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Biggest Equity Outflow In Recent History Leads To Fifth Consecutive Outflow From High Yield Funds
Last week was the fifth consecutive week of HY mutual fund outflows, which while smaller than the prior week's $1.4 billion, was still a material $759 million. With that the five consecutive weeks of HY outflows now stand at $4.3 billion, which is the second largest 5 week sequential outflow from HY funds in history, only better compared to the $4.9 billion in August of 2003. With the disappointing end of week performance in stocks last week, we anticipate that next week Lipper/AMG will announce another huge outflow. With this week's HY outflow, YTD flows are now just barely positive at $898 million. Yet the HY action was nothing compared to the unprecedented, if not record, outflow in domestic equities: ICI reports that the week ended May 26 had $13.4 billion in domestic equity outflows: a number the likes of which we don't recall even in the post-Lehman days.
Curiously, even as flows out of all risky assets picked up, money market saw yet another outflow of $11.5 billion, bringing total YTD money market outflows to $414 billion, or -12.9% of total money market assets. Ironically, the only asset class (aside from gold) outperforming this year is the dollar. Instead of keeping capital invested in cash, Americans have shifted nearly half a trillion out of the best performing asset in 2010.
Yet what is once again odd, is that the differential between YTD Money Market outflows and all other risky asset inflows, is now a 2010 high $120 billion. For all those who wonder where the money to buy 2 million iPads immediately after launch comes from, here is your answer. Americans are moving capital away from what they deem (incorrectly) is an unsafe asset class, and instead of putting it into riskier assets, they are spending it. One can only wonder what happens to already weakening retail sales, once the temptation to reallocate capital back to money markets rears its ugly head.
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Alot of money is pouring into Gold and Silver and has been for some time. This is exactly why the crooks at JP Morgan continue to leverage up their derivatives playing the metals short, in a dire straits attempt to stave of their extinction. JP Morgan has no choice at thsi point but to keep the price of Gold and Silver down, or they are finished. I am surprised we have not seen more on the DOJ probe against JP Morgan. The manipulation using their derivatives can be seen from here to China without bincoulars. Why it is taking the SEC and DOJ so long to file official charges is beyond me, and a question millions of investors should be asking. We all know why JP Morgan is doing it, but to what extent? They cannot just let these crooks keep on creating derivative after derivative infinitely just to keep themselves in business and prevent collapse. This is probably the most over-leveraged and unsafe company in the world today. When it collapses, and IT WILL, when they can no longer fund their ponzi scam manipulation, it will be 50 times worse than Lehman and Bear Stearns collapse.
I was channel surfing while eating supper last night. I just happen to get Cramer as he was telling everyone that his FAVORITE bank and FAVORITE bank executive is JPM and Jamie Dimon. He told them to buy, buy, buy.
This should be the Kiss of Death for that two-bit firm and so-called executive.
The hardon the pundits have for Dimon has perplexed me for some time. Always hearing some idiot say he should be the next Treas. Sec. I guess they're all just so caught up in being a part of the corrupt game that they don't see any other option outside of supporting another criminal to run the perpetual robbery.
From Roger Ebert: Only gradually are the final outlines of his master plan revealed. Is Tyler Durden in fact a leader of men with a useful philosophy? "It's only after we've lost everything that we're free to do anything,"
I remember Ken Lay and Enron in much the same role back in the 1990s. When a company and its leader approach the status of sainthood, you know the endgame approaches.
Abstract:
Many of us in the anticorruption community have been calling for better enforcement of "Conflict of Interest" provisions of existing laws, ban on shell corporations, especially those in money laundering havens. It is clear that if these had been followed, Enron fraud might have been detected and thousands of investors may have saved billions of dollars in losses due to Enron bankruptcy of December 2, 2001. Enron paid no taxes in four out of the last five years, had 5000 partnerships for shifting losses and debt off-balance sheet. It used fancy mark-to-market accounting devices to hide and defraud. Why various checks and balances failed in this case? Besides listing the various failures we indicate eleven groups of winners and six groups of losers. While it is fashionable to count Enron employees among losers due to their 401(k) losses, we argue that employees were also among bulk recipients in the mass transfer of wealth from investors. We include many specific policy proposals to promote transparency, curb corruption, and prevent various abuses. Since the so-called "Chinese Wall" regulations separating investment banking and other business of brokerages have failed, we call for a break-up of such brokerages. An Appendix includes the two cows joke updated for Enron.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=300542
Enron... the Energy Market Maker... did Great! and Fantastic things for everyone, in thier executive offices. Bonus Monies with no deals or real deals... shifting debt into SIV's to show a profit. Where else are we seeing EXACTLY! the same thing now going on? What do you mean Bankers who don't make loans... get Bonus Monies?
The lies that go on everyday with the bulk of America not caring enough to understand, makes me sad inside... it really does, but people get what they deserve from thier elected officials.
If you have not noticed, I always try to leave a poignant blurb in regards to Iceland on all comments. I do this because Iceland is the only nation to date that I know of that has told the IMF/banksters to take a giant leap. I think this can be accredited to the fact that Iceland's literacy rate is 99.9%. Nuff said?
I share your respect for Iceland, I now refer to them as "The Mouse that roared" after one of my favorite Peter Seller's movies.
So, Iceland not only has the "Best" party but the Q bomb, too?
I remember after the crash there was a hagiography of Dimon in the USA Today entitled "Dimon Steers Bank to Safety". IMO the worst crime of these people isn't even their insane need to steal and destroy, it's their utter contempt for the truth.
Later I saw Dimon's book right next to "The Greatest Trade Ever". The latter contains an anecdote in which John Paulson tries to explain his anti-housing bets to Dimon, who just stares at him with utter incomprehension before silently wandering away to have another ~$800 drink.
This time 2008 the Dow was down 5.44% for the year. Today it is down 4.76% on the year. We all know Lehman would go into the Fall to fail. Sounds like JPM may be the next to go this year. Time to go to the store and stock up on ammo, water, and seeds and move to Wyoming. Of course as soon as I get there Old Faithful will explode along with our economy.
you're not reading about the DOJ investigation becuase its ongoing. give it some time. they will break the story with the NY Post. for real.
What's really concerning me is the overwhelming belief in gold as a refuge. Everybody remember only in November last year when everybody thought the USD was worthless? I'm not a gold bear or bug but when the boat gets too heavy on one side it tends to tip over. I think when it does swing the other way, it's going to make a very lucrative short.
Instead of keeping capital invested in cash, Americans have shifted nearly half a trillion out of the best performing asset in 2010.
I think they are using this cash to either pay down debts or pay for daily expenses out of savings. This is deflationary. But if you want to protect yourself against hyperinflation sell your gold and put that money as 20% down payment on a real estate. It will buy you five times more of another best protection in hyperinflation then your gold holdings.
Or do both, gold is more liquid than real estate in case you need to tap into these stores of wealth.
RE will be an even better investment when all the failing municipalities raise property taxes and you have no money. Gee, I don't remember paying annual taxes on gold to a bunch of nitwits to waste, for that matter, paying any taxes at all. In fact, I lost all my gold while fishing in a leaky rowboat the other day. Deep water, too.
Iceland to IMF..... Screw you, too.
I wonder how many foreclosures are trigerred by inability to pay property tax. Looks like the states versus banks - fighting over the carcass of the american middleclass - until its all gone.
Gold is will be a dangerous thing to have during hyperinflation, because if it happens there wont be any cops around to protect you from the roving bands of barbarians.
Yeah but holed up in your condo is safe. Pshaw!
Roving bands of barbarians serve as wonderful moving targets. Too bad I also lost all my guns and ammo in same leaky rowboat incident.
"Gold is will be a dangerous thing to have during hyperinflation, because if it happens there wont be any cops around to protect you from the roving bands of barbarians."
Some advise & caution gentle writer.
Some of us don't live in cities...some of us live in the country where it is advisable to call BEFORE coming to a residence AND widely known that you honk your horn as you come up the drive to get the owners attention...to let them know (if you didn't call or weren't invited) that you have naively opened a CLOSED gate...to enter their property and who just may be behind that treeline along said roadway target practicing with their favorite rifle. This can be said for pulling too far down a side road off the main highway also to relieve yourself...it may not be a quiet lane at all...it may be they are reloading.
This advisory might save the reader from any weird discussions with insurance adjusters and body shop owners in the future.
Just watching after my fellow man ;-)
Thanks. I figured this out years ago in Texas when I pulled off a highway to have sex with my girlfriend in some fellow citizen's field, and was surprised in the act by a pissed-off bull wanting to know what the hell we were doing there. Nothing quite like pulling your pants up and running for the brush with a large animal charging down the hill at you.
Guess that must be how Goldman feels.
My understanding is that real estate still has another approximately 20% decline on the way. What about all of the real estate being held on the books? Will there be enough buyers at that point to pay anywhere close to market value (much less the value on the books)? I don't know if selling gold is such a good idea at this point.
So wait. You will have a hyperinflation while real estate prices are falling. Wow. And property taxes, do they change as fast as hyperinflating house prices? So is it deflation or hyper inflation?
There will continue to be a deflationary cycle (at least a while longer) before the inflationary cycle begins. So, can us fellow zh'ers time this thing and make a little money. I think so.
In my opinion, we are i n the middle of the second leg down. Each leg will lose roguhly 25% ontop of the previous one. I think we will move to depression levels in real estate within two years from next fall. Also, due to peak oil, and considering half of all homes are in suburbs, I think some houses will go to ZERO.
Actually, less than zero since the locals will mark-to-fantasy and continue to tax the owners in order to pay for the lousy schools and the swine teacher unions.
Less than zero hedge!
If any doubt it, refer to suburban Detroit.
Maybe not quite like in China where the criminal's family is charged for the bullet used to execute him, but there is a cost to tear down abandoned homes and structures. Are the counties to pay for this? Nope the taxpayers in the counties. Tax liens to hell and back, and banksters defaulting on property tax rolls.
We're so screwed...
oh lordy....yes!! I have seen the light. Sell my portable no-liability store of wealth and "buy" an asset that I can never actually own (registered) in an asset class that is (----ed) six 10^6^6 ways from Sunday. Oh that is the ticket.
Thank you I am hurrying to call my bullion dealer right away, I already have Century 21 on the phone and we have picked out this afternoon's itinerary.
/Elvis died trying to become less full of s88t how about you?/
the time to move from Gold to RE is when Dow / Gold = 1 to 1 and 70oz of Gold buys you a medium size family home again. we're going back there soon, just hold tight.
Too true. I would start with good farmland and a lean-to.
Iceland...see above
Don't Worry...We've Got Stress Tests.
South Korea (Reuters) - Europe is close to completing stress tests on its banks to gauge their ability to withstand a market slump and the results should be published to help restore market confidence, top European Central Bank officials said on Saturday.
http://www.reuters.com/article/idUSTRE65411920100605
I understand the Euro stress tests involved feathers and balsa wood. Can anyone confirm?
Yep.
This is what happened. Unbelievable stick save!
http://www.youtube.com/watch?v=XZiP4NaeYrE&NR=1&feature=fvwp
(its truly awesome, pls watch one of my favourite videos)
If that pilot owned a bank, he would have all my business. I think all bank CEOs and CFOs should take an identical stress test.
One good video deserves another.
"Do you have your money on the line?
Are you confident that the stock market is going to go up?"
"If you are even the tiniest bit nervous about your position right now,
here is a safer, more sedate sport that I would like to recommend for you:"
http://www.youtube.com/watch?v=oUR8ZpYCRt0
fake
And now the results, conveyed through interpretive dance.
Tyler, this is a fabulous post and first rate analysis. Unfortunately, it is also very scary stuff. It is obvious that the great majority of people are in no position to withstand another massive financial shock to the economy and that is the most damning indictment of our leadership that anyone can make.
I am not sure, if I understood your comment correctly, how ordinary people who do not understand FX investing could have "played" the top performing asset class (the dollar) but it is obvious they are caught in a cruel vice: no incentive to save because of ZIRP and escalating prices at the grocery store and at the pump. Your comment about the iPads is well taken, but I think a bit overstated.
What is an iPad. Is it anything like a maxiPad? Will it still perform when the HUGE Coronal Holes currently facing earth and erupting and likely to strike 7-8 June? Anyone remember Carrington?
Pulling The Plug
Finance ministers from the world’s leading economies ripped up their support for fiscal stimulus on Saturday, recognising that financial market concerns over sovereign debt had forced a much greater focus on deficit reduction.
The communiqué of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries’ public finances. “The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability,” the communiqué stated.
http://www.ft.com/cms/s/0/786776b4-708f-11df-96ab-00144feabdc0.html
good read. thanks for posting it.
of course the u.s. openly opposses this.
"This should be the Kiss of Death for that two-bit firm and that so-called executive.
I agree with your feelings. But Dimon is the consumate executive: He is among the few who understood the game and has played it perfectly knowing full well that it by playing the game in the fashion that he has he would incur no personal consequences other than great personal wealth for himself and for his favored minions and the adoration of brainless a**holes like Cramer and 95% of the financial press.
Kinda like Louis XVI...
Agreed.
And tha adoration of UncleTombama.
+1!
Obama is better than nazi boy bush !!!!!!!!!!!!!!!!!!!!
"That horse looks like a winner!" The man with the wingtips and top hat said as he pointed emphatically.
"This is a glue factory, sir."
He got lucky too, Rubin and the boys at City paid to get Glass Steagal revoked just as he rose to the top. Playing investment banking with all that money from Chase, he just has to squeeze everybody out. And he's doing it very well.
He knows Viki Pandit doesnt have the infrastructure to really compete at Citi, even if they weren't bust they've always been Shiti.
Worked with Bear as planned, Lehman not as planned but hey shit happens, and he's now working on GS.
If he can destroy these pure IB's over the next few years, fewer people will worry about TBTF, and nobody will rebuild Glass Steagal - which is what he is worried about.
Morgan will be tough, they are playing it very smart. I dont see many complaints about them on ZH, for example. Maybe one day we see a return to the old House of Morgan...
In a letter to the rest of the G20, Tim Geithner, US Treasury secretary, argued: “Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery”.
Ministers from many countries stressed the need for structural reforms to boost the potential for private sector growth
In private, G20 officials said that the US had been the country most concerned about the new austerity drive and feared for the momentum for global growth. In the meetings it had been frank in the meeting in calling for China to revalue the renminbi and for Germany to boost domestic demand, officials said.
Mr Geithner, himself, was open about his fears in his letter to the G20. “Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery,” he wrote, adding that fiscal tightening won’t “succeed unless we are able to strengthen confidence in the global recovery.”
--------------
Did Geithner just not get on CNBC the other day with the slut, and say Europe imploding would have no effect on the US recovery? Now today, he is expressing his concerns and fears as Europe decides QE and bailouts are not the answer, but getting their fiscal operations in order. Geithner needs to be hung in Times Square after being tried and found guilty of Treason, with Bernancompoop right next to him. Public hanging to send the message to the rest of the crooked banker executives, we will not tolerate their thievery any longer.
Just like the Germans putting an end to the naked CDS and other financial hijinx, this is yet another big, one-fingered "F*** You" to Timmay and the rest of the boys and their dangerous, third world, banana republic economics. Good for the Europeans.
Bernancompoop? LMAO! Bravo!
The biggest problem facing financial markets right now is municipal debt. I was just checking out the values on MCDX for 2y, 5y and the spread significantly widened in the last month or so. Of course this doesn't need to indicate anything is wrong with all municipalities [due to the way the MCDX is structured], but if the ABX family is any indication as to how these indexes can help in predicting the next massive implosion, we are in for a shitload of trouble.
The problem is that most municipalities income depends mostly on RE taxes; and since the rate of foreclosures is steadily climbing for the past 2 years [with no indication it will change direction] it is expected municipalities will have a harder time in issuing new debt, and servicing the old one.
The problem is more than evident if one takes a closer look at California, New York, New Jersey and Michigan. The annual deficits can not be managed any longer and some really hilarious methods are employed to pay for old liabilities.
But the problem with MCDX as a trading vehicle is that, although it was announced as the next big thing in the derivatives market when it debuted, the chronic lack of liquidity displayed in the market when the spreads are this high made it good only to serve as an arbitrage vehicle.
It has diverged from CDX.NA.IG significantly and instead of becoming a way to trade muni debt risk it has become a laughing stock and convergence opportunity in case of a doomsday effect.
It is easy to see why that is so. Even AAA IG debt risk should, theoretically, trade wider than any debt risk which is serviced by taxation; since muni debt is practically a form of sovereign debt. But with the implosion in housing that order of things has decoupled seriously and my belief is that the market is now irrational and that, in the end, AAA IG will trade wider than muni debt.
I base my belief on the expectation that the Federal Government will either be used to enhance municipal credit or the FED will structure a facility similar to Maiden Lane which will accept municipal bonds as a collateral. One, less possible, outcome is that a SPE, fully backed by the Federal Government [Treasury or the FED], will be created and take muni debt off banks balance sheets. Of course this is yet not required due to accounting practices which are currently being used in asset valuation, but if the structured instruments [with cash flows coming from municipal coupon payments] start to show a rapid deterioration in their cash flows, the contagion could spread and there are ways [easier than to play the MCDX indexes] to bet on single names. The contagion due to the problem with muni debt could be several times greater than what we have seen in the fall of 2008.
Trade recommendation would be to buy MCDX [at this current level] and sell CDX.NA.IG or if you have the balls CDX.NA.HY and benefit from the irrationality of the markets which is displayed in the spreads. The spreads will ultimately converge and corp. IG and HY debt risk will trade wider than municipal. Of course, the trade will be a losing trade until the convergence occurs, but my belief is that it will occur and that it should not take more than 1 year [4 payments] for it to do so.
"One, less possible, outcome is that a SPE, fully backed by the Federal Government [Treasury or the FED], will be created and take muni debt off banks balance sheets."
One more blatant bailout of tha Banksters might be the tipping point for tha sheeple.
This is strongly mistaken. The federal reserve will never purchase municipal debt either directly(from issuers) or buy municipal debt off bank balance sheets.
Ideologically, this is not Europe, and the Fed is not the ECB.
Secondly, the fed just spent a trillion dollars purchasing MBS from the big banks at a huge premium to the actual market value of those securities. Officers at the fed are trying to reduce their balance sheet, not increase it. A munipal debt purchase program would greatly increase the size of the fed balance sheet and they would be holding onto another class of securities outside the domain of the Fed in addition to MBS, and people at the fed are already clamoring to sell the debt of their recent MBS purchases.
All in all, a good analysis of the market dynamics but I think your trading recommendation and conclusion are seriously flawed.
No. BSB said he is comfortable with FED BS at 5 trillion if BS of 5 trillion is what it takes.
MBS purchases have absolutely nothing to do with this.Nothing.
"Ideologically"; the USA is closer to being a communist/fascist [take your pick] than any of the EU nations.
Also, FED is not a commercial player or an IB so it does not serve the purposes those banks serve; and I can guarantee you that it will step in and serve one or more of the roles i have written in the comment. That is 100% sure. With 2.3 trillion of muni debt outstanding and CDS [which ever class] multiple of, at least, 20, only 5% default rate annihilates the principal.
I know historically defaults among munis are far rarer then in any other debt class, but this is not a period of 1945-2005 when everything was going smooth and money was in abundance. Also, take a look at the tax receipts, housing stats and UE stats, and then tell me that "there is no problem, and the FED will not step in".
The FED just increased its balance sheet by 1 trillion dollars [remember the FX swaps], if not more.
Before you open your mouth have something to back up the conjecture you are spewing or shut up. Throwing random phrases and repeating the bullshit repeated hundreds of times by NYT, CNBC pundits does not make you knowledgeable, or even competent.
You have 0 data to back up your pathetic little comment [which was also probably a cut and paste job].
EDIT: Please point the "flaws" in my trading recommendation; and refute the arguments I have presented above or shut the fuck up.
FASCIST for sure!
CB, you remind me of Goodman from Lebowski.
"You're out of your element Donny!":
http://www.youtube.com/watch?v=MjYJ7zZ9BRw
He seems against synthetic-muni-debt squared... coming out of maiden lane part duex.. maybe JP can manage the muni debt and get out early?
I hope you are feeling well / better CB, JW
Technically CDO2 structured of senior and mezzanine tranches with some hybridization with CDS cash flows [CDS written either on AAA rated muni debt or some other IG debt] should be the safest possible investments; since even when such pool undergoes a securitization all tranches are safer then they were when they were parts of a normal CDO.
But since we are talking about muni debt here [bonds] most of that debt was rated AAA [for obvious reasons] and I believe most such CDO2 structured out of muni debt and IG AAA debt CDS cash flows are paid pari passu [not like CMBS, ABS, MBS structured ones which have multi-tier seniority assigned to the payments] to make the whole structure even more desirable to invest in. The problem comes when there is a fluctuation in rating asigned to the tranches and which then make the whole security toxic. This, has probably already happened with all the shit that is going on in CA, NY, NJ and MI, but the banks either mark-to-model the values of such assets or slice them even further and sell them on the secondary market.
There was a story in Bloomberg about the rigging of the muni market by GS, JPM, C and BAC; its worth a read if you want to know how that market is being played. With munis indebted up to their eyeballs you can expect the problems there to be catastrophic and that should reflect on the Market as a whole. Just remind yourself that CDOs which were backed by the Spanish government [which is equal as if the Spanish government issued them outright] were downgraded at the same time Spanish debt was downgraded [which probably triggered some collateral calls and sent out news about Soc Gen imploding due to their derivatives trades]. The same could happen to munis since municipalities rely on taxation to a) service the debt c) keep yields low d) make coupons also low. And we know what is happening with the tax #s in this recession and that the jig is up from many of the munis who issued their debt in 2005, 2006 in hope that the tax inflows will only be higher with constant growth and economic activity. Well; I dont know will anyone here on ZH try to trade all this, and I don really care. What I want to warn people here is that the next shitstorm is coming from the muni debt and synthetic market.
Yes, I am personally fine. Not fully healthy but getting there.
CB, some keys to health; honey, cayenne, and green tea (all organic). Thanks for sharing with us.
CB, thanks for the insight and hope you are recovering.
If you have time I hope you will comment on what you think will happen to the cities/munis on the West Coast of Florida if the 'oil on the beaches' scenario plays as forecast. Already (I posted a link yesterday) 'vacation bookings on the West Coast of Fl are down to a trickle'...Of course, some may come just to witness the disaster, as some come during hurricanes.
I realize that all of the US East coast and many other areas will/might be effected, but later...
I do not know much about West Coast of Florida, but I do now that Florida as a whole is having SERIOUS issues with funding and debt offerings [both on municipal and state level] due to the implosion of the RE and CRE market.
I mean that is common knowledge, and same common knowledge dictates that with the foreclosure rate being high as it is now, high level of unemployment and this BP oilcano catastrophe the future is not looking particularly bright.
Also if the tourism industry experiences a sharp drop this year [which already did or did not; i dont know; dont have the data] this could effect tax inflows to a degree that some municipalities will probably consider voluntary default [much like the city of Detroit which is considering defaulting on its debt and other liabilities] as the only measure left to combat the high debt levels.
But as I said; the biggest problem in all of this is the amount of debt issued by municipalities [and state] in the period of 2004-2008-Q-2 where they believed the servicing and redemption of debt will be of no problem since the "value of real estate only goes up, and the economy will be marching ever-so-higher". Many of the loans are either in default or are being valued [in mark-to-market model] cents-on-the-dollar.
I have read recently that BAC has taken ownership of 220 million dollars worth of condos in two Miami high-rises because the company which has taken out the loan defaulted on it. And the loan was for 760 million dollars [meaning the price of the high-rises has fallen 71%]. This one little example gives you the idea how bad things are down there.
I believe the situation is even worse, but no one can assess the gravity of the situation simply because the banks do not mark-to-market the loans, MBS, CMBS, ABS, ACDO, CDO2 , CLO, CBOs. No one really knows how big of a deterioration occured in the principal and the cash flows; and I do not think we will know at least until 2013, and if the FED begins buying those instruments we will never know, since it will pay par [and probably above].
As I said, this is fairly common knowledge, and easily deducible from everything that has/is occurred/occurring in SCoF. And I do not see any way how could municipal and state finances avoid the deterioration in the tax inflows when the value, cash flows and velocity of money have deteriorated so significantly that the only thing giving them any value is the change in accounting practice.
If I were a Floridian, I would hope the FED starts QE-II and buys all the worthless muni, state and private debts; since that is the only thing that can save FL in the long term.
Thanks CB. I see it the same way but did not realize that the Fed would get into the Muni market, bailing out everyville...but, why not if they are already in every other biz.
What Fl has accomplished is keeping their dirty laundry out of the press to a greater degree than say...Cal, Nev, Mich, Ny, etc.
Back in 2007 or 08 there was a big blow up in the Fl press about state pension funds purchasing worthless derivatives but that story went bye bye and I suppose those crappy 'investments' are still in the state pension fund...marked to some bs value. About the same time there was one about Fl counties not having access to funds held by the state and used to pay teachers because the state had taken a 20% hit on the combined fund...that story also disappeared.
The news lid is comparatively tight so far.
Disagree.
Given the output of the G20 this weekend it now looks like the US is the last socialist government in the west. Odd, but thats how it reads to me. Yes, there are internal voices in the Fed disagreeing but those voices aren't in control. When TSHTF, they would buy more toxic waste, as much as it took. No question.
Whether that means the spread corrects back to a sensible number, not sure. It's yet another broken, skewed market at that point.
Yes, sorry, I forgot to mention one little fact.
Since Bernanke has explicitly said the FED will allow no deflationary environment and only inflation is a viable solution which will pull us out of this mess; one would think that buying up all the crappy munis [100c/$] from WS Banks would be in direct accordance to such monetary policy. See; it is effectively QE and nothing but a form of QE which will help Bernanke further his policy regarding the dollar. And if that move is anticipatory among the muni bond and structured securities traders I can guarantee you that the volume of new underwritings and offerings will skyrocket. I need to check the data to see if this has happened in the past 3 months or not, but if the FED implicitly suggests that it will accept such instrument as collateral/buy them at par you will see SPD working 24/7 to churn as much of those as they can. Its the way WS operates, and the threat of deflationary depression will convince Bernanke that the best way is to just buy 2 trillion of those instruments and effectively "monetize" the debt without new bond offerings from the gov. It is a brilliant move if you want to inject liquidity into banks, monetize the debt or combat deflation.
The Fed will buy whatever is on JPM's balance sheet. That includes municipal debt.
Almost all Muni debt is wrapped. Any muni issuance related to housing is probably already wrapped by Fannie / Freddie (i.e., guaranteed by the federal government). The rest is wrapped by private insurers in various stages of fiscal collapse, but the government could bail these issues out easily by buying the contracts out of the private insurers; no need for direct market intervention.
These are just some of the representative examples.
If in affect 1.35 trillion is enhanced via monolines, what do you thin happens with that amount once the monolines get a)downgraded b) there is a significant strain on their ballance sheets and that effect the muni credit and triggers a series of CCs c) even if monolines do enhance the munis via CE what happens when the munis can not service their obligations toward monolines and both implode. This is what Buffett [i dont like him, but he knows a thing or two] said on June 2nd:
Also, if this does not prove my assessment; that look at AMBAC debt [both the value of it on the secondary market and the spread on its CDS 5y].
But why buy existing?
Surely better to underwrite/insure new issues. That helps to raise new money to repay the old.
Its probably about time to go get in on some tax lien certs BIGTIME in Ca, Fla, NY, Nevada, and Arizona.
For some unknown reason, I was reading these this afternoon. Kinda fun.
http://www.imdb.com/title/tt0137523/quotes
"...the differential between YTD Money Market outflows and all other risky asset inflows, is now a 2010 high $120 billion. For all those who wonder where the money to buy 2 million iPads immediately after launch comes from, here is your answer. Americans are moving capital away from what they deem (incorrectly) is an unsafe asset class, and instead of putting it into riskier assets, they are spending it".
I don't dispute Tyler's hypothesis that the YTD outflows from money markets is primarily due to profligate spending. I too have reduced our money market balances by over 50% this year, but not in order to keep the Keynesian dream alive. I simply transferred the balances to higher yielding checking / savings accounts at American Express (1.30%) and ING DIRECT (1.25%) picking up 70 basis points after-tax, along with the FDIC deposit guarantee.
I also think some have done this to avoid mmf withdrawal lockups.
Good point. Since I use our money market accounts for tax payments, any potential withdrawal lock-up will be a great excuse to stop funding the government.
Hey Timmy, "your" money is at Vanguard. I'll leave it in your hands to get them to release it to you....
And too add to your idea again, if they ever do put the deep freeze on mmf's, there will be no buy the dippers.
But, that just may be in their best interest anyways. I have a whole cutlery set from my younger days.
not a problem Capital One will lend you money for tax payments at 36.5%.
So is cash just trash and an unsafe place to be? Or is it a great place to be?
You people need to make up your minds.
Pick a side, any side.
I'll go! Ok, so, keep enough trash, er...i mean cash, for an emergency. Buy some stocks and bonds sure, fine, but they are still paper assets and should be weighted with gold 50/50 at least....at least! And those stocks should be miners/oil (throw in cisco and whole foods for a good time....c'mon lucky seven!) and be ready for Nationalization in approximately two years time. So pour all your wealth in gold! I will stay on this side come hell or high water.
I don't know, LH. I think two years is pushing it. More like 9-13 months, my best guess.
We find out this month! Will it be Plan A, or B?
+1 ... I thought it was a good idea in 2005 and now I think it's a better idea. No one can predict when a failed bond auction in Outer Mongolia will trigger the dominos.
'So the price of gold goes up, but the weight stays the same'... Marc Faber
Keep reading. We are diverse, but consistent.
It is both. First, Deflation. Second, Hyperinflation or Default - they will both feel the same.
Agreed.
Wait a little longer for "deflation"of "assets".
BB does QE Maximus.
Ride tha wave.
Agreed. I like to think of this as a panning for gold movement. Wash it to one side, then the other. This continous motion sifts the silt, yaoming?
Return of the phrase that pays (if you're short) is coming soon:
"Breaking the Buck"
Not this time around for MMF's. They have the legal means to stop all withdrawals.
How long will it take before this new rule is put into effect?
OT: Speaking of "outflows, when is someone going to call out BP for the cap that is supposed to be the solution but which, nearly 48 hours after being put in place, clearly is not doing the job.
Oh, right, right: They have to close those valves slowly, very slowly ... Or, are they just buying time?
And if the cap doesn't work, what next? Industrial-sized ShamWow?
Feels like Amateur Hour.
I have no idea how this would work in the ocean, but it worked here!
http://www.youtube.com/watch?v=MWi0OHuFVi8
Common sense is not so common...
BP to buy Hay? Naaaaaa?! it works to, too well.
"Hay? Fuck that! How will that make anyone we know money? Lets call Dupont and see if we can get another batch of top kill ready!"
I think people are pulling money out to live on. Maybe make Mortgage payments, pay off Credit Cards at 29% interest. Why get .004 on your savings when you are paying 29% to the Credit Card Companies? Real Genius there to make that decision.
In my area Property Taxes are eating up income, increased water bills, higher Utilitie bills. What is left but to take money out of investments.
There is NO! inflation... how can your energy costs be rising? you are crazy... those numbers you are seeing are mis-typed.
http://www.bls.gov/cpi/
Don't you see right there at that .gov site that there is NO inflation...
Way too much bullishness on gold. Haven't had a real gut check since the summer of 2008. Time to throw out all the momo monkeys. The serious players want some room at the table for another big helping.
blah blah blah.... blah blah If oil goes up and gold doesn't sell off the game is over.
Highest since Aug 2003?, that was a good time to go long!
it is never mentioned WHAT people are buying...i think they are exchanging fiat notes for tangible assets
Bingo! I don't know what others have been doing but I have been drawing down since 05 and buying hard shiny assets. I piss in the general direction of DC and Wall St.
...and I would still have those assets except for the air crash in the middle of the Amazon Jungle...where all was lost to the foot hunters...They were head hunters before being introduced to a new god by young white folk on missions.
Updated DOW charts :
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
"money market saw yet another outflow of $11.5 billion, bringing total YTD money market outflows to $414 billion, or -12.9% of total money market assets. Ironically, the only asset class (aside from gold) outperforming this year is the dollar. Instead of keeping capital invested in cash, Americans have shifted nearly half a trillion out of the best performing asset in 2010"
This makes it sound like mm funds were the best performers in 2010? Surely not the case.
Rising DXY doesn't do jack to plain cash.