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Charting The Bernanke Put
The below chart of implied vol skew from UBS is the closest thing we will get to visualizing the now prevalent "Bernanke put" on the stock market. Also, the commentary from UBS is pretty much all we need to know that even the smallest decline in the market indicates that something is very wrong at the Fed, which has now made any stock drops implicitly impossible.
As we mentioned in our report out earlier this week, These Go to 11, many investors have interpreted a more engaged Fed as providing put protection under the equity market, decreasing the potential for adverse outcomes.
This dynamic can be observed most directly by looking at the option market’s implied volatility skew, which measures the difference between the cost of puts and calls. As illustrated below, this declined significantly following the Fed’s hint at additional QE on September 21. Why buy downside protection when the Fed has done it for you?
Move over "Greenspan put." Your successor has outdone you by a factor of 600 billion, and soon - 4+ trillion.
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So, please help me understand... I give the dealers the POMO "money" to put into the market and then I use my other "money" to bet the market goes up?
Nah, the PD's make money out of/on the float, you "buy" it back, and then do it again.
There ya go.
Well said. "What OTHER money." Or alternately maybe they are saying "No, you're going to borrow the money the banks are not lending so you can speculate in the market that is staggering like a drunk dinosaur in hopes of recouping your American dream.
Meanwhile, the price of US crude oil jumped $2.5 a barrel to $87. It is up 20pc since markets first concluded in early September that 'QE2' was a done deal.
This amounts to a tax on US consumers, transferring US income to Mid-East petro-powers. Copper has behaved in much the same way. So have sugar, soya, and cotton.
...not to mention corn, coffee, rubber, vaseline, and codeine ....
Interesting. Hadn't been monitoring the charts of rubber and vaseline. Probably a couple of good commodities to watch in the coming years.
agreed....the "Wealth Effect" reminds me of 1984 Double Speak.
You have more money but it buys you less. Wow how is that for an economic benefit? GDP growth at all costs!
One financial historian made an interesting comment a few months back regarding all the tinkering that the Federal Reserve is performing - whenever the market experiences a serious external shock to produce downside price action, investor margin calls will overwhelm the ability of any PPT action to prop up the market.
I saw an ad for one of the discount, high volume brokerages the other day and in the fine print on the screen, it said that for account over $200K, they would provide $1MM in margining capability. That's 5:1 leverage on a retail account. That strikes me as insane.
We will eventually get a truly unexpected and disastrous black swan (e.g California megaquake, NK shelling Seoul, etc.), and while I have no idea when the swan will fly, I know the market structure is completely unequipped to handle it. You will have Lock Limit Down days for several days in a row. All the bulls feeling bulletproof thanks to tight stops will find those stops are useless.
A healthy market, complete with a healthy supply of shorts, can handle those kinds of events in a moderated fashion, but the current market simply cannot.
If it's the ad saying the interest they charge is 1.28%, that would be the same ad I saw.
That is scary indeed.
Yep, Interactive Brokers.
When Japan and Europe did their 1st QEs the mkt went higher for only a few weeks then, dropped.
In one of Japans recent QEs they gave cash rebates to families with children hoping they would spend the money. They took the money, paid down debt , put the rest in the bank and did'nt buy anything.
If this 401k, wealth effect has the same ending of not buying, then the cascade will come.
People will not buy unnecessary "stuff" unless 1) they have a job and confidence in that source of income going forward and/or 2) they have access to credit and can service the credit debt.
The wealth effect is a joke and is non-existent for 98% of Americans
Watch the other 98% react when the price of gas goes through the roof. CNBC will be reporting how the markets are up 20% and everyone is getting big juicy returns and Joe Hardscrabble will paying at the pump for Bernanke's put. And then paying again when buying food, and yet again when buying clothes. Of course, in this day and age housing is free. Instead of a "chicken in every pot" we get "every family in a REO."
sounds like 08 with less jobs and less job security.
There is no such thing as a "wealth effect". QE doesn't create wealth but redistributes it : so there is a "redistribution of wealth effect" from the entire population towards the few who own the stock market:
.. the wealthiest 1% own 50% of all stocks
.. the next 9% own 40% of all stocks
.. the rest (90%) own 10% of all stocks
The net result of QE2 is thus :
.. the wealthiest 1 million households will see their wealth increase by $295,000
.. the next 9 million households will see their wealth increase by $22,000
.. the rest 100 million households will see their wealth decrease by $4,800
If the 100 million undesrtood what is going on they would revolt.
Very prescient. All these bulls, would-be bulls and assorted CNBC navel gazers are in for a rude quite the surprise when they wake up to the Wall Street version of genital herpes and worse.
I saw Art Cashin on TV this morning. They were asking him about QE2. I think the election and particularly the reality of QE2 were setting in on him.
It looked like he was either gonna throw-up or shit himself.
The market should view it as not only a put, but another handout to the financial elite, another extortion payment. Another pound of flesh that has been extracted... Another step in the destruction of the world reserve currency.
We just recently inducted Ben Bernanke into our Psycho Archives over at PsychoNews.
http://psychonews.site90.net
Also be sure to see the latest addition, none other than Dick "Warmonger" Cheney!
+1/2...just keep diggin...
Aww. Only 1/2 a +? I always considered myself a good digger. What am I looking for?
Went to your blog, but can't find any psychopath profiles.
It's almost as if tomorrow's payroll report doesn't mean a damn thing. Everything seems to be locked into place and will move according to Ben and his talking helicopter.
I will never forget that story a while back where a developer allegedly stole software code from the Vampire Squid which the Squid later admitted could manipulate the market if place into the wrong hands...thankfully Lloyd would never allow that to happen.
I wonder if that developer is still on the missing persons list.
His trial started today, I believe.
http://www.huffingtonpost.com/2010/02/11/sergey-aleynikov-goldman_n_4589...
Nov. 4 2010 - 4:42 pm
http://blogs.forbes.com/emilylambert/2010/11/04/man-fighting-goldman-nee...
http://www.aleynikov.org/
U.S. Seeks to Shield Goldman Secretshttp://online.wsj.com/article/SB1000142405270230389180457557669353730633...
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - -x
UNITED STATES OF AMERICA, :
-v.- : 10 Cr. 96 (DLC)
SERGEY ALEYNIKOV, :
Defendant
http://online.wsj.com/public/resources/documents/goldmantradercase102720...
Pencil whipped data tomorrow, revised in the near future.
Barney says, spin the wheel and count out the spaces!
http://www.youtube.com/watch?v=umaikKPZGMA
Why would it. The Fed probably faxed their edits over to the BLS this afternoon. Will gain private jobs lose a few public jobs, and the unemployment rate will magically dip thanks to thousands deciding that looking for a job is a waste of time.
Let me correct that...
The Bernanke Putter
He is trying to get the "feel" of his new Nike QE2 Tiger putter.
It's been like two days since the election and still no jobs. WTF?
Tyler, can you please get rid of the damn Cramer ad on this website? It's driving me absolutely mad. Or at least give me a Flash plug-in Glock and targeting reticle so I can give 'im what for.
look at it this way, its a bit like him pre-paying his own funeral costs
Wish I could see him, however no ads are visible when viewing this site.
Do me a favor, click on his google ad for me. Each click adds up.
Gangster Teletubbies
http://www.youtube.com/watch?v=gypyc9d3IWE
Google thinks you like it. Stop cursing the darkness and light a candle, ignant.
https://addons.mozilla.org/en-US/firefox/addon/6826/
That advice hurts this website, btw.
Better yet: Click on that Cramer ad a few times. You'll be taking money from Cramer, and giving it to Tyler.
Why do that? Cramer praises our new and fearless Lord king Judah Ben Hur Bernanke...
http://www.cnbc.com/id/39988983/
Go here:
http://www.mvps.org/winhelp2002/hosts2.htm
Follow their directions and install the file(s). Most advertising will not even be loaded by your web browser afterwards. Works for me under Linux, at any rate
"...something is very wrong at the Fed, which has now made any stock drops implicitly impossible."
Nice adverb choice: "implicitly"
Tick, tock...Big Ben
We're talking about a guy who did an emergency cut to the ffr of 75 bps when socgen liquidated. Bennie B. will not tolerate stock market declines.
I am surprised there isn't more mentioned around here of the fed conference coming up...
http://www.frbatlanta.org/news/conferences/10jekyll_index.cfm
The ZH crowd would simply have too much fun with the aggenda items!
Really, Is there an entity that can actually compel Bernake to stop the foolishness.Can the President?,Congress? What power controls the "independent" Fed. If Bernake were insane would we know it? Do the Fed governors really have any influence? Way too much power for one man.
President can't remove Fed members once appointed and confirmed. Originally, he could. The only way to remove one or more would be impeachment, a majority vote in the House and a 2/3rds vote in the Senate. The President doesn't get a veto.
Unlike most agencies and branches of government, the Fed generates its own revenue, so it isn't dependent on Congess for funding limiting its influence over the Fed. Fed members have such long, staggered terms (14 years), it's difficult to replace by attrition.
Congress could pass legislation that alters the scope of the Fed's authority, as Frank-Dodd did, but that's an uphill battle. Ask Ron Paul.
Perhaps, but having a Texas (or any other state for that matter!) Sheriff arrest him and put him in a cell, might change one's way of thinking.
It feels like we have reached the moment of critical mass when it might be time for a Save the Dollar/End the Fed march on Washington. Bring in the tea parties and have Beck, Santelli, and others talk it up. Not a march to the Lincoln memorial to the White House or some other mock placeholder for power, but a march to the steps of the Fed itself.
It has a nice regional flavor too, since the HQ of every Fed region would make for its own target for locals.
Anyway, I'm not into organizing, but if someone gets it going, I'll bring my Blazing Ben effigy.
ha, ha. Paul Revere would be so proud of the lengths we go to preserve freedom. :)
Buy Ag and oil futures to protect yourself. Aside from taxes of course, this is their only shot at extending slavery since housing prices are going down.
Also, buy at least a couple months of food at Costco tomorrow. This could get ugly real quick.
Their recent special on 1-yr supply of freeze dried was a great base. The UPS guy looked pretty down when he delivered that one, so I had to help him out.
5 gallon food grade buckets, mylar bags, heat sealer and throw in the packets(you need two kinds) for bottling the rest of your staples. Everything can be found on Amazon/Ebay cheap.
I can't time the markets anymore than I can time the moment of the great food panic of 201X.
Last things for me to order are some solar panels and a candle water purifier.
Chris Mortenson(en?) was a great article to learn the basics. I honestly sleep better knowing I have food stored. It feels as good as owning PM, I kid you not. Just like physical, you won't know how good it feels until you take the plunge.
It takes up a ton of space, though. Also, if married, expect your wife to roll her eyes when you do it. Don't bother talking to anyone else about it, you'll just get the deer in headlights look(they will carry on conversations about iPads, though).
Hyperinflation is occuring, as we speak. There is no need for debate about it any longer.
My only stocks are commodity plays, now. They used to be commodity longs/index shorts. Obviously, being short was not the place to be.
great summary. get your guns and ammo, friend.
Good point, Chopper. Having food but weapons makes you a staked out sheep in a world of wolves. I asked a Mormon who was discussing having a year's food for his family of six on hand if he had any weapons. He was incredulous that anyone would want, or own, a gun. If society collapses, a person with a gun may be able to take food (may just eliminate their need for food if they try to take from the wrong person) but a person with food, but no gun is just going to be a victim.
Governments weren't created to protect you, just to rule you. We will always have some sort of government, we may not, at some future date, have any form of protection except what we provide for ourselves.
+1
as i continue to say around these message boards: i soundly recommend that we panic, continue buying guns, freeze-dried food, and precious metals. I hope we are all having a good laugh about how wrong i was sometime in a few years.
Much like the former USSR, our system is unsustainable. Big Government "Solutions" are a broken window fallacy. "Progressive" Democrats and Republicans have further accelerated our demise by undermining State and local government rights and individual liberties in order to concentrate evermore power within both our Wealth Redistribution Complex (Washington D.C.) and our Wall Street Industrial Complex (New York City) which have evolved into vehicles for white collar crime in virtually every facet of their parasitical existence.
Of course, as we have talked about many times, the key culprits are centralized money planning, fractional reserve counterfeiting, and faith-based paper money. It is our debt-based monetary system which allows for illegal leverage via fractional reserve counterfeiting that gives the international banking cartel and their cronies significant power and influence over our lives. because we compete against these newly printed Federal Reserve Notes with our existing FRNs that we have earned through providing valuable goods/services, we are subjected to a system which favors the existing rich, hurts the existing poor, and creates strong headwinds to upward mobility in our economy.
if FRNs were not the only 'legal tender', then they could not be counterfeited. you would only need to deal with other honest business people at your own risk, and so would other individuals. in other words, nobody would have an unfair advantage.
The Welfare State, for example, cannot exist without keynesian money printing within a debt-based monetary system. keynesian money printing is dependent upon infinite amounts of loans expanding exponentially. obviously, this is not sustainable. this is a sick, twisted system of fraud, with the promise of "free lunches" all around and a "chicken in every pot". Obviously, these promises are on the eve of being broken and leading us ever-closer to economic collapse by the moment.
a rule of law protecting your property from other monkeys is paramount. 'more government regulation' is not. this is sleight of hand misdirection that only results in making your life more difficult and never results in solutions. namely, end the private federal reserve gosbank, outlaw fractional reserve lending, and open up regional economies to competing asset-backed currencies including gold and silver.
bigger centralized governments are not the solution. they simply succeed in creating large public coffers to be raided by corporate and labor cronies and their lapdog politicians. starve the beast and place our government workers in soup lines immediately so we can go back to being sovereign men who are responsible only for not imposing upon the liberty of our neighbors and other global inhabitants.
Further, if Trillions of $USDs were not tied up in U.S. Treasury Bonds supporting the Welfare State, this capital would be in the private sector because it would have no other place to go. The Dow Jones Industrial Average would be at 100,000 and everyone would have a helicopter in their back yard. Hurricane Katrina victims, for example, would not need to rely on central planners who currently have a monopoly on both "force" and incompetence. The abundance of wealth would increase the generousity of fellow Americans to unseen levels, and dwarf financial outpourings towards Haiti's hurricane victims and Bali's tsunami victims by comparison.
instead, we are paying ever-expanding interest payments on nearly $15 Trillion with approximately $160 Trillion in unfunded liabilities to the further enrichment of The Federal Reserve and extended members of the International Banking Cartel.
FOOD, GUNS, GOLD, bitchez.
Forget the blazing ben effigy, here's a suggestion of what the Fed's new logo/Ben's desk art should be given what has happened to the dollar et al.......
http://www.publicartaroundtheworld.com/Manneken_Pis_Statue.html
M2 Money Supply- Federal Reserve Bank of New York presentation - Frank Smajlaj
At 2:00 the audio becomes silent.
http://www.youtube.com/watch?v=9sxVvUt-vMU
Does anyone have this transcript?
Full series
http://www.youtube.com/user/frankiesmileeye#p/u
This could be complete horse shit, just want to read transcript to verify. Kindly publish if someone holds this mysterious blacked out information.
Thank you.
If you had the post-WWII power of the United States, the military, power projection, and the complete global system it built after WWII, you would have what you needed to escape this situation fairly intact after the initial pain and losses. The only reason we're sacking the American people with these losses is because the int'l privatizing capitalists who have commandeered our nation (most american themselves) have CHOSEN to do so. Our leaders don't have the knowledge or courage to stop them. We elevate effete leaders who know how to kiss babies and get along.
It's embarrassing.
Wow!! No downside? Does this mean that i can reply to every post that has bad news related to the so called fictitious economy ( Such as tomorrows job number ), With a big rip roaring Who gives a fuck? or a Cramer driven, "BOOYAH"
No response to idiots but .....:
http://www.youtube.com/watch?v=qHpDGxCAzU4
The Fed has created the impression that there is NO risk! Does anyone really even dare short the stock market any more? I don't! There is no longer even a semblance of a free market. It's a manipulated one!
But my gut tells me there are some very dreadful consequences when we try to "fool with mother nature"! I have a visceral feeling that there is going to be hell to pay!
Can anyone link a ZH article from a few months ago that was about a scenario where everyone piles into commodities after they give up on the dollar. Probably be good to brush up on that one now, I think it was by someone based out of SE Asia or Australia.
Marc Faber, for one
http://online.barrons.com/article/SB123276613972012603.html#articleTabs_...
and search on
"marc faber" site: barrons.com
BOJ buying equities, Fed buying equities, even zero hedge readers are becoming bullish. I'm sure goldman has unwound their short vix play and doubled up on 1125 puts. $600 billion of qe is only nine times amzn. I backed up the truck short on nq and es yesterday. My balls will either be in a vise or getting licked.
unfortunately this put does definitely not hedge any tail risk
Some thoughs about a market collapse:
- BAC dead (loan put backs) and I doubt that FED can afford it to bail out
- JPM and HSBC gone as they can't cover their metal short contracts (silver ligitations on going)
- When one of these key banks fails, all banks are fucked (all banks depending on interbanking lending and collaterals -> chain effect)
- People getting worried -> bank run (nobody will have faith in the deposit insurance, especially since the FDIC removed the limit which means we anyway can't pay it out
- Global bank bankruptcies (Fuck Basel II and the little Tier 1 capital)
- Your securities belong to you but it will take ages to bring it out of the bankrupt estate (if your securities are stored outsie of your country you bear the political risk)
- You lost all your cash and you can't buy the goods which are quickly getting rare
Thus, when you're trading in this artificial market, think well about where your securities held and how safe your bank is (if there is any safe bank in the universe)
With Stock prices were they are, Buying here is like jumping off a 100 Story Building, hoping the FED parachute opens up before you hit the ground.
DOW/S&P500/FTSE daily and weekly overbought charts are now at an extreme level. Similar extreme conditions were detected before the correction started in mid 2007.
http://stockmarket618.wordpress.com
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