LIQUIDITY WATCH. FINALLY, SOME DECENT NUMBERS!
. Federal Reserve: "Factors Affecting Reserve Balances", December 19

- Fed's Treasuries holdings: $788.4bn (+$6.0bn)
- Other central banks' Treasuries holdings: $1,224.6bn (-$4.0bn) (*)
- Other central banks' agency securities: $823.3 (+$11.6bn) (*)
- Global Dollar Liquidity Measure: $2,836.3bn (+$13.6bn)

(*) Off-balance-sheet items
agustin_mackinlay@yahoo.com
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[1] Decent numbers! After several weeks in the doldrums, the weekly Fed balance sheet finally manages to produce a set of decent numbers. The Global Dollar Liquidity measure surges on the back of renewed central bank activity — both domestically and internationally. Note also the pick up in lending through the discount window, now at levels not seen since the September 2001 terrorist attacks. The annual rate of growth of the Global Dollar Liquidity measure recovers somewhat, to 12.7% from 12.4%. But look at the growth rate of securirties held by the Federal Reserve itself: only 1.5%. Dare I say it? Dollars are ... scarce! There you have it.

[2] The VIX & the mini-rally. Is the current mini-rally in stocks sustainable? Remember the last attempt to get past 1525 on the S&P500. The VIX did not collaborate: its refusal to trade through 20 sounded the death knell of the rally. Given the dreadful signals sent by credit spreads (Moody's Baa spreads are still toying with four-year highs), the VIX offers the only glimmer of hope in terms of "endogenous liquidity". Watch it carefully!