QUESTION: Mr. Armstrong and thank you for what you are doing for us regular people. For my first ever question for you, would you please explain as simply as possible exactly what the REPO market is and how it works and how it affects our multi-faceted financial world.
I am truly grateful for your work and communication.
GLH

ANSWER: The REPo Market is where banks will post AAA securities and borrow against them for the night. Normally, the big banks like J.P. Morgan provide over $300 billion in liquidity daily which allows banks, hedge funds, and institutions to raise cash for the night. When the banks withdrew from lending into the Repo Market, the Fed was compelled to inject cash and thereby lending into the Repo market to prevent the short-term interest rate from rising as it did to 10% on September 17th, 2019.

A Reverse Repo (RRP) injects the purchase of securities with the agreement to sell them at a higher price at a specific future date. The party selling the security to raise cash in the market agrees to repurchase the securities (repo) from the lender at a future point in time which is known as a Repurchase Agreement (RP). Repos are classified as a money-market instrument, and they are usually used to raise short-term capital.

This is not a market that is open to the public. However, it is the basic market where everything else is factored on top of this rate. If the Fed did not intervene, then short-term rates would rise and instead of the consumer paying even 20% on a credit card, it would have jumped as must as 10%.

QE was where the Fed was trying to lower long-term rates after the mortgage-backed crisis hit in 2007 so they were buying 30-year bonds. This is the short-term which has nothing to do with QE. Here the Fed is trying to prevent short-term rates from rising rather than lowering long-term rates which they can only “influence” since the Fed posts only short-term rates like the discount rate (wholesale rate) which banks can borrow at.

Here the economy is not declining and unemployment is back to the 1960s. All the talk about QE makes zero sense for these people do not understand what is taking place and it takes professionals in the field to grasp this issue and they cannot speak since they are under confidentiality agreements.

QUESTION: Marty, you laid out gold’s forecast back in October 2018 which has been amazing long-term. While you said if gold would rally after the Pi turning point from a bounce off the downtrend line, then it should rally into the bottom of the ECM. Will you now publish the gold report? I know you have been really busy. But it would be nice to hear from you. Socrates has been bullish since that turn back in 2018. That has been great. It would be nice to see a report with gold in all the currencies.

Happy New Year
LM

ANSWER: Yes it is getting time to do the Gold report. Let us see if that forecast proves correct since we are approaching the target.

COMMENT: Marty, just wanted to say thank you for Socrates. It has been great on gold and even in the miners it has distinguished the lagers like Barrick from Newmont without worry of who is getting paid to pitch what stock.

Can’t wait for the sector overviews.

Happy New Year

PB

REPLY: It is tracking over 1,000 instruments each day. I do not have the time to write about everything. I am working on the sector overview. That should be ready with the turn in the ECM. I am so glad people are getting the hang of Socrates. I do have an expiration date and have no desire to write forever.

HAPPY New Year to All.

“Manipulating the World Economy” is now available on Amazon for pre-order. Amazon expects the book to be in stock on Christmas day, but you can purchase your copy of the book today. We do not control when Amazon lists the book and we have no idea how long it will last in stock. The price was kept low at $95 to enable everyone of all means to be able to purchase the book. This is already the second edition – 466 pages completely illustrated in full color.