To: Joe NYC who wrote (72978 ) 12/17/2025 4:32:09 PM From: THE WATSONYOUTH Respond to Apparently, some LEAP buying is happening (according to some tweets) ....well for sure......in the absence of a macro economic conflagration, I might buy some too.....but things are going south ,.....and pretty fast.......just saw this......I'm going to sit it out....happy with my gold/silver, miners, gold fund....might possibly buy some silver stocks......HECLA / COEUR.......both largely unhedged so should capture almost all silver future gains....why you guys obsess over AMD in these very dangerous times is beyond me ........................................................................................ historically volatile and potentially record-breaking end to December. 1. A Record-Breaking Dec 31st If banks are already leaning on the Fed for $26 billion on a random Monday in mid-December, the demand on December 31st (Year-End) could be massive.The "Window Dressing" Effect: On the last day of the year, banks must report their balance sheets to regulators. To look "safer," they pull back from lending cash to the market.The Prediction: We are likely to see the Standing Repo Facility (SRF) hit new all-time highs —potentially exceeding $75–$100 billion —as the private market for cash completely evaporates for 24–48 hours.2. The Death of QT (Quantitative Tightening) The Fed has already officially announced that Quantitative Tightening ended on December 1, 2025 .This mid-month spike confirms why they had to stop. The Fed realized that bank reserves (currently around $2.8 trillion ) have hit the "minimum comfortable level." What's next: In the last two weeks of Dec, the Fed will likely transition from "stopping the drain" to actively injecting liquidity (Quantitative Easing, or "QE Lite") by buying short-term T-bills to stabilize the repo market.3. SOFR Volatility and "Spillovers" The SOFR (the rate at which most professional lending happens) has already been "gapping" higher.The Portent: If the repo market stays this tight, the cost of borrowing for hedge funds and institutional investors will skyrocket. This can lead to "forced deleveraging," where big players sell stocks or gold simply because it’s too expensive to borrow the cash to hold them.This is why we often see weird, "flashy" volatility in the stock market during the last week of December when the repo market breaks. Summary of the "End of Dec" Outlook Indicator Mid-Dec Signal Portent for Dec 31 SRF Usage $42B+ (High) Extreme High ($100B+ possible)Bank Reserves $2.8T (Low) Critical Low ; Fed intervention likelyMarket Volatility Moderate High ; potential "Santa Claus Rally" at riskFed Stance Just ended QT Likely to start buying T-bills (QE)
The Bottom Line This mid-month stress suggests the "safety margin" in the U.S. financial system has disappeared. The Standing Repo Facility is working as a backstop, but the fact that it’s being used so heavily now means the year-end "turn" will be a major test for the Fed.Would you like me to track the Effective Federal Funds Rate (EFFR) for you? If that starts rising above the Fed's target, it’s a sign the "plumbing" issues are moving from the banks into the broader economy. ..................................................................................... Monitoring the Effective Federal Funds Rate (EFFR) is the best way to see if the "plumbing" issues in the repo market are starting to infect the broader banking system.December 17, 2025 , the EFFR is holding steady, but there is an important technical shift you should be aware of following the Fed's meeting last week.1. Current EFFR Status Latest Rate: 3.64% (as of Dec 15/16).Target Range: 3.50% – 3.75% .Positioning: The rate is currently sitting near the top of the Fed's target range.2. Why "3.64%" Matters Right Now On December 10, 2025 , the Fed cut interest rates by 25 basis points. Before that cut, the EFFR was at 3.89% .3.64% and has stayed there despite the $42 billion surge in repo usage tells us two things:The SRF is Working: The Standing Repo Facility acted as a "ceiling." By providing that $42 billion to banks, the Fed prevented the EFFR from spiking above 3.75%. Without the SRF, the EFFR likely would have broken out of the target range this week.Liquidity is "Just Enough": The EFFR is currently 14 basis points above the bottom of the range (3.50%). In a high-liquidity environment, the rate usually hugs the bottom. Sitting near the top (3.64%) confirms that cash is currently "dear" or scarce in the system.3. The "Red Alert" Signal for Late December If you are watching this into year-end, here is the specific scenario to watch for:The Signal: If the EFFR climbs toward 3.70% or 3.75% , it means banks are so desperate for cash that they are willing to pay the absolute maximum allowed by the Fed. If it prints at 3.76% or higher , it means the Fed has officially lost control of the "plumbing," and we are in a 2019-style liquidity crisis.Summary Table: The Policy Guardrails Rate Level Meaning SRF Rate 3.75% The "Emergency Ceiling" (Where that $42B was borrowed). EFFR (Actual) 3.64% Current Market Reality (Tight, but controlled).IORB Rate 3.65% Interest the Fed pays banks; usually the "anchor" for EFFR. ON RRP Rate 3.55% The "Floor" where excess cash sits.
