Does anyone have any analysis of the unwinding of the Fed's

https://www.bloomberg.com/news/articles/2017-04-28/federal-reserve-ponders-how-to-do-the-big-unwind-quicktake-q-a

That is one article I just found which explains what is meant by all this talk about the balance sheet.

Essentially, what is meant by balance sheet reduction is the fed will no longer re-invest the money they have received, from the bonds they hold, into buying more securities from the market.

Implicitly, this may result in bond prices dropping (decreased demand, lower prices), which will lead to yields on government treasury securities going up (look further into "Yield to Maturity" to get a better idea of why this happens).

If treasury yields go up, this eventually impacts other market interest rates, as investors (or banks) will expect at least the "Risk Free Rate", if not better.

The Fed is trying to avoid spooking the bond market by saying things like 'gradual tapering'.

This is the point that might lead into what you've been hearing about slower price growth in the Equity market. It's my belief (and one held by many others) that the stock market has roared up these past 9 years primarily because of Quantitative Easing. The fed pumped a lot of new money in after the 08 crash in order to maintain market liquidity, and to stimulate growth (more bond buying, increased bond prices, reduced yield, resulting in lower interest rates, leading to Aggregate Demand growth). Granted, there has been incredible growth in US tech, and many other industries which has justified share prices growing.

But, if yield on debt is about to go up (balance sheet reduction, and the Fed looking to increase the fed funds rate, which they could do through selling securities to the market - all of these things driving bond prices down), then debt could start to look more attractive than Equity. Leading to outflows from the stock market, into more debt allocation. At least, that's my understanding.

>>3210995
As for the Volcker Rule (and prop trading), I don't think Trump wants to allow all institutions to return to the days before the 08 crash, but mainly just to simplify some regulations. My understanding is that banks have quite strong capital requirements these days, over-leveraging would be an impossibility.

>>3211528
>as investors (or banks)
that should say 'lenders' actually

>>3210995
Yes anon what you say is correct. Basically what I can say is watch US bond yields, not just as they rise, but importantly the long term yields vs short term yields

If long term yields (ie a 10 year note) begins to yield less than a short term yield (2 year note), we are in trouble. Stocks will fall

>>3211557
>>3211763
>>3211898
Also,
The tapering will reduce the balance sheet by offering for sale the assets the fed owns. As institutions give the fed money for their assets they are effectively removing it from the economy (contractive monetary policy). Now there will be less in the monetary base, although it won't be much at first, compared to how much they injected during QE.


So stocks will run a bit more and gradually slow down until maybe 2019 and we have a bear market

>>3211898
This is an extremely important point.

I just wanted to give the basics behind the mechanics of it all.

>>3211528
Based Aggregate Demand post.

>>3211528
>no longer re-invest the money they have received, from the bonds they hold, into buying more securities from the market.
it's about time they fucking wake up

>which they could do through selling securities to the market
Buying securities resulted in a decade of growth. What do they think will happen if they now try to liquidate their positions?

The FED has printed themselves, along with the US, into a multi-trillion dollar hole. They're going to have to be very careful while they try to get out of it, one of the side walls may collapse.

>>3212061
While I don't think it'll all collapse (but what do I know?), I do think crypto will serve a purpose as the back-up.

>>3211943
>>3212061
Too extreme, in reality the plunge protection team exists and we've seen too many collapses. Everybody is a shill. We will have a few years bear market slow bleed until interest rates go down again. Crypto won't do shit

I'm short 10yr Treasury futures going into Jackson Hole meeting. Any other bizbros sling dem derivatives?