Good morning ☀️

Quick thought on markets today:

When banks are short on cash, the normal market response is simple. Sell assets, cover shorts, let prices clear. That’s discipline. That’s price discovery.

But when the Fed steps in with overnight repo liquidity, it short-circuits that process. Instead of forced deleveraging, we get emergency cash. Instead of prices adjusting, funding stress is capped.

Call it what it is: lender of last resort behavior.

They’ll say it’s “market plumbing” or “orderly functioning.” Traders know better. It suppresses volatility, delays risk being repriced, and keeps leverage alive longer than it should be.

In a free market, cash scarcity forces decisions.

In today’s market, cash scarcity gets patched.

That’s the regime we’re in.