Reasons For A Market Free Fall? - Finale

Continuing our theme from Wages: Less is More? more reasons for a market dip or free fall?  From Fed: Devil In The Details...

Every Fed dollar used to purchase Treasury securities at auction is one less dollar that the Treasury does not need to borrow from other investors. Lacking said Fed reinvestment, the Treasury will have to decide how to raise those missing dollars.

If the Treasury chooses to increase bill issuance and/or draw down on cash balances, then there would be little impact on the net supply of Treasury duration. If the Treasury increases coupon auction sizes, the lack of Fed reinvestment would result in an increase in the net supply of Treasury duration. 

The portion of MBS/Agency gross issuance previously purchased by the Fed will need to be absorbed by private sector investors. This would increase the supply of mortgage duration held in investor portfolios, which could affect yields and/or spreads.

Bonus points, think rising cost of loan funds and all things tied to LIBOR viz. rising mortgage rates, ARM hike, or floating bonds, say used for stock buy backs. 

As opposed to the way we were, these days the banks are NOT so much in the LENDING business, because they have been forced into the SAVINGS and speculation business.

Even well intentioned and intelligent individuals, still believe that the commercial banking system must have deposits or savings (and do utilize them) for loans. Unfortunately the reality is, and as our faithful readers know, that assertion has been proven an urban myth.

Along those lines, does one believe those aforementioned bank non deposit liabilities or off balance sheet (shadow banking) shenanigans, which are not subject to reserve requirements, are strictly a Chinese problem?

StJL - "What could drive prices higher is companies buying back more shares"

Salmo Trutta - "The drop in oil came about a week early.  That's been constantly nagging me. "  

IMHO, that drop occurred early, concomitant with equities due to a doubling of Treasury and Agency rollover limits on Jan 15, 2018 viz. QT which started Oct 15, 2017.

Riddle me this Batman? Considering floating rate notes will also reflect a higher cost of loan funds, unless LIBOR remains low, one wonders how much the corps will be able to buy back to artificially prop valuations? (less buy backs, higher float, lower equities).  

Then again, do equities blow up and prop the bond market? Worse yet, perhaps the 3.5T notional commercial net long (lower rates) on 90 day Eurodollar positions are wrong? As they were on May 30, 2017?  

As Salmo wisely quipped: "The "big boys" are often wrong."

At the end of the day, running down a multitude of reasons for a market dip or free fall....

Rather than in banks, and with investment decisions based upon fundamentals, all the money in ETF and bond funds who execute mindless buy and sell orders on "platform value" index components.

Tax cuts for the 1%, rising trade and budget deficits for John Q., requiring larger Federal deficit funding via public debt, driving up interest rates, debt service to GDP and lowering the dollar. 

The Fed's agency and treasury bond buying taper, aka QT "quantitative tightening" causing liquidity issues, higher bond float and rising cost of loan funds. 

Falling dollar, rising bond yields. Rising Yen, leveraged JPY/USD carry squeeze. 

Economic proxies declining since mid December: 

Since mid Dec. Yen gaining on the dollar, tight liquidity. Baltic dry shipping, bond yields, money supply, interbank lending, commercial and industrial lending, all TANKED. 

BLS fake happy daze employment news, or what is behind the wage squeeze and lower purchasing power.  Less spending, less income, lower earnings per share, wash and repeat.

Due to higher floating bond costs, less future buybacks, larger float, lower equities.

At the end of the day, dollar holdings losing attractiveness, foreign holders of dollar assets losing faith, a long overdue market correction, dip or free fall?