault B.
    10 February 2020 @ 14:20
    Great interview! I understand how the Treasury drains liquidity when building up their account, but what is the mechanism by with they can release it into the market in a short amount of time, as Bart alluded to?
  • JM
    Jim M.
    10 February 2020 @ 14:01
    Hope everybody realizes how bullish this is for equities.
  • RS
    Ruben S.
    10 February 2020 @ 13:52
    i dont get how we can say at the same time: repo issue is only a technical problem, linked to reserve scarcity AND FED MUST increase reserves - as if its vital for banking system and hence for the rest of economy... Can someone explain please? its either important to have a lot of reserves to ba able to finance the economy - and therefore the "not qe" is actually QE, OR, its only technical and therefore not critical for banks function.
  • ag
    anthony g.
    10 February 2020 @ 13:07
    Lack of liquidity says it all in last few minutes. That lack of supply makes USD more valuable. We shall find out.
  • jS
    john S.
    10 February 2020 @ 10:06
    The biggest bubble is bonds
  • JG
    Judith G.
    8 February 2020 @ 16:33
    I am curious what angle Jeff Snider would have added to the conversation.
    • JV
      James V.
      9 February 2020 @ 22:07
      or Luke Gromen.
    • JM
      Jim M.
      10 February 2020 @ 01:32
      Or Grant....what was his name?
  • JM
    Jim M.
    10 February 2020 @ 00:33
    This is Real Vision at it's best.
  • JA
    Jerram A.
    10 February 2020 @ 00:25
    Great video. Pro tip Raoul.. Turn off notifications on your computer :)
  • NC
    N C.
    9 February 2020 @ 22:57
    Boy, this topic of repo... Reminds me of Jeremy Irons in Margin Call... "please, speak as you might to a young child, or a golden retriever. It wasn't brains that got me here, I can assure you that." I'm still looking for that version. Great video, nonetheless.
  • FG
    Flavio G.
    9 February 2020 @ 21:45
    Very clear explanations about the repo mechanics by Dr. Z. Barton Wang. Invite him for a 1-to-1
  • DS
    David S.
    9 February 2020 @ 16:43
    Excellent and timely video. A big thanks to everyone at RVTV. I love the multiple view perspective, especially when the issue is so complex and important to understand. DLS
  • WG
    Wade G.
    8 February 2020 @ 19:46
    Great work by Raoul and his guests. I'm a bit discouraged, honestly. Market participants miscalculate short term funding availability and price (these include highly leveraged private speculators, i.e., hedge funds; and the leveraged assets include massive amounts of long term Treasuries) -> Fed responds by providing liquidity to bring down spikes in Repo funding costs -> over-leveraged participants are spared losses -> asset prices, including those of long term Treasuries are supported, rather than correct -> moral hazard is reinforced by the "save" provided and worse, extended by the presumption or outright promise of future Fed supplied "saves". Presumably highly leveraged players do quite well on such trades. Yet, retail investors clip a 2.x % coupon if prices stay flat, or can do better (or worse) if rates drop further (or rise). Meanwhile, the gov't gets funded "smoothly" for now, until something blows up. The Treasury can even exercise discretion managing the TGA to goose or diminish leverage (and prices). Is this anyway to run and fund a Country? I don't know, but maybe speculators shouldn't fund highly leveraged positions in overnight repo markets. Or if they do, they should be permitted to go bust when they miscalculate, should that be where market prices take them. Maybe the bottom 90% could get by more easily with less asset inflation & financialization in the economy. Maybe a government more difficult to fund would be smaller and more efficient. Maybe small investors could fund a smaller government with actual savings rather than (short term, overnight) debt, and at a positive real interest rate. Or I guess we can run this Ponzi until something blows.
    • LP
      Lynn P.
      8 February 2020 @ 20:55
      Like your reply Wade G. You're describing the increase in the financialization of the economy, which the Fed (and/or Treasury -- thanks Barton) seem committed to supporting, even at the cost of losing the information provided by the price function of markets. So long as the Fed takes on this role of stabilizing these speculative market players, we will just have more of the same, until a Minsky moment arrives. You summarized it well IMO.
    • AR
      Anthony R.
      9 February 2020 @ 16:16
      Lynn P.: IMHO, financialization itself is not necessarily the issue - but rather the issue is the loss of 'consequence' when the private party traders get it wrong - which Wade points out. Yes - moral hazard everywhere. Unfortunately, anymore, the US executive branch will use its bully pulpit with the fed and its cabinet post at Treasury to 'hold markets up' to win elections. Trump is doing this. Obama & BushII did this. All presidents in the last 50 years have had at least an eye on doing so as well. But the current extreme is the new norm until, as you pointed out, the human ability to manipulate or distort equations finally breaks down in a Minsky moment. We don't have leadership that says 'we have to respect and work with the economic cycle'. And we don't have that leadership because we have a population that doesn't want to hear it. They just want the 'outcome' they want, which is never-interrupted 'up and to the right' markets..... 'Set it and forget it'.
  • SB
    Salvatore B.
    8 February 2020 @ 20:46
    Can above explain a little more why the TGA is the one to watch?
    • SB
      Salvatore B.
      8 February 2020 @ 20:46
    • sm
      sam m.
      9 February 2020 @ 07:22
      The argument is ... to the extent you agree that the amount of bank reserves on deposit at the Fed matter ... that the marginal account that is adding/withdrawing funds is the Government account at the Fed (this is the TGA ... Treasury General Account). Aside from the Fed the balance of reserves must be by definition held either by the TGA or by Banks. So if the Government issues more debt (purchased by banks) then the TGA goes up and bank reserves go down and vice versa. This transmission mechanism seems to me (happy to be corrected) to be based on a belief that banks multiply loans as a function of the reserves on deposit ... which the central banks themselves have tried to educate people on is total BS (see page 1 https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654 ... "As a by-product of QE, new central bank reserves are created... these reserves cannot be multiplied into more loans and deposits... ."
    • AR
      Anthony R.
      9 February 2020 @ 16:06
      Per Raoul's discussion at the end, the TGA has become the marginal provider of liquidity, meaning they have the greatest availability of cash to inject into or remove from the market and the most unfettered ability to exercise the use of that availability. Other market participants are hamstrung by US or EU banking regulations and/or Basel III constraints while the PE and HF firms need liquidity to fund their massively leveraged trades. If I butchered that, please, someone correct me, but that's my take.
  • DN
    D N.
    9 February 2020 @ 11:26
    If you want a peek into the whole collateral system behind the funding concepts in this video, here is a paper written by folks at Morgan Stanley (a primary dealer / prime broker) outlining all the collateral and secured funding flows involved. https://www.google.com/url?sa=t&source=web&rct=j&url=https://financialresearch.gov/working-papers/files/OFRwp-2016-06_Map-of-Collateral-Uses.pdf&ved=2ahUKEwjcroDDrcTnAhUrGKYKHdh3BWMQFjABegQICBAB&usg=AOvVaw0q4C96derB-fH93OJp_29t This is known in the industry as *collatetal sources and uses* and anyone working on the treasury / ALM desks of the big investment banks know this inside out. If you really want an expert view, interview them.
    • DN
      D N.
      9 February 2020 @ 11:33
      If you want to understand new potential binding liquidity constraints at the biggest US broker dealers vis a vis liquidity requirements, would suggest reading into some concepts covered here re resolution planning. Concepts like RLEN and RLAP in resolution planning, just as important (if not more) as LCR (which is a basel 3 concept and not as severe). https://www.federalreserve.gov/publications/resolution-plans-faqs-fbo-liquidity.htm
  • DC
    Dawid C.
    9 February 2020 @ 08:32
    Great video. Insightful perspectives.
  • AA
    Anthony A.
    8 February 2020 @ 13:01
    Funny how the technical guy's don't see the correlation in repo and asset pricing. Either that or they don't want to admit it. The Barton Wang interview was fascinating. Great job Raoul! I would love to see him as a regular on R.V!!
    • sm
      sam m.
      9 February 2020 @ 06:23
      I didn't hear any persuasive arguments from Barton as to the causation of such correlation, but happy to be corrected. His argument (see pp 20-21 of transcript) is that bank reserves became so low that participation in the repo market was restricted and this led to a spiking in interest rates and that (somehow) means that "in the downstream, that would affect how much leverage hedge funds can use in their trading. Because they're basically posting their collateral, their equities, their treasury bond positions to primary dealers." I don't see it. Sure it was a shock that the inter-bank market repo rates spiked but the repo market for GC is 100% about funding government bonds (they are the only eligible collateral for GC repo). And control of the fed funds rate is fundamental for a CB to control expectations of rates - if they lose control of the overnight rate they cease to have control over interest rates. I don't think a 1-2 day event where repo rates spiked and the CB responded to get control back of their policy rate means that there has been a change in the appetite of banks to allow leveraged positions on government bonds (and where does equities come into it?). There was a surprise and now we are back where we were - who could think the CB would allow the loss of control of this rate? Under Basel 3 High Quality Liquid Assets (HQLA) both government bonds and reserve balances are Tier 1 so they are fungible. To be honest, I am surprised that a bank funding desk didn't just sell some of their short term government bonds to another bank and then enter the repo at 8-10% to capture the benefit. And it would have started happening if the "crisis" had continued since it is better to get 8-10% than stuff all on your account with the CB. The problem is more likely on the "other side" being increased government bond issuance soaking up reserves and transferring them to the Governments account (TGA in the USA). Buyers of Government debt have a very reasonable expectation that they can rock up to any Bank/CB and ask to be funded at the policy rate ... I don't see people being "bailed out" if the system can't fund the apparently risk free asset. Basel 3 if anything increased demand from the banks to hold Government Paper (in fact in Australia the demand from banks to meet Basel 3 requirements is so large that they had to allow banks to purchase a notional "committed liquidity facility" from the CB because otherwise there wouldn't have been enough Govt Bonds on issue to meet the HQLA). The notion that banks are constrained in their lending to hedge funds because of the volatility in the overnight repo rate/fed funds rate is false in my opinion, as is the general argument about layering lending on top of the reserves at the CB (the BoE argued in their paper on how the fractional reserve system works that banks don't have issues creating reserves to back up their lending and they are not constrained by the simplistic idea of having to hold back 10% (say) of a loan in a liquidity reserve). The notion that banks are constrained in their lending to hedge funds to buy equities because they need to hold CB reserves versus government bonds is also false as they are fungible for HQLA under Basel 3.
  • PG
    P G.
    9 February 2020 @ 04:51
    I see 4 books on the desk. I am very curious what they are. I suspect they will make a good read 😉
  • HE
    Henry E.
    8 February 2020 @ 13:58
    Certainly a very timely topic. Appreciate the input/thoughts. I do sense that this is a very important issue and one that everyone should be focused on. However, it may just be me, I would greatly appreciate a tutorial on the federal bank system as it pertains to the REPO market. For example, when I heard the word 'cash' I think of hard currency, but the word 'cash' (at least in this context includes much more than hard currency), but what? What are reserves compromised of? What 'assets" constitute a reserve? In the repo context, what exactly is happening? What assets qualify for use in a repo transaction? Essentially, an entity with 'excess reserves' sells (via a overnight purchase) those excess reserves to another party 100% secured by collateral. But, the repo 'seller' isn't sending over hard currency, they making available something else. I'm assuming reserves (whatever that is) that the repo seller has on deposit at the Federal Reserve and transferring them to the repo buyer in exchange for what collateral? Would be great is something that really adds context to this very important discussion. Maybe there's something on RealVision already (that I missed) that helps. Anyway, very good and timely topic...
    • LP
      Lynn P.
      8 February 2020 @ 20:48
      If you can slog through it, Perry Mehrling's course on money and banking (available free to audit at the Institute for New Economic Thinking) takes you through all you need to know, starting with the hierarchy of money (that which makes final payment is the best money).
    • LP
      Lynn P.
      8 February 2020 @ 20:58
      https://www.youtube.com/watch?v=1HNpmlvDzqg A Mehrling lecture. Just a place to start.
    • LP
      Lynn P.
      8 February 2020 @ 21:01
      https://www.youtube.com/watch?v=IzRLmeYXQ20 This may be a better place to start.
    • LP
      Lynn P.
      8 February 2020 @ 21:02
      Mehrling's course is available on Coursera
    • sm
      sam m.
      9 February 2020 @ 04:37
      Reserves in this context are simply the funds that banks have in their deposit account with the Central Bank (CB). When a bank buys or sells an asset it settles the net difference with other banks using its account at the CB. The rate that banks borrow reserves from each other overnight is the fed funds rate and the fed buys and sells assets in the market to influence the amount of these reserves and hence the fed funds rate. In your example your "repo seller" is purchasing the asset (the "collateral") today with an agreement to sell it back in future (e.g. the next day for an overnight repo). Typically the asset will be a Government Bond but it can include other assets and the highest quality assets are grouped under the term "General Collateral" or GC. Each country is different and can include RMBS or other assets, this link explains more (https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/repo-and-collateral-markets/icma-ercc-publications/frequently-asked-questions-on-repo/8-what-is-general-collateral-gc/).
  • JS
    Jim S.
    8 February 2020 @ 21:06
    In regard to the 1st speaker, what’s the difference between buying long dated coupons or buying short dated bills that you intend to roll over indefinitely?
    • SM
      Stuart M.
      8 February 2020 @ 22:00
      Short dated bills could see a change in interest rate on the roll?
    • sm
      sam m.
      9 February 2020 @ 04:03
      I assume you mean in relation to QE? The definition of QE is the lowering of longer term rates so it requires the purchase of longer term bonds. But in terms of adding to or withdrawing reserves in the system and hence the overnight borrowing rate between banks there is no difference. The purchase/sale of any duration security by the Central Bank are both simply Open Market Operations (see https://www.federalreserve.gov/monetarypolicy/bst_openmarketops.htm).
  • EH
    Erina H.
    8 February 2020 @ 18:02
    Real vision has better real-time information than any economic course. The deep dives are really helpful, please continue. Would you consider creating relevant content for adolescents/college students? I feel run of the mill economic courses are either out of date or not quite hitting the mark, causing an entire generation of young people to be financially illiterate.
    • MB
      Marc B.
      8 February 2020 @ 22:14
      Fantastic comment!
    • WS
      William S.
      9 February 2020 @ 03:58
      Stigum’s Money Market, 4E has been a reliable primer on these markets since the late 70’s.
  • BK
    Bokchain K.
    8 February 2020 @ 23:38
    Can someone point to me which website can I monitor the Treasury General Account balance. Barton interview is very insightful.
    • sm
      sam m.
      9 February 2020 @ 03:45
      See: https://fred.stlouisfed.org/series/WTREGEN And: https://www.federalreserve.gov/releases/h41/
  • JK
    John K.
    9 February 2020 @ 03:24
    Raoul, just as the ECRI can be used to be a leading indicator for the business cycle, are there any means of monitoring (possibly within IB, but not limited to IB, maybe Treasury data or Shadow data), relevant Treasury General Accounting metrics?... Another way to ask this is, what measurable factors drive the Treasury to decide when to demand and when to supply? Is it wrong to think that if we could figure that out, then, just like we use the ECRI, we could use those measurable factors to provide us a better understanding of the TGA activities in (1) timing their impacts to markets, (2) assessment of the relative positioning of expected future flows (into which specific markets) based on the TGA activities, and (3) even possibly determine the relative strength of the impact (ergo, strong vs weak impact) from TGA activities/metrics? In closing, what do you think are the ECRI equivalents which may provide TGA metric/activity leading indicators which can be correlated to the three aforementioned variables (timing, flow direction, and strength)? Thank you. Regards, John K.
  • KT
    Kai T.
    8 February 2020 @ 23:32
    May I suggest you find out how many of your subscribers have never traded anything but stocks and crypto. You might want to figure out how to educate them in the best way to trade bonds - I mean where to do it, lowest fees etc.
    • YO
      Yoshitaka O.
      9 February 2020 @ 02:32
      Just buy TLT...
  • CH
    Charlie H.
    9 February 2020 @ 02:26
    I’m skeptical mnuchin’s trial balloon about increasing the TGA has much, if anything, to do with goosing the economy. Appropriations’ laws and implementing regs preclude Federal agencies DoD, HHS, etc. from changing payment policy from reimbursement to prepayment of their operating disbursements (even to States’ coffers) without sound justification. I haven’t heard mnuchin’s rationale for bumping up the TGA, but he would be unwise to raise it, absent legitimate cash-flow needs.
  • GE
    George E.
    9 February 2020 @ 01:05
    Dr. Z. Barton Wang really added to the conversation here. Specifically, his comments regarding the Treasury General Account were compelling. Thank you for having him on, and look forward to hearing more from him in future interviews.
  • FB
    Floyd B.
    9 February 2020 @ 00:46
    Having deep dives like this with experts,market participants and skilled investors makes the contribution by RealVision truly unique..These topics deserve the time and effort...Thank you!
  • TZ
    Tibor Z.
    8 February 2020 @ 22:43
    Raoul's discussions I love the most! You are a great presenter! If you read this: Would be great more technical trades, trade ideas and my biggest dream, fundamental analysis from companies are worth looking on and put them on a wishlist for future investments. Thanks!
  • JB
    John B.
    8 February 2020 @ 22:26
    Love that you guys are posting videos on the weekend!
  • TH
    Timo H.
    8 February 2020 @ 09:04
    Essential viewing! My biggest takeaway from this is, that the market seems to become more and more fragile and the list of entities needing constant Fed support keeps of growing. New entrants to that list may well be hedge funds and eurodollar market participants. Some day the trend of increasing fragility reaches the point of shattering. Repricing of assets in a violent way seems to be the inevitable end game of this.
    • HM
      Harold M.
      8 February 2020 @ 22:12
      W sad😢
  • JE
    James E.
    8 February 2020 @ 21:29
    Excellent discussions. Thank you.
  • NR
    Nathan R.
    8 February 2020 @ 20:54
    Some things that came to mind: What happens when you try to waltz in a canoe? 2008 seems to have permanently impaired bank balance sheets from a credit expansion point of view. The CBs stepped into the gap but QT showed that banks would not or could not grasp the nettle in 2018/19. In a credit bloom, fractional reserve world we may be circling the drain. This hunt for GSIB balance sheet capacity seems to be the crux in a de-globalizing world still dependent on USD collateral to transact flows. That capacity (or scarcity thereof) is directly impinged by the witches' brew of Basel, trade wars and thinking reserves are collateral. It all amounts to trying to re-inflate your tyres with a drinking straw. What ever happened to bankruptcy? Whatever happened to market pricing? When did the capital stack become so fragile that CBs must not let equity fall or they risk a literal armageddon in credit? I'm afraid the ghost of 1987 will be with us until one day, and shockingly, the CB Put doesn't work. N95 mask anyone?
  • AM
    Alexander M.
    8 February 2020 @ 18:20
    Fascinating to view. I just feel the debt levels that individuals have, the huge inflation they see in their monthly payments for rent, food, utilities etc.accompanied with stagnant wages will undermine all the machinations of the Fed.
  • GC
    Gary C.
    8 February 2020 @ 17:56
    One subject that did not come up is the pulling of cash out of the Repo market by JP Morgan. Some initial commentary in alternative media suggested that JPM was trying to push the Fed into buying Treasuries. That concern seems to have faded, or, the treasury bond holders are happily collecting a premium now that the Fed is supporting buying bonds.
  • AM
    Alonso M.
    8 February 2020 @ 17:48
    This was awesome. Putting it all together, it sounds like the beginning of a debt monetization scheme where fiscal policy dictates monetary policy.
  • BS
    Bevyn S.
    8 February 2020 @ 16:32
    Love these investigative pieces Raul...! Thank you for taking us on this thought journey with you. One of my favorites on RV, by far.
  • DN
    Dave N.
    8 February 2020 @ 14:49
    The most important element seems to be that there are a lot of moving pieces and objective functions by many different agents that operate in this key market. What we learned in the GFC is that when the assets are contaminated, and counter party balance sheets are questionable, the repo market will sort that out quickly. And since there are still concerns about QE, QT and how we get back to normal as asset prices soar, what we come to realize is that the repo market is epicenter for appreciating there is no way out once CB’s use asset prices as key marginal driver of growth, other than inflation actually overshooting targets. Rick Scott’s recent letter to Powell and any subsequent questioning could be a tipping point to have a good discussion on WTF is going on and who is ultimately on hook for CB actions. Either way, we have opened Pandora’s box in the same way Japan has. Because if funding assets gets tougher, and the tide rolls out, some swimming w/o trunks will get exposed. I think that is what Raoul’s line of questioning is about. What is the Minsky moment that makes everybody realize the foundation has cracks, and can we post GFC allow such things to happen? In any event, this was a extremely valuable piece, but, what I seemed to get is that it is all ok and manageable with a few tweaks. My antennae suggests cracks in operating a capitalist market system where supply and demand is overwhelmed with brute force. But, it is hard to see any alternative once this path is chosen. FUBAR is probably best way to describe it.
  • JA
    Joseph A.
    8 February 2020 @ 14:33
    Ending this piece with Barton was the icing on the cake. Finally a proper insight even though not all questions answered I think there were a few light bulb moment here for anyone trying to wrap their heads around repo and liquidity mechanisms. Essential viewing at precisely the right time given the current state of both the equity and bond markets.
  • TS
    Tim S.
    8 February 2020 @ 13:42
    I really like the deeper approach in one review. The content provides a lot of value by pulling in multiple viewpoints summarized for the holistic digestion of data. 1) Timely? Check 2) Comprehensive? Check 3) Compelling content? Check. Well done guys!
  • CL
    Claudio L.
    8 February 2020 @ 13:06
    Great insights and a very difficult and complex topic to follow, thanks for bringing it up as it will more create interest from many investors who like to be well informed.
  • PJ
    Peter J.
    8 February 2020 @ 11:36
    Exceptional discussion which is very educational , gives great insight into a very complex and opaque area. I will now have a better understanding of some of the ongoing twitter discussions that were previously unintelligible to me. Thanks.
  • AA
    Anthony A.
    8 February 2020 @ 11:33
    Raoul Great piece. This whole repo spike happened right around the same time as the spike up in rates more than likely caused a few over-leveraged hedge funds in the bond market to blow up. They say Bank of Mellon was part of the blow-up and possibly JP Morgan. We don't know exactly
  • UJ
    Ulf J.
    8 February 2020 @ 08:22
    This is in rating 10 on a 10 scale, very interesting and a complex system, USD system is so big and many things are involved even the black market and also missing trillions from Pentagon where does this money go. there is not enough USD that's for sure and on the other hand, many countries are getting out of USD. Raul talks about two USD markets but is it three? Catherine Austin Fitts 21 trillion missing from the books where did they go. This is like when Wright's brothers tried to fly the rate of climb is to step when will it stall and crash nobody knows what the outcome will be in the end. In the short term Tesla stock will go up but for how long.