[Reader Mailbag] What Happens to the Stocks the Fed Buys?
We’ve covered a lot of ground over the last week, so let’s do a quick wrap-up of everything we know so far.
Central banks are now openly intervening in the stock market. The Swiss National Bank and the Bank of Japan both print money and buy stocks outright.
The Fed is also intervening in the stock market, though it is doing so not as an investment but to prop up the markets when they are in danger of breaking down.
We know these are interventions because:
- They show indiscriminate buying (real investors don’t want to move the market when they establish a position).
- They occur at a specific time of day (the 9:50AM-10AM window) on days when the market is falling.
- Trading volume actually falls while the market rips higher indicating that real buyers are not driving the move; rather, it’s the Fed’s “ghost money.”
The Fed’s interventions focus on four key stocks: Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), and Facebook (FB). Together, these companies account for over 10% of the stock market’s weighting.
If the Fed can get these big four companies to rally, the automated trading programs that make up 90% of all trading activity in the stock market will take over, buying everything else to drive the market higher.
With the review out of the way, I want to take a moment today to address another pressing question I’ve received about these interventions.
What Happens To the Stocks the Fed Buys?
When the Fed buys these stocks, don’t they at some point have to unload them back onto the market? What happens to the stocks when they do that?
This is a great question. (And if you have further questions, you can submit them here.)
Technically, the answer is no. If the Fed buys stocks, it doesn’t ever have to sell them. Indeed, we’ve seen other central banks such as the Swiss National Bank and the Bank of Japan do precisely this.
However, if the Fed were to unload the positions it owns, it could easily do so at times when trading volume is high.
Remember, the primary reason the Fed is able to accomplish these interventions is that it is doing them at times when volume is low and the market is easier to manipulate.
Trading volume is always greatest during the first 30 minutes of trading. That’s when financial institutions are opening and shutting positions based on developments.
This is why the Fed typically waits until 9:50AM-10AM to intervene. By then, trading volume is low and an intervention is easier to pull off.
Then throughout the day, there are time periods in which trading volume is higher. And those are times when the market could easily absorb the selling pressure from the Fed if the Fed chose to unload its positions at those times.
Personally, I believe the Fed doesn’t sit on the stocks it owns for long.
Remember, the Fed is intervening to stop the market from collapsing – NOT to simply buy stocks for no reason. So my gut feeling is that as soon as the market is rallying again, the Fed likely unloads its stock positions.
Now of course, the big question is… how do we profit from this?
“Front Running” Fed Interventions for Massive Gains
It would be one thing to simply know this market anomaly exists… that would you put you well ahead of nearly every investor on the planet.
But learning how to “front run” these interventions takes it one step further – delivering you hard and fast LIFE CHANGING profits.
In fact, the system I’ve built around this discovery has already produced gains of:
- 22% in 35 minutes
- 56% in 100 minutes
- 70% in 130 minutes
- 85% in 90 minutes
- 123% in 65 minutes
- And even 367% in one day.
I’m nearly ready to reveal EVERYTHING to you about this trading strategy – this week in fact. Stay tuned…
Editor, Money & Crisis