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After Nearly Two Years Of Searching, TrimTabs Still Can't Figure Out Who Is Buying Stocks

Tyler Durden's picture




 

A year after Charles Biderman's provocative post first appeared on Zero Hedge, in which he asked just who is doing all the buying of stocks as the money was obviously not coming from retail investors (and came up with one very notable suggestion), today Maria Bartiromo invited the TrimTabs head once again (conveniently in CNBC's lowest rated show, during Christmas Eve eve, at a time when perhaps 5 people would be watching) in an interview which disclosed that after more than a year of searching, Biderman still has no idea who actually buying. In response to Bartiromo's question if the retail investor, who left after the flash crash (thank you SEC), Biderman responds what every Zero Hedger has known for 33 weeks: "Retail investors are not coming back to the US. Those investors that are investing are buying global equities and are buying commodities. We are seeing lots money going into commodity ETF funds: gold, silver..." and the even more unpleasant summation: "individuals have been selling, companies are net selling, insider selling and new offerings are swamping any  buyback and any cash M&A activity since QE 2 was announced. Pension funds and hedge funds don't really have that much cash to invest. So what nobody's asking is what happens when QE 2 stops: if the only buyer is the Fed, and the Fed stops buying, I don't know what is going to happen...When I was on your show a year ago I was saying the same thing: we can't figure out who is doing the buying it has to be the government, and people said I was nuts. Now the government is admitting it is rigging the market." Cue Bartiromo jaw dropping.

As for the simple math of where the money is actually going:

"Money flows come out of income, take home pay of everybody plus money that came from real estate is down about $1 trillion a year. It peaked in the 3rd quarter of 2008, at $7 trillion, that's take home pay for everybody who pays taxes plus the money that came from real estate. It has now bottomed at $5.9 trillion. We are still down $1.1 trillion in money that people have to spend each year, that 16%. And some of the money that is leaving equity markets we think is going to pay bills."

Much more CNBC non-grata truthiness in the full clip, in which Biderman suggest what Zero Hedge readers realized over a month ago, that in June QE3 will likely have at least a partial municipal bond focus.

 

Update: Charles has just sent in the following addendum to his CNBC appearance:

Due to time constraints, what I didn’t get to address on CNBC today is what will happen after the Fed is either successful or not successful with QE2. The Fed is rigging the market by digitally creating money that is used to buy financial institutions assets —  currently Treasuries, last year all kinds of toxic waste. What will happen when the Fed stops buying assets?

What the Fed is hoping is that QE2 actually works and the economy starts growing at 3+%. If that happens, unlikely as it is, then the Fed will end its QE activities. But for the stock market, if the only source of buying power, the Fed, withdraws its support, the market is likely to plunge to well below fair value. At that point perhaps some new source of money , i.e., China, et al will be able to buy US assets on the cheap. 

The Fed is legally mandated to manage the economy, not the stock market.  If the Fed’s QE is successful and the trickle down impact of higher equities creates a sustainable recovery, the Fed will gladly sacrifice the stock market to its legal mandate to manage the economy.

A more likely outcome is that while stocks will be higher by the end of QE2, economic growth will not be sustainable without government aid. That would then require additional QE. Stock prices could then keep rising for a while. At some unknowable now moment in time, unless the economy starts to grow again, no amount of QE can work forever in keeping the current stock market bubble from bursting.

 

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Thu, 12/23/2010 - 19:10 | 827141 High Plains Drifter
High Plains Drifter's picture

Yep, Biderman sounded like Tyler Durden today. Either that or he has been reading ZH.

Thu, 12/23/2010 - 19:27 | 827168 cougar_w
cougar_w's picture

You ever notice how you never see those guys in the same room together?

Just say'n

Thu, 12/23/2010 - 19:53 | 827208 Cheesy Bastard
Cheesy Bastard's picture

Biderman doesn't look like Brad Pitt, however.

Thu, 12/23/2010 - 21:30 | 827342 hedgeless_horseman
hedgeless_horseman's picture

I am Jack's overdeveloped sense of holiday cheer.

Merry Christmas, everyone, and Happy New Year!  This past one sure has been interesting. 

Call someone you should have forgiven a long time ago.

Don't drive drunk.

And may the peace of the Lord be always with you!

Thu, 12/23/2010 - 21:35 | 827369 Cheesy Bastard
Cheesy Bastard's picture

And may the peace of the Lord be always with you!

+1

Thu, 12/23/2010 - 22:15 | 827422 jeff montanye
jeff montanye's picture

nice talk.

Fri, 12/24/2010 - 18:26 | 828674 Malcolm Tucker
Malcolm Tucker's picture

Maybe a Fed or Treasury employee would catch the PPT in action and upload a video using...The Patriot APP:

http://fedupmontrealer.blogspot.com/2010/12/patriot-app.html

unbelievable

Thu, 12/23/2010 - 23:24 | 827502 tahoebumsmith
tahoebumsmith's picture

youch..is your head twisting around at warp speed? Kind of harsh even for the roughest of us.

Fri, 12/24/2010 - 00:30 | 827562 iDealMeat
iDealMeat's picture

I junked you with pride..  Although I'm godless and lord-less I still think you should change your name to:

NuterSpade

End your genetical contribution to humanity..

good riddance..

Fri, 12/24/2010 - 00:46 | 827576 Amish Hacker
Amish Hacker's picture

Kindly remember: It's nice to be important, but it's more important to be nice.

Fri, 12/24/2010 - 01:15 | 827600 vxpatel
vxpatel's picture

the peace of the lord is within, as is the kingdom of heaven.

 

I'm just say'in....

Fri, 12/24/2010 - 03:28 | 827713 revenue_anticip...
revenue_anticipation_believer's picture

VELO new to ZH i see...eh, he he ha ha

Fri, 12/24/2010 - 05:03 | 827760 Problem Is
Problem Is's picture

Rude Newbie With a Mouth a Flappin'... <JUNK>
5th Rule is... you have to shut up the first 26 weeks or put something in that pie hole...

Thu, 12/23/2010 - 22:17 | 827425 Aghast in Midlothian
Aghast in Midlothian's picture

And also with you.

Thu, 12/23/2010 - 22:43 | 827453 Katharotes
Katharotes's picture

@hedgeless

amen

Thu, 12/23/2010 - 20:00 | 827222 knukles
knukles's picture

.... in the presence of Marla. 

Aaaaaaaargggggggggaaaaaaaaaaaaaahhhhhh.

No.  NFW.  Maria is Not Marla.  Tell me it ain't so, Joe.

Thu, 12/23/2010 - 20:30 | 827251 El Hosel
El Hosel's picture

  "We can't figure out who is buying"

  Its the "New Deal", selling makes the market go up.

    WTF? He knows who is buying.

Thu, 12/23/2010 - 20:26 | 827253 unwashedmass
unwashedmass's picture

well after this, we're not going to see Chuck again until Christmas 2011.

Thu, 12/23/2010 - 20:30 | 827260 High Plains Drifter
High Plains Drifter's picture

She kept trying to put the old CNBC spin on things, as usual.

Thu, 12/23/2010 - 21:01 | 827310 dark pools of soros
dark pools of soros's picture

she always keeps her eye on where the growth is

Thu, 12/23/2010 - 23:39 | 827521 Cursive
Cursive's picture

she always keeps her eye on where the growth is

Lulz.  Even at 15,000 feet in a compresurized compartment.

Thu, 12/23/2010 - 21:24 | 827348 Thomas
Thomas's picture

Yeah. She simply refuses to respond to his assertions, instead chosing to act very matter-of-fact.

Thu, 12/23/2010 - 21:42 | 827377 Bay of Pigs
Bay of Pigs's picture

Why not just say she's as dumb as a bag of hammers?

Thu, 12/23/2010 - 22:34 | 827448 fellatio is not...
fellatio is not fattening's picture

As usual anytime he said something provocative she just made some sucking sound and said "uh yah yah" she needs to lose that damn retainer "suck suck um yah yah"  why doesn't she ask "Charles, do you truly believe the gov't the Fed is buying stocks?" but nope, uh yah yah

Thu, 12/23/2010 - 22:42 | 827451 Cheesy Bastard
Cheesy Bastard's picture

Your name is "Fellatio is not fattening".  I have been called a ""cunning linguist".  Yes, it rolls right off the tongue.  "Cunning linguist".  I usually get junked by those who don't get "cunning linguist".  I can understand that people get frustrated if they don't get it.  Yeah, I know, too bad I am taken....

Thu, 12/23/2010 - 22:58 | 827463 VeloSpade
VeloSpade's picture

So if I understand correctly, you like eating cunt?

Thu, 12/23/2010 - 23:13 | 827471 Cheesy Bastard
Cheesy Bastard's picture

Which answer would make you respect me more in the morning, yes or no?  (7 replies to go, sweetie,  unless you lift the restraining order...)

edit:  Ok, it's Christmas, so if you insist, I will kiss you under the cameltoe...

Fri, 12/24/2010 - 12:58 | 828059 Fidel Sarcastro
Fidel Sarcastro's picture

"edit:  Ok, it's Christmas, so if you insist, I will kiss you under the cameltoe..."

LMFAO


Fri, 12/24/2010 - 06:08 | 827770 Ted K
Ted K's picture

The truth hurts friend.  Remember this is the skank who asked Congressman Anthony Weiner (roughly age 49) why wasn't he on Medicare???  And the interview with her mouth wide open for Thain's tool (by tool, of course I mean Thain's propaganda) as he told her his bank was on solid ground and very solvent. "REALLY!!!"


Thu, 12/23/2010 - 22:46 | 827454 mr66
mr66's picture

I'm staying out and waiting for the reset

Thu, 12/23/2010 - 19:14 | 827146 King_of_simpletons
King_of_simpletons's picture

Skynet. Pure and simple, just coz the odometer is running doesn't mean the wheels are turning too.

Thu, 12/23/2010 - 21:21 | 827344 New_Meat
New_Meat's picture

... er ... Stuxnet

Thu, 12/23/2010 - 19:14 | 827148 bogey4
bogey4's picture

I must have been out the day the government admitted to "rigging the market."

Thu, 12/23/2010 - 20:10 | 827229 knukles
knukles's picture

Yeah.  Where'd that shit come from?  The Bernank, Timmah, none of them's said so outright.  Charlie says so and Maria agrees, so like everybody do get it, Lordie, Lordie, and if MSNutbagM say so.....  But, ain't been no "Official" Fed or Treasury announcement about an "Official" equity account, let alone an "Official" gold or even, and less likely, an "Official" silver account.
(JP's silver is probably "Unofficial" parallelling the "official" gold programs, as it would explain the DoJ, scrambling offshore, etc.)

Thu, 12/23/2010 - 21:02 | 827309 Red Neck Repugnicant
Red Neck Repugnicant's picture

Question for anyone...

Please explain something to me:

How does QE2 inflate the stock market, and do you have any proof to support your claim?

In November, when QE2 was implemented, there were over $1 Trillion in excess reserves just sitting at the Federal Reserve by member banks. Some of this is real cash, some is just digits on a screen.   

With the commencement of QE2, the Fed has transferred $75 billion ($75B/month for 8 months) from savings accounts to checking accounts of the member banks. This is NOT money printing - it is simply a digital accounting gimmick on a ledger, where digits are moved from the savings side (bonds) to the checking side (digital cash) of a ledger. 

Bonds are nearly identical to cash, except for the interest they yield.  Cash sits in a checking account and earns X% interest, while bonds sit in savings accounts and earn X(plus a little more)% interest.  Those banks are in no different position financially (with exception of minimal interest differences) to invest money into the stock market than they were before QE2.  Had the banks wanted to exchange their bonds for cash, and invest that cash into the market, they could have instantaneously.  In this example, cash and bonds are identical.

Here's a real world example that mirrors what is happening to those checking/savings accounts at the Fed:

Imagine you have $1 million dollars in cash sitting at a bank, and you currently have no use for it. Now imagine that you convert your house into a HELOC, thereby converting your home into $100,000 of available credit.  Your wealth has not increased - only your personal accounting ledger has changed. And now you have $1.1M in cash/credit that you aren't using.   

Having said this, please explain how QE2 inflates the stock market, or please explain how my summary is wrong. The market has been moving up for 1 year 9 months.  Why is the last 30 days any different, and how did QE2 affect the last 30 days of market activity?

Thu, 12/23/2010 - 21:16 | 827330 Cheesy Bastard
Cheesy Bastard's picture

I admit this is a simplistic example, but it gets to the crux of your question.  Qe (whatever) leaves the banks flush with cash.  Money borrowed at zero interest can be invested short term (with even a small yield) in equities.  Instant profits, no risk.  They trade to each other, back and forth.  They can't lend because no one wants to borrow, and even if there were, there are no standards left for lending.  Risk.

If I could prove it, it wouldn't work anymore.  I can't prove gravity exists, either. 

Thu, 12/23/2010 - 21:46 | 827378 Red Neck Repugnicant
Red Neck Repugnicant's picture

Money borrowed at zero interest can be invested short term (with even a small yield) in equities.  Instant profits, no risk.

 

If the banks wanted to implement that strategy, they could have before QE2 - QE2 has no influence on that strategy. Their bonds could have been exchanged for cash instantaneously in the open market. At any point prior to QE2, those banks could have taken their bonds, exchanged them for cash in the open market, and used that cash to buy equities for the short term, as you say.

Qe (whatever) leaves the banks flush with cash.

Before QE2, banks were already flush with cash.  There were over $1 trillion in reserves at the Fed in November. 


Thu, 12/23/2010 - 22:11 | 827417 Cheesy Bastard
Cheesy Bastard's picture

If the banks wanted to implement that strategy, they could have before QE2

Yep.  It was called "tarp" way back then.

Before QE2, banks were already flush with cash

Nope.  Flushed with debt.  Different

Thu, 12/23/2010 - 22:17 | 827427 packman
packman's picture

At any point prior to QE2, those banks could have taken their bonds, exchanged them for cash in the open market, and used that cash to buy equities for the short term, as you say.

I'm a pure layman so this is conjecture - but don't those bonds apply towards banks' capital reserve ratios?  And equities can't be used as such can they?  Thus in order to do such an exchanged (bonds->cash->equities) they would have to call a ton of loans (i.e. pull money out of the economy) in order to maintain their reserve ratios, would they not?

Bottom line is that even Ben has stated that QE2 is essentially printing money.  Why in the world would he say so if it wasn't true?  If anything he would make statements to the opposite effect.

 

 

Fri, 12/24/2010 - 10:41 | 827901 Red Neck Repugnicant
Red Neck Repugnicant's picture

@packman

You are spreading wrong information, which is understandable because nearly everyone in the comments section here is making up facts.  Bernanke NEVER said that QE2 was "essentially money printing."

Everyone is making wild conjectures based on wrong information.

Bernanke's exact words were:

“What the purchases do… is… if you think of the Fed’s balance sheet, when we buy securities, on the asset side of the balance sheet, we get the Treasury securities, or in the previous episode, mortgage-backed securities. On the liability side of the balance sheet, to balance that, we create reserves in the banking system. Now, what these reserves are is essentially deposits that commercial banks hold with the Fed, so sometimes you hear the Fed is printing money, that’s not happening, the amount of cash in circulation is not changing. What’s happening is that banks are holding more and more reserves with the Fed.Now the question is what happens the economy starts to grow quickly and it’s time to pull back the monetary policy accommodation. There are several tools that we have”

Fri, 12/24/2010 - 12:41 | 828031 The LD
The LD's picture

 

From March 2009:

 

"You've been printing money?" Pelley asked.

"Well, effectively," Bernanke said.

 

So how is it that QE1 effectively printing money, and QE2 is not? You are being disingenuous. 

Fri, 12/24/2010 - 14:16 | 828176 Red Neck Repugnicant
Red Neck Repugnicant's picture

It is really important that you (and others on this forum) understand something:

So far, both QE1 and QE2 are (for the most part) key strokes on a keyboard - not the work of the printing press.  I truly don't think you guys understand the mechanics of quantitative easing and how this money is "created" and accounted for. 

It was widely assumed that QE1 would lead to money printing (and perhaps it has, to some small degree, but not what you guys assume), as Bernanke thought banks would ask to "cash in" their new digital/binary "cash" balances held at the Fed. Bernanke hoped that banks would take the trillion or so dollars, and begin to diffuse it through the economy in whatever manner they felt would increase returns, such as loaning money to businesses and consumers.  No doubt about it, he was hoping this would increase the velocity of money and breathe some life into the economy.   

Here's the problem:  Banks did NOT ask to "cash in" their digital/binary balances.  Surprisingly, the banks are just letting the reserves accumulate, rather than asking for tangible cash to lend.  For the most part, the digital/binary cash from QE1 still remains nothing more than a digit on a screen, a balance on a ledger. That is why QE1 did nothing for the economy, and did not lead to money printing as Bernanke had thought. Money is NOT being diffused through the economy as loans or investments. For all practical conversations, it's just a digit on a screen.

Under normal times, reserves held by the Fed are typically around $10 - $15 billion, or so.  As of November, reserves are around $1 TRILLION.  That "money" just exists as a digit on a screen - not moving, not doing a damn thing except earning .25% interest. 

QE2 is doing nothing for the banks, except adding to those excess reserves that the banks don't need right now. The function of QE2 is to allow our Treasury to borrow money for free (interest earned by treasuries held by the Fed are rebated back to the Treasury at year end), and to pick up the lost demand for our bonds, now that China seems more focused on buying hard assets rather than our debt.  There is NO money being added to circulation in QE2; the money that the Treasury gets for its bonds was already paid by the banks before the Fed enters into the picture.  

The threat to inflation will occur when banks begin to "cash in" these trillion dollars worth of accounts at the Fed.  As soon as the economy turns, the banks will ask for "real cash" to loan into the economy, and those digital/binary accounts will be turned into real paper currency.  As cash is printed and velocity increases, there will be more cash in the system to chase goods and services.  But Bernanke can adjust that - in 15 minutes, if he wishes.  He can simply raise rates and raise reserve requirements which will shut the spigot.  

As a side note, it is amazingly funny how the 23 Republicans wait until QE1 is done to pen their open letter criticizing the Fed.  Once the banks have gotten all the money they need (and more), THEN the Republicans start firing off angry letters into the newspapers - hilarious and pathetic.  How convenient that they start conversations about inflation, AFTER the banks got all the money they need and have a trillion in reserves they can't use.  Apparently, inflation is only a concern if the banks can't benefit from it.  Once banks can't benefit, they pull out their magical puppet strings, attach them to their favorite Republican talking head, put them on soapboxes and turn on the microphones - the Kabuki theatre is now open for business.    

lol

 

 

Sat, 12/25/2010 - 02:28 | 829333 Chuck Bone
Chuck Bone's picture

E2 is doing nothing for the banks, except adding to those excess reserves that the banks don't need right now. The function of QE2 is to allow our Treasury to borrow money for free (interest earned by treasuries held by the Fed are rebated back to the Treasury at year end), and to pick up the lost demand for our bonds, now that China seems more focused on buying hard assets rather than our debt.

That is a benefit of course.  Not only is the Federal Reserve able to temporarily bail out a completely debt-ridden and unfunded liability filled state by buying its bonds when people are finally realizing that maybe this whole system of tons of sovereign credit just isn't sustainable. Your analysis however neglects to take into account just how absolutely and utterly insolvent the large banking institutions are. Their balance sheets are a complete mess, just behemoths full of extremely complex derivatives and toxic residential debt (which by the way still hasn't finished adjusting further into the toilet--we still have a large amount of option ARMs that have yet to reset) which they can only deal with by propping up the asset side of their balance sheet through these excess reserves and hiding the true losses by changing the accounting rules.

Then there is the fact that the ONE group which runs the Fed (which is the entity that is really supposed to be keeping these BANKrupt institutions in line!) is the same group that works for these banks! So of course they are going to claim that the worst thing in the world is for the price of this debt to clear, that everything is fine and they didn't all just collective take on tons of risk and now they are doing everything they can to cover their asses. A normal market would PUNISH this behavior, a non-complicit state would go after these fuckers for the sheer fraud, but instead everyone in charge wins. Politicians get elected, and the bankers stay rich and keep getting bonuses while the leverage increasingly is transferred to the state.

Then of course there is the fraud that led to the creation of all this debt in the first place, through both easy lending courtesy of the monetary policy from this same institution and nobody asking questions about just how they were packing all these notes into trusts and selling it while knowing full well it was full of garbage but just doing a half assed statistical analysis and lying to ratings agencies and investors, hiding the sheer garbage within.

It's just a story group of people who by actively managing the economy by not allowing their malinvestment and risk-taking and FRAUD to go unpunished just benefit while the rest of us see everything we must buy increase increase in price, and wait for the excess reserve moneybomb to finally hit the economy. Meanwhile the masses are placated by handouts, financed by the increasingly leveraged state. 

It's a simply unsustainable system, and it will end poorly. It's like yo have a hole in your boat and you continually keep bailing it out at a slower rate than the water is coming in, rather than plugging the hole. Ben likes to pretend that when the inflation hits he'll be the one raising the rates, but time and time again the invisible hand proves it's really in charge because interests rates will rise and that's when you know the shit has hit the fan.

Sat, 12/25/2010 - 21:45 | 830096 chopper read
chopper read's picture

A normal market would PUNISH this behavior, a non-complicit state would go after these fuckers for the sheer fraud, but instead everyone in charge wins. Politicians get elected, and the bankers stay rich and keep getting bonuses while the leverage increasingly is transferred to the state.

 


It's just a story group of people who by actively managing the economy by not allowing their malinvestment and risk-taking and FRAUD to go unpunished just benefit while the rest of us see everything we must buy increase increase in price, and wait for the excess reserve moneybomb to finally hit the economy. Meanwhile the masses are placated by handouts, financed by the increasingly leveraged state.

 

It's a simply unsustainable system, and it will end poorly. It's like yo have a hole in your boat and you continually keep bailing it out at a slower rate than the water is coming in, rather than plugging the hole. Ben likes to pretend that when the inflation hits he'll be the one raising the rates, but time and time again the invisible hand proves it's really in charge because interests rates will rise and that's when you know the shit has hit the fan.


well put, Chuck Bone.  well put, indeed.  

Fri, 12/24/2010 - 16:11 | 828398 traderjoe
traderjoe's picture

RNR, I'll take a stab at responding to your query, which I felt was a legitimate comment, but the original might get junked into oblivion...

I do believe QE2 increases the 'money supply', but clearly it depends upon how you define that term. 

Let's start from a zero state: Fed balance sheet with zero assets, banks own $100 billion in UST's. In QE2, the Fed purchases the $100 billion in UST's from the banks with new Federal Reserve Notes. So, the Fed balance sheet now has $100 billion in UST's as assets (and a liability of $100 billion for FRN's). The bank's balance sheets are $100 billion in cash, instead of UST's. 

So, the broadly defined money supply, the Fed's assets plus the bank's assets has gone up by the $100 billion. You are partially right in the sense that if the Fed never re-deployed that additional $100 billion (stored in UST's), less-broad measures of the money supply would be unchanged. 

However, if the banks chose not to replace the sold UST's with new UST's, this redeployed capital can flow into stocks, commodities, etc. It may have been impossible for banks, CB's etc. to unload (and the Treasury to sell) 'excess' UST's without the Fed purchasing them. 

So, yes, I believe the all-encompassing 'money supply' has increased. And the QE flows to the bank are not being used to re-purchase UST's. Finally, I think the Fed and the main PD's are gaming the market higher in ways that are not immediately apparent at this time. 


Thu, 12/23/2010 - 23:45 | 827528 Cursive
Cursive's picture

@CheesyBastard

I can't prove gravity exists, either. 

I'll take that bet.  We could test it on a couple of bankers in a lower Manhatten high rise.

Thu, 12/23/2010 - 23:59 | 827547 Cheesy Bastard
Cheesy Bastard's picture

+qe3. Keep testing the theory all day and all night.  Excellent.

Thu, 12/23/2010 - 21:19 | 827340 MichaelNY
MichaelNY's picture

That fake money's gotta buy something...both to earn its keep and to earn its keepers a keep.  Whaddya suppose it's gonne buy?  BRICs and bricks, and equities, and bonds too.

Thu, 12/23/2010 - 21:32 | 827366 Red Neck Repugnicant
Red Neck Repugnicant's picture

No.  It doesn't need to buy anything.  It can just sit there earning interest, as it was before.  

First, it sat there earning very little interest as a bond.  Now, it sits there earning slightly less interest as binary cash.

Assume you have $1,000,000 cash in a briefcase, and don't use it.  Now you cash a bond for $75,000 and put that cash in your briefcase.  Do you have to use it?  No.  Now you have $1,075,000 cash in a briefcase that you aren't using.  

 

 

Thu, 12/23/2010 - 21:41 | 827376 Cheesy Bastard
Cheesy Bastard's picture

If I may be so bold, it earns negative interest if it just sits, unless you count in terms of only nominal gains.  I currently have only just a simple question.  Does the law of supply and demand apply to the fiat dollar?  Maybe you can educate me.

Thu, 12/23/2010 - 21:58 | 827397 espirit
espirit's picture

Watch the tick on the dollah. Somebody with alot of BennieBux buys/sells in lots big enough to move the DX and make profits. What do you think it takes?

50 mil? a hundred? 500 mil?

Thu, 12/23/2010 - 22:05 | 827409 bonin006
bonin006's picture

You and I care about the real return because we use our own money. If we "save" $1000 at 0.5% interest and inflation is 5.5%, after 1 year we have lost $50, but the bank, that took our $1000 and got say 3.5% nets a nominal gain of $30 per year, which is a real after inflation gain of $28.50 

Thu, 12/23/2010 - 22:16 | 827423 Cheesy Bastard
Cheesy Bastard's picture

Thank You!  Bank makes real return, you make nominal return (loss).  They dont even need to lend you money to steal your money.  Inflation does the dirty work for them.

Thu, 12/23/2010 - 23:33 | 827512 Al Gorerhythm
Al Gorerhythm's picture

In a nutshell; you have to work to earn money from guys who only have to print it to pay you...... paper.

They get to spend their funny money in the open market buying assets they haven't had to work for. 

WOW!!! How do I get on that gravy train.

New Year resolution: Give up share cropping, put on my home-spun suit and get to know that Hilton girl or one of them fancy Roth's childs beauties.

Fri, 12/24/2010 - 00:45 | 827575 chopper read
chopper read's picture

no reason to complicate things.  marry a rockefeller.  this is nothing shy of a pure feudal system.  i long for the days that we try and hang these scumbags from the gallows for all of the pain and misery they have caused once-free people.  

i'd prefer we start here:

http://en.wikipedia.org/wiki/David_Rockefeller

i would not shed a tear if someone put a bullet in this idiot's head:

http://en.wikipedia.org/wiki/David_Mayer_de_Rothschild

 

Fri, 12/24/2010 - 02:26 | 827659 Al Gorerhythm
Al Gorerhythm's picture

Do I get shot if I'm just a "prick" relation?

Sat, 12/25/2010 - 01:00 | 829241 chopper read
chopper read's picture

depends upon whether or not you are a financial beneficiary of America's debt-based money system, and whether or not you are an indirect owner of the private Federal Reserve Bank via an LLC or otherwise.  If so, I'd love to put a bullet in your head for raping our country for 98 years, after a fair trial for treason in violation of the U.S. Constitution, of course.  If not, then you are a victim like all others, so no harm done. 

fair enough for you?

come to think of it, the only good Rothschild is a dead Rothschild, in my opinion.  So, go fuck yourself.  

Sun, 12/26/2010 - 07:56 | 830360 Al Gorerhythm
Al Gorerhythm's picture

Dang nabbit. Looks like I'll have to stick to my home-spun suit. The natives are getting cranky.

Mon, 12/27/2010 - 03:12 | 831298 chopper read
chopper read's picture

+1  

too funny! 

Fri, 12/24/2010 - 02:39 | 827662 Al Gorerhythm
Al Gorerhythm's picture

"They dont even need to lend you money to steal your money." 

They don't even have to print to give you money. They just send you a digital credit! Now why didn't I think of that?

In payment for my next bank fees and charges bill.. I reckon I'll just write them an email and attach some credits on it. Just returning the courtesy.

The more I think about it, fees and charges are just like the silver scam where banks charged folk storage fees for silver that people thought the banks had bought for them. Fees and charges are fees for borrowing fictitious money the banks convinced you that they had loaned you. What a fucking gyp! Just ledger book entries. 

 

Fri, 12/24/2010 - 01:54 | 827626 DaveyJones
DaveyJones's picture

well said and simple. now where is RNR's useless paid for response?

Fri, 12/24/2010 - 11:46 | 827977 Red Neck Repugnicant
Red Neck Repugnicant's picture

bonin006's quote:

You and I care about the real return because we use our own money. If we "save" $1000 at 0.5% interest and inflation is 5.5%, after 1 year we have lost $50, but the bank, that took our $1000 and got say 3.5% nets a nominal gain of $30 per year, which is a real after inflation gain of $28.50

I understand your point, but you are using the extreme numbers on both sides of your argument to make your argument look better than it is. First, .5% is among the worst yields you can find for anything.  If you're earning .5% on your money, then you haven't invested it properly.  On the other end, 5.5% inflation per year is extreme - that's even greater than the numbers out of China.

If you use real data points, and plug them into your argument, you will see that your argument looses a lot of steam. And that is beside the point that you still haven't answered my question about how QE2 inflates the stock market. 

Sat, 12/25/2010 - 15:55 | 829904 RockyRacoon
RockyRacoon's picture

Ok. I'll bite.  How does it cause market ramping?  Or does it?  Or what's the point of all the micro-argumentation?

Fri, 12/24/2010 - 11:02 | 827929 YHC-FTSE
YHC-FTSE's picture

+1

Fri, 12/24/2010 - 02:10 | 827645 QQQBall
QQQBall's picture

A bank has $1MM in depsoits and pays out interest to depositors. Bank loans out $9MM on $12MM ($75% LTV) in real estate. Real estate drops in value to $7.8MM (35% drop in value from $12MM). How is the bank flush with cash? Only if it deposits the $9MM note with the FED at face value? If the bank MTM their loan book, they are NOT just w/o cash, they are due a visit from the FDIC one Friday night.If its a LOC on equipment loan, its eve n worse.

 

I believe DSL showed big profits in part on "capitalized interest". The profit was an accounting gimmick - there was no dough there, just negative amortization, which is still reason to claim big bonuses.

Thu, 12/23/2010 - 21:25 | 827350 New_Meat
New_Meat's picture

how are Cas's focus groups workin' out for ya?  Since we're contributing for free, not even a gift certificate to a watering hole of our choice, at least you can clue in the crowd on the eventuating results.

really now...

- Ned

Thu, 12/23/2010 - 23:04 | 827470 undereducated
undereducated's picture

and you have just explained the ponzi...

Thu, 12/23/2010 - 23:07 | 827473 KickIce
KickIce's picture

For one, while the Fed is buying, top execs are selling.  So while the Bernake market stays inflated, cash is flowing into personal bank accounts.

Two, the government is spending more than they are taking in, meaning the money Ben is printing is going to social security, pork and pensioners.  Money that certainly will work it's way into circulation.

If the money supply isn't increasing, why the need to print at all?  There is 100 billion in unusable bills.  How much have they printed that is already in circulation?  Unfortunately, we will never know the full extent until there is an actual audit of the fed.  Yeah, I'm holding my breath.

 

Thu, 12/23/2010 - 23:19 | 827496 undereducated
undereducated's picture

If the money supply isn't increasing, why the need to print at all?

Ding, ding, ding.

Fri, 12/24/2010 - 02:44 | 827671 Al Gorerhythm
Al Gorerhythm's picture

If they can print money for nothing, why the need to tax at all?

Dang! Dang! Dang!

Fri, 12/24/2010 - 02:48 | 827676 primefool
primefool's picture

The tax system does not exist because they need the money ( as you say Ben can simply print it ). Taxes are what make the Dollar legit. You can barter, or use alternate record keeping schemes to avoid the dollar - but you WILL have to pay taxes in Dollars - or the state will employ violence against your person. It is no coincidence that the Income Tax system and the Federal Reserve system came into being at the same time ( around 1913).

Fri, 12/24/2010 - 02:57 | 827682 MsCreant
MsCreant's picture

We are so funny. We keep trying to figure out "the truth." 

Even the people who think they have the truth are lying.

We should all, withdraw.

Fri, 12/24/2010 - 03:05 | 827690 Al Gorerhythm
Al Gorerhythm's picture

Lying?

Fri, 12/24/2010 - 03:18 | 827701 MsCreant
MsCreant's picture

None of us can know what is "really" going on because:

1. Everyone involved is self interested, all of the stories are biased.

2. No one can apprehend the whole macro picture because no one can know all of the things going on. 

3. Even if you could be in all places at all times, you couldn't hold it all in your head at once.

4. Even those with the very best of intent cannot resist the temptation to "spin" when they do, indeed, come into possession of a bit of the puzzle. The enemy does it, right? So hyperbole is not such a bad thing if it is done for the sake of good, right?

My point of view may sound nihilistic at first blush, but it is actually our very best hope. All these things I listed apply to the likes of Bernanke, the leaders of GS, JP Morgan, China, you name it.

Even the effort to try to ferret out the truth, I swear, I wonder if it too is helping them and supporting the system.

 

Fri, 12/24/2010 - 11:25 | 827946 DaveyJones
DaveyJones's picture

all I know is that I know nothing - Socrates

and not once did any of you tell me hemlock is poison - Steve Martin

 http://www.youtube.com/watch?v=FdHp0FmEr78 

Fri, 12/24/2010 - 11:49 | 827984 Red Neck Repugnicant
Red Neck Repugnicant's picture

all I know is that I know nothing

Perfectly fitting quote.  I'm happy to see that you finally recognize your ignorance. Any chance you could attach that as your signature on all your posts? 

Fri, 12/24/2010 - 12:13 | 828001 DaveyJones
DaveyJones's picture

Glad to associate with Socrates. Good to know you wont 

Fri, 12/24/2010 - 13:51 | 828140 Mr Vepr Vyatskie
Mr Vepr Vyatskie's picture

"Even the effort to try to ferret out the truth, I swear, I wonder if it too is helping them and supporting the system."

Revelation of the Method and the Murder of Spirit

http://www.revisionisthistory.org/crypto1.html


Fri, 12/24/2010 - 03:06 | 827693 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I can be sure to know I will never know, but I still long to know.

Fri, 12/24/2010 - 03:26 | 827710 MsCreant
MsCreant's picture

I am glad I know more. Somehow that does matter. Better than just having their story only, and swallowing it, and choking and dying in their service. 

Somewhere the logicing it out fucks us. It keeps us stuck in the paralysis of analysis. Maybe I should just speak for myself. But when we engage them, ask them to answer charges, accuse them, even then, we are playing into their hands. What does the heart already know, that the head makes us doubt? 

 

Fri, 12/24/2010 - 04:01 | 827732 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The heart knows a laugh and a tear is worth more than any amount of tangibles.  The head can' believe it would be so simple.

Fri, 12/24/2010 - 02:59 | 827685 Al Gorerhythm
Al Gorerhythm's picture

You forgot legal tender laws and the monopoly of the FED to print. Cosy.

Fri, 12/24/2010 - 03:04 | 827689 primefool
primefool's picture

Yep cozy. Works too.

 I mean you and I can decide to drop out of the system and live without the evil fiat money. You sell me chickens, I mow your lawn. Right? Wrong. The IRS will attribute dollar values to your chickens and treat it like a dollar transaction and impose tax payable in dollars. Now - we are going to have to polish some bankers boots to earn dollars to pay the taxes. See - thats how it works.

Fri, 12/24/2010 - 03:20 | 827694 Al Gorerhythm
Al Gorerhythm's picture

Nobody cuts my grass!

Don't ask, don't tell. It's promulgated!

Fri, 12/24/2010 - 03:06 | 827692 MsCreant
MsCreant's picture

There is no normal to get back to. It was all always a lie.

Fri, 12/24/2010 - 03:14 | 827697 Al Gorerhythm
Al Gorerhythm's picture

Ahhh.

Fri, 12/24/2010 - 03:21 | 827707 MsCreant
MsCreant's picture

I tremble to say it, but I think I am willing to take that one back to the Constitution itself.

Fri, 12/24/2010 - 03:21 | 827708 Al Gorerhythm
Al Gorerhythm's picture

How so?!!

Fri, 12/24/2010 - 10:09 | 827876 WaterWings
WaterWings's picture

"The best defense against usurpatory government is an assertive citizenry." 
  --  William F. Buckley

 

"When dictatorship is a fact, revolution becomes a right."  

  --  Victor Hugo

Fri, 12/24/2010 - 11:29 | 827960 DaveyJones
DaveyJones's picture

or lips become tight

Fri, 12/24/2010 - 04:42 | 827748 KickIce
KickIce's picture

We're all tied to the dollar simply through property taxes, a tax that I'm sure our Founders would not have supported.

Fri, 12/24/2010 - 11:38 | 827970 TwelfthVulture
TwelfthVulture's picture

Actually, property taxes would be the only tax the founders would have approved.

Fri, 12/24/2010 - 11:46 | 827979 KickIce
KickIce's picture

I seriously doubt that seeing their strong views on property ownership.

They would be much more apt to support a sales tax.

Fri, 12/24/2010 - 12:42 | 828033 Buckaroo Banzai
Buckaroo Banzai's picture

Wrong. The founding fathers understood that most taxes undermine at least one of the three legs of Freedom (Life, Liberty, Property). Property taxes undermine property directly because the moment that the property tax is enacted, the State becomes the de facto owner of the taxed property.

Similarly, income taxes undermine your Liberty because you now labor for the benefit of the State, which now gets paid first for your labor (you get paid second).

The founders forbid direct taxes of all kinds for this reason. Excise taxes were the only taxes permitted because they are legally and morally avoidable-- and thus, consistent with Freedom.

Thu, 12/23/2010 - 23:07 | 827474 TwitFilter
TwitFilter's picture

It all has to do with "expectations".  Before QE2 the banks DID, in fact, buy everything (stocks, bonds and commodities) on the "expectation" of QE2.  Since QE2, bonds have sold off and gold and silver are just sitting there.  Equities have rallied a bit, but I think it is just EOY window dressing mixed with short covering.

To be sure, Wall Street vampires will continue to squeeze the blood out of every living soul via the FED who are nothing more than servants for the Living Dead.  Case in point was Tyler's observation that the recent spike in crude oil will wipe out all the 2011 SS tax benefit.  Basically, Wall Street is going after all your disposable income - the rat fucks that they are.

Watch.  Their next move will be to buy distressed munis with the "expectation" of QE3.  Of course, this will occur after state and locals fire tens of thousands of workers and cut critical services. These situations will go on and on...

To make money, one has to become like them.  This is where the REAL contagion exists - a lethal virus that will eventually consume itself.

 

Fri, 12/24/2010 - 12:25 | 828017 woolly mammoth
woolly mammoth's picture

That pretty well sums it up. Damn Rat Fucks.

Thu, 12/23/2010 - 23:23 | 827501 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Very 2 D example (bonds and cash affect M2 and M3 differently and that is just for starters).  you also forgot to mention the loan schemes using fractional reserve lending, and by the way, paper instruments are worthless but IOU.

Fri, 12/24/2010 - 00:01 | 827549 defender
defender's picture

The Fed let slip that they have been accepting equities for the discount window when the court ordered release of info happened a month(ish) ago.  Since the Fed is buying more Treasuries than are being sold, the total amount in the market is decreasing.  This cash is then going to the stock market, which is then being sent to the discount window.  Wash and repeat. 

The banks get the dividends and the Fed achieves its purpose.

Fri, 12/24/2010 - 08:40 | 827825 thepigman
thepigman's picture

Well, the fed didn't slip, they got
caught red-handed on equities which is
a violation of the Federal Reserve Act.
Anyway, NOW we know they do it.
The smoking gun would be the equities
showing up somewhere. They aren't in
the PDs value at risk, they aren't
on the Fed's balance sheet. What the
hell do they do with them? Does the
fed have an off-balance sheet dark pool
subsidiary where they keep their trash?
None of us would be surprised.

Sat, 12/25/2010 - 21:49 | 830098 chopper read
chopper read's picture

great questions, tPigMan. 

Fri, 12/24/2010 - 08:11 | 827813 XPolemic
XPolemic's picture

Well, we all know that you don't REALLY want the answer to this question, you are just trolling, but for the sake of discourse, here is my take.

Once upon a time, in a country that had free markets, there was something called 'Investment Theory'. Investment theory was long and complicated, but it really boiled down to two things: RISK and RETURN. 

The 'RATIONAL INVESTOR', the theory claimed, would seek the highest return, at the lowest acceptable level of risk. Of course, if investors are actually IRRATIONAL, then the theory does not hold, but let's assume the investor is rational, for the sake of argument.

What is the rate of return of a Treasury Issued Promissory Note at this point in time. Well, it is currently less than 1%. Given the current rate of inflation in the United States of American (conservatively 3%, but more like 10%), you would have to be BARKING MAD to purchase Treasury Issued notes.

In other words, you need to seek OTHER INVESTMENTS. Historically, when the economy 'corrects' or 'contracts', investors change their focus from chasing returns to protecting capital (flight to quality), but right now the Fed is driving down the returns on govt instruments so that investors can no longer do that.

As a consequence, investors moved to other markets. And there are still better returns (currently) in Equities than -2%. Even the dividend yield is higher for many companies than the treasury rate.

Capital must seek returns, or it decreases in value (time value of money), hence the capital inflows into equity markets (and commodities of course).

That's my take on it anyway. The Fed is preventing a 'Flight to Quality' and forcing investors into riskier investments, hence capital inflows into equity markets.

The more sinister scenario (as claimed here) is that the Fed is actually purchasing equities to prop the market up. As you say, they have large reserves of worthless paper money, why not exchange it for worthless equity.

THE SHOW MUST GO ON!

 

Fri, 12/24/2010 - 11:28 | 827959 Red Neck Repugnicant
Red Neck Repugnicant's picture

Thank you for your honest response, but I need to add a few things. 

First, Bernanke said that he would purchase bonds with an average duration of 6 years (perhaps 5s and 7s), so the average rate that the banks are loosing by having their bonds converted into reserves is somewhere in the 1.7% - 2.5% yield, not less than 1% as you stated.

http://www.treasury.gov/resource-center/data-chart-center/interest-rates...

It is assumed that Bernanke chose these terms because most consumer loans are attached to the shorter duration bonds (5yr - 10yr) rather than the longer bonds (20yr - 30yr). The hope was that it would drive down yields, thereby drive down interest rates on mortgages, car purchases, etc. Hopefully, the banks would see that issuing consumer loans at low rates was still better than earning the rate of return that excess reserves yield: nearly nothing.  Per the Fed's website, The rate paid on excess balances will be set initially as the lowest targeted federal funds rate for each reserve maintenance period less 75 basis points.

http://www.federalreserve.gov/newsevents/press/monetary/20081006a.htm 

You are correct when you suggest that banks would seek higher rates of return, but that does not mean that it would gamble QE2 funds in the stock market.  The banks have more than enough cash to fulfill their proprietary trading wishes.  Instead, the hope was that banks would simply issue more consumer loans and these loans would yield more profit than sitting at the Fed as excess reserves. 

So, yes, the banks would look for "riskier" investments, but that means consumer and business loans, not the stock market.  As Tyler points out every day, money is flowing OUT of the market, not IN. Banks have all the proprietary trading money they need. If QE2 money was flowing into the market, we wouldn't have net outflows month after month after month.    

And by the way, I'm not "trolling," as you say.  I'm simply looking for a reasonable conversation based on facts, rather than conspiracy.  

Fri, 12/24/2010 - 19:56 | 828818 XPolemic
XPolemic's picture

First, Bernanke said that he would purchase bonds with an average duration of 6 years (perhaps 5s and 7s), so the average rate that the banks are loosing by having their bonds converted into reserves is somewhere in the 1.7% - 2.5% yield, not less than 1% as you stated.

Without an audit of the Fed's balance sheet, there is no way to know what they are purchasing. But let's go with short dated bonds. Even a 2.5% yield isn't going to keep up with inflation, and slicing 75bips off money that is going backwards adjusted for inflation is just craziness.

So, yes, the banks would look for "riskier" investments, but that means consumer and business loans, not the stock market. 

Except of course that when the market is saturated with debt, and 30% of mortgages are 'under water', the notion of trying to stimulate borrowing (lending) is a strategy only a complete fool would pursue (i.e. Bernanke). And if you can't get anyone to borrow more money, then you need to invest that excess liquidity elsewhere.

As Tyler points out every day, money is flowing OUT of the market, not IN.

Mutual fund outflows. Always has to be a buyer for every seller. The question raised in the topic article was "Who is the buyer?". If it is not funds (they are selling), and it is not retail investors, and it is not banks or investment banks, then who is the actual buyer. It could be European retail investors or mutual funds. It could be Asian investors. Every time the dollar drops US equities become cheaper in EUR and some Asian currencies (those that are not pegged). OR, it could be the Federal reserve. If it is the Fed, then that would be very bad.

But this misses an even bigger question. If US fund managers are selling equities, what are they buying? They would be crazy to hold USD. Some of them are no doubt dispersing cash to their investors, especially those who are unemployed, but that still leaves a massive gap between equity outflows (cash inflows) and whatever they are investing in on the buy side.

If QE2 money was flowing into the market, we wouldn't have net outflows month after month after month.

Actually, that is exactly what you would have. If the Fed really is purchasing equities, then they are doing it so as to allow large institutional investors to unwind their massive positions slowly. When large equity positions are unwound, it has a panic effect on the market. By purchasing equities on a schedule, large institutional investors can unwind their very large positions piecemeal, limiting the downside to a small band of about a buck fifty.

In this scenario, you would see the market drop, then rise, then drop, then rise, on a fairly predictable schedule. At the end of this game, large institutional investors would be light on equities, and the Fed's balance sheet would be heavy. Then the market would be allowed to free fall, after which the equity holdings on the Fed's balance sheet could remain an unrealized loss forever, or until the economy recovers, whichever comes first.

And by the way, I'm not "trolling," as you say.  I'm simply looking for a reasonable conversation based on facts, rather than conspiracy.  

The problem is that the 'facts' are difficult to establish. We only have the Fed's word on what they are actually purchasing, and as a result, we can only speculate based on the effects seen in the market. The effects seen in the market are not rational from an investment point of view, hence the market is most probably being manipulated.

As for conspiracy. The definition of a conspiracy is: 5 or more people acting in secret to commit a crime.

Of those three conditions, only the last one is uncertain, however there are definitely 5 or more people acting in secret. Whether what they are doing constitutes a crime really depends on your politics. My take is that killing 200,000+ civilians in a far away country for no other reason than to protect a ponzi scheme is a crime. Your opinion may vary.

Fri, 12/24/2010 - 08:13 | 827816 XPolemic
XPolemic's picture

Well, we all know that you don't REALLY want the answer to this question, you are just trolling, but for the sake of discourse, here is my take.

Once upon a time, in a country that had free markets, there was something called 'Investment Theory'. Investment theory was long and complicated, but it really boiled down to two things: RISK and RETURN. 

The 'RATIONAL INVESTOR', the theory claimed, would seek the highest return, at the lowest acceptable level of risk. Of course, if investors are actually IRRATIONAL, then the theory does not hold, but let's assume the investor is rational, for the sake of argument.

What is the rate of return of a Treasury Issued Promissory Note at this point in time. Well, it is currently less than 1%. Given the current rate of inflation in the United States of American (conservatively 3%, but more like 10%), you would have to be BARKING MAD to purchase Treasury Issued notes.

In other words, you need to seek OTHER INVESTMENTS. Historically, when the economy 'corrects' or 'contracts', investors change their focus from chasing returns to protecting capital (flight to quality), but right now the Fed is driving down the returns on govt instruments so that investors can no longer do that.

As a consequence, investors moved to other markets. And there are still better returns (currently) in Equities than -2%. Even the dividend yield is higher for many companies than the treasury rate.

Capital must seek returns, or it decreases in value (time value of money), hence the capital inflows into equity markets (and commodities of course).

That's my take on it anyway. The Fed is preventing a 'Flight to Quality' and forcing investors into riskier investments, hence capital inflows into equity markets.

The more sinister scenario (as claimed here) is that the Fed is actually purchasing equities to prop the market up. As you say, they have large reserves of worthless paper money, why not exchange it for worthless equity.

THE SHOW MUST GO ON!

 

Fri, 12/24/2010 - 08:58 | 827831 cranky-old-geezer
cranky-old-geezer's picture

"... and do you have any proof to support your claim?"

This is a favorite narcissist tactic, implying they're the judge, the authority, and people with a different view must "prove" their view to the narcissist's satisfaction, or their view is declared invalid.

When I see or hear that, I make a judgment of my own.  They're a nacissistic nutcase.  End of discussion.

 

Fri, 12/24/2010 - 12:26 | 828018 Unlawful Justice
Unlawful Justice's picture

There is also the narrative fallacy

~The narrative fallacy then refers to the propensity to engage in story-telling, summarizations, and simplifications to reduce the dimension

Fri, 12/24/2010 - 09:05 | 827843 chubbar
chubbar's picture

The Treasury is issuing bonds that are being purchased by the big banks (primary dealers).

The U.S. gov't is the recipient of the funds used to buy those bonds and promptly spends the money.

The primary dealers then sell these bonds to the FED after about a two week delay as I believe TD reported here a while back. When it does so, the funds that were used to buy the bonds are now replenished with a small stipend for their troubles.

The FED now owns the bonds and has effectively "printed' money and given it to the U.S. gov't, who is the spender of last resort.

That's how QE2 is utilized to print money and get it into the economy, through the primary dealers.

Fri, 12/24/2010 - 10:13 | 827879 Red Neck Repugnicant
Red Neck Repugnicant's picture

Yes.  I understand that.  And everything you said is perfectly true - you have just given a very basic description of QE2. 

But you have not answered my question, and quite frankly, no one has.

How does QE2 inflate the stock market?

No one has answered it because no one knows.  Everyone just believes what they want to believe, whether it is true or not.  


Fri, 12/24/2010 - 12:02 | 827993 KickIce
KickIce's picture

How does QE2 inflate the stock market?

A couple questions back...

If not why the need for the fed to buy stocks in the first place?

Where do you think the market would be without Fed intervention?

 

Thu, 12/23/2010 - 21:06 | 827315 The Profit Prophet
The Profit Prophet's picture

One of the FED govenors (I forget which one) was interviewed on CNBC just after the QE2 announcement, and he admitted that one the nice "side-effects" of QE was it's postive effect on the equity markets....and that this was one of the arguments around the table in support of proceeding with QE2.  That's about as clear an admission of market manipulation that you are going to hear from any FED member.....although nothing would surprise me at this point. Once QE33 fails, perhaps Ben's last ditch survival strategy will be to guarantee all future market losses.....hmmmm

 

T.E.I.N. everyone!

Thu, 12/23/2010 - 19:18 | 827149 the rookie cynic
the rookie cynic's picture

Isn't it so Pomomuniwonderful?

Thu, 12/23/2010 - 20:38 | 827271 VeloSpade
VeloSpade's picture

I want to POMO Barney Frank's bun hole.

Shhhh!  Don't ask, don't tell.

Thu, 12/23/2010 - 20:53 | 827295 Cheesy Bastard
Cheesy Bastard's picture

Shhhh!  Don't ask, don't tell

Kinda gives the phrase "I gotta swab the poop deck" a whole new meaning, huh?

Fri, 12/24/2010 - 03:30 | 827714 revenue_anticip...
revenue_anticipation_believer's picture

Velo, clever troll, knows nothing except trolling...what'd expect?

Thu, 12/23/2010 - 19:21 | 827151 SwingForce
SwingForce's picture

"Some of that withdrawn money is being used to pay bills" Wholly shit!

Fri, 12/24/2010 - 17:29 | 828534 ArsoN
ArsoN's picture

Obvious right?  I don't get why the outflows thing is treated like such a magical phenomenon.  It's just a function of unemployment.  

Thu, 12/23/2010 - 19:21 | 827152 RobotTrader
RobotTrader's picture

I can probably guess what the answer to the riddle is:

List of Buyers:

1) Underinvested fund managers attempting to "make their year" and save their jobs.

2) Hedge funds who were constantly shorting, getting blown out week in, week out.

3) Foreign investors who started piling into stocks once the S & P 500 started turning up and running hard in Euros, Pounds, Canadian Dollars.

4) Bessemer Trust clients grabbing once in a lifetime bargains at the lows, then gunning the tape with their massive cash reserves to run the tape higher so they could compound their vast fortunes.

5) Goldman Sachs and JP Morgan prop desk traders unexpectedly driving up the tape in order to burn their biggest clients, most of which were macro-themed funds biased on the short side.

6) Millions of new retail mo-mo gamblers who are starting to defect from the NFL, NBA, NCAA sports betting casinos

7) Uncle Thug using his 800-lb. gorilla influence to boost stocks in order to create a self-reinforcing feedback loop in an attempt to inspire more confidence in the business community so they can start hiring people.

8) The Federal Reserve using POMO's to turn the tape at key inflection points where bearish investors were overcommitted to the short side ended up getting destroyed.

9) Chinese, Korean, Taiwanese action junkies buying anything that moves using their smartphones on expansive Wi-Fi networks in Asia.

10) Foreign central banks attempting to buy stocks to offload huge dollar holdings.

11) Giant bond funds starting to re-allocate more cash to equities after a 25-year bull run in bonds and a 10-year bear market in stocks.

And the sellers?

1) Joe Six and his paltry ETrade account selling out what ever scraps were left after his account was blowtorched in 2000 and 2008.  Joe had to sell in order to make ends meet and pay his bills.

..................

Now you know why buyers have swamped the sellers.

Thu, 12/23/2010 - 19:25 | 827162 ihedgemyhedges
ihedgemyhedges's picture

Your post is useless without gratuitous pix of chix...............Sorry, but like the TrimTabs guy, I tell the truth..................

Thu, 12/23/2010 - 19:26 | 827166 the rookie cynic
the rookie cynic's picture

You make a good case for not fighting the Fed. Have you heard? The Bernank is really a BORG plant. I got a leaked copy of his speech slated for the next FOMC.  Concluding sentence reads, "Resistance is futile. You will be assimilated."

Thu, 12/23/2010 - 22:50 | 827459 1100-TACTICAL-12
1100-TACTICAL-12's picture

Robo get's junked alot... why?

He see's it for what it is. Then does the best to turn to his advantage. That is Walker Texas shit... Bottoms up to Robo...

Fri, 12/24/2010 - 01:59 | 827629 DaveyJones
DaveyJones's picture

maybe because this site is not just about making money ?

Fri, 12/24/2010 - 03:45 | 827719 revenue_anticip...
revenue_anticipation_believer's picture

Robo has been around FOR A LONG TIME, since at least Feb '09...and NEVER was 'junked' until last 4 months or so...when Mr. Market 'turned up' definitively, unambiguously, into a new bull market..from the 'traders perspective..correct but many ZH are moralists, revolutionaries, and too damm poor to venture any 'venture money' RIGHT? no?...so they 'junk' ...fucking suckers, tit sucking from birth to death...as a way of life...

Oh, and Yes, Young and Historically illiterate, THIS 2008-2010 aint nothing..get some 'contextual framework'..

http://en.wikipedia.org/wiki/Troll_%28Internet%29

OH, and ALSO, Please show the TROLL VeloBabe YOUR APPRECIATION by repeated junking...'recognition of Lifetime Achievement B/B nuisance Trolling'

 

Fri, 12/24/2010 - 10:17 | 827883 WaterWings
WaterWings's picture

Longer than four months...and what a shift it was - wondered if his account was hijacked at first. No more funny posts. Turned Sith.

Refusing to implicity back genocide is a moral question?

Mon, 12/27/2010 - 12:38 | 831663 Panafrican Funk...
Panafrican Funktron Robot's picture

"Robo has been around FOR A LONG TIME, since at least Feb '09"

This username (revenue_anticipation_believer) has been around about 6 weeks.  In case anyone was suffering under the illusion that this isn't an alt-flame account. 

Operating under the assumption that this is actually Robo's alt-flame account, why use this vs. just having the minimal amount of balls to post what you really think under your real account? 

Thu, 12/23/2010 - 19:28 | 827169 Phineas Gage
Phineas Gage's picture

You must know.  You have a whole 10 years in this game.  LMFAO.

Thu, 12/23/2010 - 20:53 | 827299 JohnG
JohnG's picture

I'm 26 years into the "game" and Robo is spot on right here.

Thu, 12/23/2010 - 21:08 | 827318 MeTarzanUjane
MeTarzanUjane's picture

According to the majority of ZHeeple, if it's not pro-PM's it's not right. ANYthing that has a deleterious effect on PM price is wrong. Even if it's right and has potential to make money, it's wrong.

Merry fucking christmas.

Thu, 12/23/2010 - 21:23 | 827346 Phineas Gage
Phineas Gage's picture

Thanks for the non sequitur.

Thu, 12/23/2010 - 23:10 | 827483 chopper read
chopper read's picture

here is your sequitur.  MeTarzanUJane, ...asshole comment.  

Fri, 12/24/2010 - 02:49 | 827678 Al Gorerhythm
Al Gorerhythm's picture

Then why pile on?

Fri, 12/24/2010 - 02:57 | 827681 primefool
primefool's picture

Huh? Fed tax rates are at the lowest point in the past 100 years.

OK - the problem is all those other "taxes" ( state income tax, property tax, etc etc) - but those are things the peasants do to each other ( your property taxes pay my fireman's pension and send my kids to school - so thats why it exists). The Federal tax system is what is tied in with the fiat money system in a mutually reinforcing parasitic manner.

Fri, 12/24/2010 - 03:19 | 827703 Al Gorerhythm
Al Gorerhythm's picture

Sorry Chopper, thought you were referring to the post you replied to.

Sat, 12/25/2010 - 01:07 | 829260 chopper read
chopper read's picture

no problem.  sorry for telling you to "go fuck yourself" in the thread above. 

Thu, 12/23/2010 - 21:49 | 827385 JohnG
JohnG's picture

Anything that is deleterious to my positions is of course a "bad thing."

I am exposed to PM's to my level of risk.  That trade goes againt me and I'll bail.  So far it hasn't.

And Merry Christmas to you as well Sir.

Thu, 12/23/2010 - 22:13 | 827421 JonNadler
JonNadler's picture

I agree with MeTarzan, you can't say anything bad about gold, just because gold quadrupled, who do this zheeple think they are? Wait till gold pops and it goes back to 250 all over again

Thu, 12/23/2010 - 22:27 | 827439 JohnG
JohnG's picture

I agree that any non pro gold comment gets flamed.

Maybe it's in a bubble, maybe not, at least yet.

I'm alway able to change my posiitons as the market dictates.  I don't beileve in being a "....bug" on anything.  Whatever it is, it works until it doesn't.

Bugginsm (TM) can result in holding a losing position.  Bad idea.  Better to sell on the way up and not ever try to toptick.

Still, I like PM's right now.  Next week it might be Yen....who cares, whatever works.

Thu, 12/23/2010 - 22:54 | 827461 1100-TACTICAL-12
1100-TACTICAL-12's picture

That will never happen my friend.. Not as long as the FRN is around... @ nadler

Fri, 12/24/2010 - 09:27 | 827858 JonNadler
JonNadler's picture

don't call me your friend and look up the word parody in the dictionary. Don't look up the word naiive, though, it's not in the dictionary.

Thu, 12/23/2010 - 22:20 | 827432 KickIce
KickIce's picture

So wrong.  We also encourage food, guns, ammo, land...

Fri, 12/24/2010 - 02:00 | 827633 DaveyJones
DaveyJones's picture

and uprising

Fri, 12/24/2010 - 08:15 | 827819 Ghostbusters
Ghostbusters's picture

according to anyone with an ounce of logic left in their media poisoned brain, the stock market is a joke.  if you want to play with the likes of jpmorg, gs, the fed, and insider/smart money then go ahead and play because it certainly isnt investing any more and that is the point.  how many stock market crashes do you need in a decade to believe the market is rigged, not in your favor?  Flash crash, accounting rule changes, QE1/2/???, swap lines, bailouts, unemployment benefit extensions, and the list goes on and on.  Are you trading on fundamentals, govt assistance(EUC), riding the smart money or what because people who understand economics know that the stock market is totally removed from reality.  maybe it always has been but the game is up.  retail investors dont want to be shelved to the benefit of the bankers, again, and the fact is tomorrow aapl can go to 0 and PM will retain some value determined by supply/demand, remember that, in whatever said fiat yuan/dollar/rupee.  all of you chasing zales, aapl, spx, or whatever feeds your fancy, more power to you, your risk tolerance is obviously a bit higher, but dont come complaining when the floor falls out from underneath your feet.  Gravity really does exist?  Pump and dump.  you're getting pumped by CNBC/FED/GS/Uncle Sam & Friends.  Merry Xmas.  You feel good about a menial capital gain? Congrats, that is the true function of the stock market, ha.  People are sick and don't miss fast money today i hear they've got a hot tip, go figure. 

Thu, 12/23/2010 - 21:19 | 827338 Phineas Gage
Phineas Gage's picture

6) Millions of new retail mo-mo gamblers who are starting to defect from the NFL, NBA, NCAA sports betting casinos

This is spot on?  You are kidding I take it.  This is random noise, along with some of the other suggestions.

Thu, 12/23/2010 - 21:53 | 827392 JohnG
JohnG's picture

Can you simply not understand sarcasm? 

I've read that some people have no sense of humor whatsoever, and I find that to be harsh thing for those so afflicted.

Ease up a bit.  You'll feel better for it.

Take a vacation to anywhere but the gulf coast maybe?

Trying to help man. 

Thu, 12/23/2010 - 22:08 | 827413 espirit
espirit's picture

Use the sarcasm on/off button because of the trolls that peruse ZH to abuse the seriousness of these issues.

Just do it.

Thu, 12/23/2010 - 21:22 | 827347 The Profit Prophet
The Profit Prophet's picture

Robo is a whole group of paid pump-monkeys that are the intellectual anti-matter of the Tyler Durden group. They use a spectrum of logical fallacies, and combine them with just the right amount of sexual stimulation in order to render a normally focused and intellectually superior individual - into a hapless drool-spewing Homersapien.  Their strategy in pure genius in it's utter simplicity!!!

 

T.E.I.N everyone!

Fri, 12/24/2010 - 01:03 | 827590 Fearless Rick
Fearless Rick's picture

I drink single malt scotch and trade options, and this one statement, "6) Millions of new retail mo-mo gamblers who are starting to defect from the NFL, NBA, NCAA sports betting casinos" and others proves to me that Robo makes shit up as he goes along.

Wake the fuck up. You're dreaming if you believe his BS.

Thu, 12/23/2010 - 19:31 | 827175 cougar_w
cougar_w's picture

booooobiez ftw or gtfo

Thu, 12/23/2010 - 19:33 | 827182 Cheesy Bastard
Cheesy Bastard's picture

True dat.

Fri, 12/24/2010 - 02:21 | 827654 MsCreant
MsCreant's picture

So there is this kneading thing with you cats... is this what your comment is about? ;-)

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