 Hey everyone, this is Dan with another episode of my videos on the Federal Reserve Banks. In this video, I will talk about the Fed Total Assets, QE, Quantitative Easing, and QT, Quantitative Tightening. Let's get into the details. The Fed or the Federal Reserve Banks are the central bank of the United States and they are certainly in charge of printing money. But in addition to printing money, the Fed has some other very important responsibilities. According to the mission statement on the Federal Reserve Banks website, it says the mission of the board is to foster the stability, integrity, and efficiency of the nation's monetary, financial, and payment systems so as to promote optimal macroeconomic performance. But that doesn't say much. The more telling information is really in the Fed's strategic goals. There are six stated strategic goals by the Fed. Number one, conduct monetary policy that promotes the achievement of the Federal Reserve statutory objectives of maximum employment and stable prices. Number two, promote a safe, sound, competitive, and accessible banking system and stable financial markets. And then there are four more additional strategic goals. I highlighted a few key words. They are maximum employment, stable prices, the banking system, and stable financial markets. Certainly if you invest in the stock market, you care about the stable financial markets as much as the Fed. But in addition, you need to know that the Fed has other strategic goals including maximum employment and stable prices. So what are Fed's assets? The Fed assets include Treasury securities that the Fed buys from the primary dealers. So who are the primary dealers? Here's a list of them. They're only about a couple of dozens of them. According to the Federal Reserve Bank's website, they are mostly the major banks. And then the Fed also has in its total assets mortgage-backed securities also purchased from the primary dealers. And then there are other assets including repurchase agreements or repo and discount window loans to banks. And then on the other side of the balance sheet, the Fed has the liabilities and that includes of course the money in circulation and the bank reserves on deposit with the Fed as well as reverse repurchase agreements. Now these are the Treasury securities that the Fed sells to the counterparties, which is the opposite of the Fed assets. What happens when the Fed buys assets? When the Fed buys assets, it receives Treasury securities or mortgage-backed securities from a primary dealer. And then in exchange, the Fed issues credit to the primary dealer. This is a graphical representation of the transaction. This is the Fed. This is the primary dealer. The Fed receives Treasury or mortgage-backed securities from the primary dealer and a Fed issue credit or money to the primary dealer. Of course, this is not paper money, it's an electronic form of money. When the Fed issues credit to the primary dealer and the dealer can turn around and loan the money to its customers or invest the money or credit in other instruments. Therefore, when the Fed buys assets, it's in effect printing money or creating money or adding liquidity to the overall market. If you like what you've seen so far, I'd like to encourage you to click the like, subscribe and notification button. Thank you very much. We will continue. Let's see how the Fed total assets have been increasing over time. If you look all the way back to 2004, you can see that we had back then less than $1 trillion of Fed total assets. And then the Fed went through several rounds of QEs or quantitative easing by adding more liquidity to the market or by purchasing more assets. The first round happened during 2008. That was during the great financial crisis. As you can see, the Fed assets doubled during that time from $1 trillion to $2 trillion. And then the Fed went through another round in 2010 as QE2, yet another round in 2012, QE3 and the last big round was QE4 that happened during the 2020 pandemic. In QE4, the Fed total assets went from about $4.5 trillion to $9 trillion, double again. As you can see, the Fed has added a lot of assets just in the last couple of years. In other words, the Fed has been adding a lot of liquidity to the market, a lot of money into the market. What's an added effect to the stock market? If you look at the two lines here, the orange line is the Fed assets, a double between 2017 and today. And the blue line is the ETF SPY representing the movement of the S&P 500 index, SPY almost double also during this period. So there's definitely a very strong correlation between having more total assets for the Fed and the stock market being higher. What's happening now is that the Fed will be going through the opposite of QE, it will be QT, quantitative tightening. From this chart, you can see that since after the pandemic, the Fed total assets had been increasing at the rate of $120 billion a month. But starting April of this year, it has flattened out. It has not increased anymore and actually it's been decreasing in the last two, three weeks. During the Fed's latest plan, in the months of June, July and August, the Fed total assets will be decreasing at the rate of $47.5 billion a month. It's starting to head down like this. And then starting September, it'll go down even faster. Starting September of this year, the Fed total assets will be decreasing at the rate of $95 billion a month. With QT, I expect the stock market to be dropping in the next few months. In addition to subscribing to my YouTube account, I'd also like to encourage you to subscribe to my Twitter account, which is DanMarketL. I share almost on a daily basis some of my trades or any important news development with my subscribers on Twitter. For example, on May 24th, I tweeted that I saw my SQQQ share at 2.6% gain because it looks like the market is rebounding. And then on May 25th, the following day, I said that because the GDP price index was 8%, higher than April 7.1%, I expected the May CPI, which will be posted on June 10th, to be higher than April's 8.3%. That means the Fed will be motivated to step up the rate hikes to tame inflation, which will make the market more bearish. And then on May 27th, I said I saw 2.3% of my UCO ETF shares, which I bought on May 19th, and I realized a 9.5% profit. If you like what you're seeing so far, I'd like to remind you again to click the like, subscribe, and notification button. And as usual, I very much appreciate your comments, questions, and suggestions. I'd like to remind you that I'm not a financial advisor. I share my analyses and stop trading strategies for educational and entertainment purposes only. If you want to buy or sell stocks, you should definitely make your own decisions, and you should consult with your financial advisors before you do so. This wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.