Market Morning: Fed Repo Men, Free Trades, Cheese Hoarding, PayPal Bails on Libra

Stock Market Roundup

Repo Men At the Fed Extend Their Stay to November 4

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The Federal Reserve is now extending its daily repurchase operations in the overnight loan markets until November 4. The previous end was called for October 4, but the banking system needs ever more liquidity. The so-called repo markets are overnight agreements to buy Treasuries or mortgage-backed securities with newly created money in exchange for a bank buying them back the next day, or sometimes two weeks later in the case of a term repo, at a higher price. The central bank has been involved in the repo markets ever since September 17 when there was a sudden spike in overnight interest rates to 10% on the fringes.

SEE: Cannabis Stock News Daily Roundup October 4

Mark Cabana, the guy that generally comments on this stuff at Bank of America and has made a name for himself as the one that explains all this backroom lending whatnots, is equating this move with the “whatever it takes” speech by Mario Draghi when he unleashed a bazooka to save the Eurozone from collapse in 2012. Yet, the Fed is still not admitting that this is the same as quantitative easing. Meanwhile, the Fed’s balance sheet has been expanding faster than QE3, with assets up $176.158 billion since the repo operations started three weeks ago.

TD Ameritrade, Charles Schwab Drop Trading Commissions

It now doesn’t cost anything to trade at TD Ameritrade (NASDAQ:AMTD) or Charles Schwab (NYSE:SCHW). Fees of $6.95 and $4.95 respectively have been eliminated, which could increase trading volumes and volatility as lowering prices increases demand, generally speaking. Many analysts in the retail trading industry think that this might be a bad thing. “It has the potential to be a disruptive issue,” Kashif Ahmed, the president of American Private Wealth, said. “The market is already delicate, so to speak. On top of that, you throw in people’s ability to trade without consequence. Acting on no discipline and no cost, it’s a recipe for disaster.” There’s also the matter of how the firms will make money now. Though, dropping such a small fee compared to the dollar amount of trades may not do much of anything. We’ll see what happens.

The Cheese Hoarding Begins After Aircraft Retaliation

Cheese companies are starting to hoard a whole bunch of European cheese in preparation for 25% on European goods instituted by the Trump Administration in retaliation for subsidies for Airbus (OTCMKTS:EADSY). One company ordered an extra $15 million in hard cheeses that can be stored for about a year in order to insulate customers from price hikes through the end of 2019. That really isn’t so long. Prepare to pay more for cheese and whisky starting sometime in 2020 if the trade war persists. Cheese executive Phil Marfuggi predicts that higher-priced cheese will simply disappear from stores if subject to a 25% tariff. “I’ve been building up inventory … because we have a target on our backs,” he said. What would be especially ironic is if Airbus was involved in transporting some of those cheeses across the Atlantic.

Australia Buys In To Cannabis Research

Australia will fund AUD$3 million for cannabis research for cancer patients. Cannabis is legal in Australia, though heavily restricted, requiring a medical prescription and a license to grow and make the stuff. Access has been permitted to about 11,000 patients this year. “There have only been a limited number of well-designed clinical studies on medicinal cannabis, and we need to increase the evidence base to support medical professionals,” an Australian ministry statement said. 78 companies in Australia are licensed to grow cannabis, only one more than 2 years ago. Legalization of recreational cannabis looks like a long shot, however.

PayPal Bails on Libra

PayPal (NASDAQ:PYPL) has said it will pull out of the Libra Association, a group of organizations supporting the Libra cryptocurrency developed by Facebook (NASDAQ:FB). “PayPal has made the decision to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations,” a PayPal spokesperson said in a statement. “We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future.” Companies are getting cold feet over the stablecoin project backed by a basket of other currencies and possibly liquid short term debt instruments because they don’t want to get on the bad side of regulators, who would rather keep currency monopolies to themselves. It is unclear if the Libra project can get off the ground if it doesn’t have broad based support from corporate America. Meanwhile, the cryptocurrency complex isn’t doing too well, but who knows where it will be by the time you read this.

 

 

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