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Stealth QE Is Over: Treasury Projects Adding $350BN In Cash By Dec 31, Reversing “Liquidity Tsunami”

Stealth QE Is Over: Treasury Projects Adding $350BN In Cash By Dec 31, Reversing "Liquidity Tsunami"

Three months ago, at the start of May when the Treasury was busy spending hundreds of billions of cash parked in the Fed’s Treasury General..

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Stealth QE Is Over: Treasury Projects Adding $350BN In Cash By Dec 31, Reversing "Liquidity Tsunami"

Three months ago, at the start of May when the Treasury was busy spending hundreds of billions of cash parked in the Fed's Treasury General Account in a form of stealth QE, the US government surprised markets when it announced that it expected to release just $100BN in cash in May and June, bringing its total cash balance to $800BN by the end of June, and then just another $50BN lower three months later, or $750BN at the end of Sept. Additionally, the Treasury assumed a cash balance of approximately $450 billion at the expiration of the debt limit suspension on July 31 based on expected outflows under its cash management policies. And while the Treasury caveat that "the actual cash balance on July 31 may vary from this assumption based on changes to expected outflows in that period" its estimate was surprisingly spot on, with the latest Daily Treasury Statement showing $459 billion as of the end of July, not far from its forecast.

And as a reminder, on Sunday the debt ceiling was reinstated after a two-year break, and lawmakers have not yet formulated a concrete plan to avert default, which the Congressional Budget Office warned could come in October or November once Treasury exhausts special measures and its cash pile. It will now be up to Congress to extend this token limit in the next few months. We don't expect it to be an issue especially in the aftermath of the August 2011 debt ceiling debacle.

So fast forward to today when the Treasury released its latest Treasury Announces Marketable Borrowing Estimates which showed that the Treasury plans on borrowing almost $1.4 trillion in the second half of calendar 2021, it hopes to end the year with $800 billion in cash - well below the $1.7 trillion in cash it held at the end of 2020 - and last but not least, assumes that a debt limit suspension or increase will be enacted.

First, looking at the just completed quarter, the Treasury reminds us that it previously estimated privately-held net marketable borrowing of $463 billion and assumed an end-of-June cash balance of $800 billion. The actual numbers were $319 billion in debt issuance, a $143 billion decrease in borrowing from the previous estimate primarily from an increase in receipts and a decrease in expenditures, offset by the increase in the end-of-June cash balance, which were $852BN vs the Treasury estimate of $800 billion. The slower pace of debt issuance may go a long way to explaining why yields plunged as much as they did in a quarter that saw far less supply than many had expected.

What about the current and future quarters? Here are the details:

  • During the July – September 2021 quarter, Treasury now expects to borrow $673 billion in marketable debt, assuming an end-of-September cash balance of $750 billion. This borrowing estimate is $148 billion lower than announced in May 2021, primarily due to the higher beginning of quarter balance and lower outlays.
  • During the October – December 2021 quarter, Treasury expects to borrow $703 billion in privately-held net marketable debt, assuming an end-of-December cash balance of $800 billion.
  • The end-of-September and December cash balances assume enactment of a debt limit suspension or increase.
  • These borrowing estimates are based upon current law and do not include any assumptions for the impact of additional legislation that may be passed.

The Treasury's Sources and Uses table is below:

Source: Treasury Sources and Uses table

In other words, the government expects to borrow almost $1.4 trillion in the second half assuming lawmakers raise or suspend the newly reinstated debt limit, as money continues to support coronavirus relief even before the impact of additional economic programs being considered by Congress. As for the cash, what for the past six months had been one huge "stealth QE", as the Treasury injected $1.1 trillion in cash into the economy - and the Fed's reverse repo facility - it's about to go in reverse with the Treasury now expecting cash balances to rise by almost $300 billion to $750 billion through the end of Q3 from today's $459 billion, and another $50BN by the end of the year, pushing the net cash balance to $800 billion by year end.

Visually, this is how Stealth QE is expected to end and go into reverse, assuming of course that the US will find a way to extend (and pretend) the debt ceiling limitation, which after much theatrical posturing, it will.

Today's data merely underscores what we said three months ago when we said that "the liquidity tsunami is over" and since the Treasury will now be actively rebuilding its cash balance over the next 5 months, not only is the stealth QE over but it is about to go into reverse.

A much more detailed picture of the Treasury's funding needs will be unveiled on Wednesday when the Treasury releases additional details about its borrowing plans. As Bloomberg notes, for the first time in more than five years, the Treasury in coming months will be scaling back its mammoth quarterly sales of notes and bonds according to  Wall Street dealers - a shift so large it’s likely to more than counter the Federal Reserve’s potential pullback in purchases. While most dealers expect no change in the $126 billion size of recent refundings, many see officials setting the stage for a reduction in November. It is this surprising decline in net issuance that many speculate could be behind the striking drop in yields in recent months as there is not nearly enough supply to meet demand. That too will change, however, once the Fed begins tapering and certainly once QE is over.... although we aren't holding our breath.

Tyler Durden Mon, 08/02/2021 - 15:37

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Government

Student loan borrowers may finally get answers to loan forgiveness issues

A major student loan service company has been invited to face Congress over its alleged servicing failures.

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U.S. Sen. Elizabeth Warren (D-MA) wants answers from one of the top student loan service companies in the country for allegedly botching its student loan forgiveness process involving the federal Public Service Loan Forgiveness program, leaving borrowers confused and without answers.

The senator sent a letter to Mohela CEO Scott Giles on March 18 inviting him to testify before Congress at a hearing on April 10 titled “MOHELA’s Performance as a Student Loan Servicer.” During the hearing, Giles will have to answer for why his company allegedly failed to send billing statements to student loan borrowers in a timely manner and miscalculated monthly payments for borrowers when it was time for them to repay their loans in September last year.

Related: Here's who qualifies for Biden's student loan debt relief starting next month

Also, in the letter, Warren highlighted a report that claimed that Mohela failed to perform basic servicing functions for borrowers eligible for PSLF, which led to over 800,000 public service workers facing delays in receiving student debt relief. The report also accuses the company of using a “‘call deflection’ scheme” to keep customers away from speaking to a customer service representative and instead redirecting them to parts of their website.

“Your company has contributed to student loan borrowers’ difficulties by mishandling borrowers’ return to repayment following the COVID-19 pandemic-related pause on payments, interest, and collections and by impeding public servants’ access to PSLF relief,” wrote Warren in the letter.

The move from Warren comes after the U.S. Department of Education withheld $7.2 million in payments to its servicer Mohela in October as punishment because it failed to issue timely billing statements to 2.5 million borrowers which resulted in 800,000 borrowers becoming delinquent on their loans. The department ordered Mohela to put those affected by the issues into forbearance until the mess was resolved.

U.S. President Joe Biden is joined by Education Secretary Miguel Cardona (L) as he announces new actions to protect borrowers after the Supreme Court struck down his student loan forgiveness plan in the Roosevelt Room at the White House on June 30, 2023 in Washington, DC. 

Chip Somodevilla/Getty Images

Mohela is also currently facing two class-action lawsuits, one filed in December last year and another in January this year, for its alleged “failure to timely process and render decisions for student loan borrowers enrolled in the Public Service Loan Forgiveness program.”

In response to recent criticism surrounding its alleged issues and failures regarding the PSLF program, Mohela claimed in a statement to the Missouri Independent that it “does not have authority to process loan forgiveness until authorization is provided by FSA, which can take months to occur.”

The company also claimed that there are “false accusations” inside of the bombshell report, which was released in February, that details the company’s servicing failures.

“It is unfortunate and irresponsible that information is being spun to create a false narrative in an attempt to mislead the public. False accusations are being disingenuously branded as an investigative report,” said Mohela. 

Related: Amazon just made a major announcement that will bring you big savings — and we have all the details

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International

Bolsonaro Indicted By Brazilian Police For Falsifying Covid-19 Vaccine Records

Bolsonaro Indicted By Brazilian Police For Falsifying Covid-19 Vaccine Records

Federal police in Brazil have indicted former President Jair…

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Bolsonaro Indicted By Brazilian Police For Falsifying Covid-19 Vaccine Records

Federal police in Brazil have indicted former President Jair Bolsonaro for falsifying his Covid-19 vaccine card in order to travel to the United States and elsewhere during the pandemic.

Federal prosecutors will review the indictment and decide whether to pursue the case - which would be the first time the former president has faced criminal charges.

According to the indictment, Bolsonaro ordered a top deputy to obtain falsified Covid-19 vaccine records of himself and his 13-year-old daughter in late 2022, right before he flew to Florida for a three-month stay following his election loss.

Brazilian police are also waiting to hear back from the US DOJ on whether Bolsonaro used said cards to enter the United States, which would open him up to further criminal charges, the NY Times reports.

Bolsonaro has repeatedly claimed not to have received the Covid-19 vaccine, but denies any involvement in a plan to falsify his vaccination records. A previous investigation by Brazil's comptroller general concluded that Bolsonaro's vaccination records were false.

The records show that Bolsonaro, a COVID-19 skeptic who publicly opposed the vaccine, received a dose of the immunizer in a public healthcare center in Sao Paulo in July 2021. [ZH: hilarious, Reuters calling the vaccine an 'immunizer.']

The investigation concluded, however, that the former president had left the city the previous day and didn't leave Brasilia until three days later, according to a statement.

The nurse listed in the records as having applied the vaccine on Bolsonaro denied doing so and was no longer working at the center. The listed vaccine lot was also not available on that date, the comptroller general's office said. -Reuters

"It's a selective investigation. I'm calm, I don't owe anything," Bolsonaro told Reuters. "The world knows that I didn't take the vaccine."

During the pandemic, Bolsonaro panned the vaccine - and instead insisted on alternative treatments such as Ivermectin, which has antiviral properties against Covid-19. For this, he was investigated by Brazil's congress, which recommended that the former president be charged with "crimes against humanity," among other things, for his actions during the pandemic.

In May, Brazilian police raided Bolsonaro's home, confiscating his cell phone and arresting one of his closest aides and two of his security cards in connection to the vaccine record investigation.

Brazil's electoral court ruled that Bolsonaro can't run for public office until 2030 after he suggested that the country's voting system was rigged. For that, he has to sit out the 2026 election.

Tyler Durden Tue, 03/19/2024 - 11:00

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International

This gambling tech stock is future-proofing the world’s casinos

Supported by the universal thrill of a quick payout and the need for leisure, gambling stocks make a compelling case for long-term returns.
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Supported by the universal human thrill of a quick payout, and the need for leisure and entertainment to bring enjoyment to adult life, casinos will remain essential spaces for people to dream and play for the foreseeable future, making gambling stocks a prospective space to look for long-term returns.

According to Research and Markets, the global casino industry was valued at US$157.5 billion in 2022, and it will grow to US$224.1 billion by 2030 at a compound annual growth rate of 4.5 per cent. This trend includes:

Approximately 100 million gamblers in the United States, who generated US$66.5 billion in revenue in 2023, a 10 per cent gain from 2022, which itself was a record year A little fewer than 20 million gamblers in Canada, who generated about C$15 billion in revenue in 2023 A global addressable market of thousands of casinos, and more than 4.2 billion people who gamble at least once every year, according to a 2016 study by Casino.org

The main challenge with attracting these billions through casino doors is they sway heavily toward middle age. The mean age of U.S. casino visitors has hovered around 50 for the past decade, with a similar trend across the world, forcing casinos to attract younger, tech-savvy customers, many with less gambling experience, to continue growing profits for their stakeholders over the long term.

Investors seeking exposure to a leadership position in building the bridge between casinos and the next generation of gamblers should evaluate Jackpot Digital (TSXV:JJ). The Vancouver-based company is a manufacturer of dealerless electronic table games that deliver immersive experiences tailored to the digital age, while earning casinos attractive returns on investment.

The gambling technology stock benefits from no direct competition in the dealerless poker space, with orders spanning North America, Europe, Asia, Africa and the Caribbean, a long-established presence with major cruise ship brands, such as Carnival, Princess Cruises and Holland America, and a growing land-based presence with orders or ongoing installations across 12 U.S. states. Its highlight partnership to date is a master services agreement with Penn Entertainment, the country’s largest regional gaming operator with 43 properties across 20 states.

Jackpot Digital’s differentiated technology and well-rounded management team are at the heart of its success in landing several blue-chip casino gaming companies as customers.

Jackpot Blitz

The gambling technology stock’s flagship product, Jackpot Blitz, is a dealerless poker table featuring three of the world’s most popular variations – Texas Hold’ em, Omaha, and Five-Card-Omaha – brought to life through slick 4k graphics on a 75-inch touchscreen, and offered in three formats – pot-limit, no-limit and fixed-limit – designed to attract a diversity of revenue from casual to experienced players.

Spokesperson and NFL championship-winning coach Jimmy Johnson explains the benefits of the Jackpot Blitz. Source: Jackpot Digital.

The table also comes equipped with house-banked mini-games, including blackjack, baccarat and video poker, as well as side bets on the main poker game, such as Bet the Flop, all of which keep players engaged and entertained between, and even during, poker hands. The stunning Jackpot Blitz machine also offers multi-venue “Bad Beat” jackpot functionality, allowing casinos to offer a “Poker Powerball” with massive Jackpots, further enhancing the attractiveness of Jackpot Blitz to new players.

It’s by striking a balance between the needs of the modern gambler, and efficiency and profitability that in-person operators couldn’t hope to match – unless they ordered the machine for themselves – that Jackpot Digital has earned itself the top spot in dealerless poker.

Player benefits

When a veteran or novice gambler takes a seat at the Jackpot Blitz, his or her experience begins with an easy-to-use interface, laid out in a modern and stylish design, programmed to respond to hand gestures that bring real casino play into the digital age, including card bending and chip jingling.

Source: Jackpot Digital.

The table’s intuitive controls, combined with instant payouts and its dealerless nature, translate into faster game play, which maximizes playing time and player excitement, while minimizing human error and the intimidation new gamblers might feel about approaching an analog poker table. The gambling technology stock’s in-house development team is also constantly working on new games to keep content fresh, with a special focus on bringing international games and regional versions of poker to casino audiences in Asia, South America and the Indian subcontinent.

As hands are laid down and pots pile up, players can also track game stats in real time, which inform future strategy and enhance the thrill of the moment with an added element of competition.

Operator benefits

From an operator’s perspective, a floor of automated gaming tables can meaningfully and instantly reduce casino staff expenditures and management pain points, while avoiding wage inflation, labour shortages and supply costs.

The Blitz is no slouch on revenue either, dealing more hands per hour, resulting in higher revenue and higher profitability, which is further enhanced by onboard side bets and mini-games that can be played while players are engaged in a poker hand.

The Jackpot Blitz’s economics are attractive to operators thanks to its ability to accommodate non-stop play, while monetizing downtime through side games and bets. While a human dealer must spend time shuffling, interacting with players, and consulting with colleagues, the Jackpot Blitz can accept wagers 100 per cent of the time, making sure gamblers get the action they came for and operators see a return on their investment.

Source: Jackpot Digital.

Beyond gaming revenue, casinos are further incentivized to onboard the Jackpot Blitz because of its fully customizable advertising functions, including logos, card backs, chips and felt colors, all of which bolster casino culture and enable the pursuit of revenue from third-party advertising partners.

The Blitz ties its value proposition together by generating automatic reports – including demographics and consumer behaviour through a rewards card system – and plugging directly into most back-end management systems, saving casinos the hassle of manual tracking, while also minimizing tampering, money-laundering and theft through the use of isolated servers.

Whether it’s streamlining the player experience or putting automation at the service of operators’ bottom lines, Jackpot Digital’s flagship product is positioned to create value, and plenty of it.

Jackpot Digital’s path to profitability

After existing as an exclusively cruise-ship-based operation since 2015, Jackpot Digital suffered a steep decline in revenue during the COVID pandemic, falling from C$2.18 million in 2019 to C$0.42 million in 2021.

Management quickly pivoted in the face of uncertainty, redesigning the Blitz to execute on a land-based expansion strategy – backed by Gaming Labs International certification in fall 2023 – which is bringing about a successful turnaround after the re-emergence of the casino business. Revenue more than tripled to C$1.43 million in 2022, and reached C$1.57 million through three quarters of 2023, with the company expecting to ramp up significant recurring revenue after it installs several dozen machines currently in its backlog.

The Jackpot Blitz electronic gaming table in action. Source: Jackpot Digital.

The first installation of land-ready Jackpot Blitz machines is now completed at the Jackson Rancheria Casino in California, as the company announced today. The three-machine installation marks a new era of growth for the company, having announced 25 Blitz deals since November 2021 (slide 12), with many more across Canada and the United States in the works, in addition to a strong pipeline in Asia and Europe.

“Jackpot Digital could be a profitable company right now if it only focused on care and maintenance of the revenues it currently generates. But that’s not why we’re here,” Mathieu McDonald, Vice President of Corporate Development at Jackpot Digital, said in a recent interview with Stockhouse. “We intend to scale up to many multiples of the tables we have out right now, with the potential for up to 2,000 tables over the next three to five years.”

According to McDonald, the company is fielding three to five inquiries per week about the Blitz from casinos around the world that recognize the machines’ first-mover advantage in dealerless poker and potential expansion into other games in need of automation.

Jackpot Digital’s ambitious plan of action is supported by a management team of proven gambling, finance, advertising and legal professionals, many of which have been serving Jackpot stakeholders for more than two decades.

A long-tenured management team

The management team behind Jackpot Digital is led by Jake Kalpakian, who has served as president and chief executive officer since 1999, including under the gambling technology stock’s former incarnation as Las Vegas From Home.com Entertainment Inc. Kalpakian brings more than 30 years of experience managing small-cap publicly listed companies, granting him a steady hand when it comes to maneuvering through the volatility of the economic cycle.

Kalpakian’s efforts are supported by three directors whose well-rounded expertise positions Jackpot Digital for long-term sustainable growth:

Gregory T. McFarlane, a director at Jackpot Digital since 1999, previously ran an independent advertising firm and holds a degree in mathematics from the University of Toronto. McFarlane is also a co-founder of the popular Control Your Cash personal finance website. Chief financial officer Neil Spellman, a director at the company since 2002, boasts an almost two-decade track record as vice president at Wall Street firm Smith Barney, where he developed a multi-industry understanding of the journey to profitability. Finally, Alan Artunian, a director since 2017, currently serves as CEO of Nice Guy Holdings, a corporate and legal consulting company advising clients across a diversity of sectors.

Guided by a strategic management team, and benefiting from a macro-trend toward casino automation, Jackpot Digital is on course to ride a wave of millions of gamblers looking for an elegant, tech-informed alternative to traditional in-person play.

A multi-bagger opportunity

The Jackpot Digital opportunity sets up savvy investors who recognize the soundness of the company’s value proposition. The tremendous risk/reward value of Jackpot Digital gives investors the opportunity to ride the macro-trend toward casino automation, as deals for the Blitz keep pouring in, the company adds games to its portfolio, and the global casino industry adds hundreds of billions in revenue through this decade.

Join the discussion: Find out what everybody’s saying about this gambling technology stock on the Jackpot Digital Bullboard.

This is sponsored content issued on behalf of Jackpot Digital, please see full disclaimer here.

The post This gambling tech stock is future-proofing the world’s casinos appeared first on The Market Online Canada.

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