Last week I read two articles in The Wall Street Journal that had a big impact on me. So I want to give them to you with commentary. I saved them to my Google Docs file, since the WSJ hides them behind a paywall. Completely inappropriate when I want to comment on them for educational purposes.
The first article is on the Depository Trust & Clearing Corp’s (DTCC) request for $50 billion from its members in backup reserves for bank repurchase agreements (repos). The article has a number in it that has had me terrified for a year. There are $2 trillion in repos outstanding at any one time. We don't know the current DTCC reserves.
I got out of the Stock Market last year when I read that the Fed was planning to act as the backup system for the repro market. That terrified me. In a financial emergency the entire repo market will be swamped with the short term needs of everyone getting out of the market when there is no market for their securities. The Fed can move as fast as a Mature Sperm Whale on a clay tennis court using its backhand.
My comment is: $.05 trillion is not an adequate backup for $2.1 trillion in repos. Regardless of the current backup. This is not reassuring to me. The article also suggests that the DTCC may not get approval from its members for this backup reserve. I’m not going back in the Stock Market yet. I may have to learn how I can make investments in the futures market and avoid the stock market risk.
The second article in my Docs file is about Netflix keeping its viewership secret. The reason is so the companies that own the original releases, like AMC Networks which created ‘Breaking Bad’ doesn’t know how much money to charge for the permissions it sold to Netflix.
I faced this problem when trying to evaluate the price of Netflix. I could only roughly estimate the price of the stock as the company became an original producer.
I’m out of the market right now. When Nielsen begins measuring streaming programs I’ll be able to estimate the value of Netflix and might again buy the stock.