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Et Tu, Treasury Auction Accounting?
It it widely known that in June the treasury made accounting changes to its Treasury Auction process that likely boosted the amount of indirect bidders (considered a proxy for foreign interest).
From a Reuters article:
"The Treasury's changes, contained in a June 1 entry to the Federal Register, relate to what it considers a "guaranteed bid." Under the previous arrangement, once a primary dealer offered securities at a pre-specified level to its customer, that bid was considered to be the dealer's own.
The matter was technical enough to confuse even industry veterans.
"We are not precisely sure what this all means," said Ward McCarthy, managing director at Stone & McCarthy Research Associates in Princeton, New Jersey.
"We spoke with some very seasoned market players with decades of experience on dealer trading floors who were similarly unsure what to make of the contents of the Federal Register.
...
The Treasury was not immediately available for comment."
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Cue to the sale of 5 year treasuries on July 29:
Bloomberg: "Indirect bidders bought 36.7 percent of the five-year notes, down from 62.8 percent of the securities at the June sale, the highest since December 2004."
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So... after a magical and massive increase in 'indirect bidders' in June (which qualmed market fears that foreign interest was waning), we go back to "normal" levels of ~35%...
Unfortunately, thanks to the accounting obfuscation we have come to rely upon from our friends at the Fed & Treasury & Co., the already elusive 'foreign interest' is further enshrouded in mystery. We don't really know if foreign interest is up, down or stagnant from its level one year ago.
We do know, however, that experts widely attributed the massive increase in 'indirect bidders' in June largely to the accounting manipulation change and not likely due to vastly increased foreign interest. So, ceteris parabis, could we not at least hypothesize that the fall from 62.8% to 36.7% in indirect bidders represents quite a significant fall in foreign interest?
Oh what am I saying, I'm sure my fears are irrational and unfounded. Our Dear Leaders (Fed & Treasury) have already proven themselves to be bastions of accounting consistency. True believers in 'tellin' it like it is.'
I mean, it's not like the Fed abused hedonic adjustments and geometric averaging to downwardly adjust the CPI to rationalize the government's desire to pay out less for social security. Or conveniently neglects millions of people in unemployment statistics. Or uses dollar swaps and liquidity programs to fudge the dollar's exchange rate. Okay, nevermind.
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"the already elusive 'foreign interest' is further enshrouded in mystery"
Because 'foreign interest' a.k.a. 'indirect bidders' is a way for the Fed to hide the extent of its debt monetization activities (in addition to what it has formally announced) from the public while at the same time (falsely) projecting strong overseas demand for the toilet-paper a.k.a. US Treasuries. And they have been doing this even before they formally announced it. Whoever is stupid enough to believe the bullshit fed by the Fed/Tres. that 'indirect bidders' is 'foreign demand' (cough..Karl Denninger...cough) deserves to lose their money.
"I'm sure my fears are irrational and unfounded"
Well, the answer is no - not because indirect bidders recently fell from 62.8% to 36.7%, but because real 'foreign interest' probably vanished a long time ago and all you have is a gamed number that goes up and down depending on how much debt the Fed wants to monetize stealthily. Countries want to get rid of their existing and practically illiquid (due to their size) UST's, not buy more. Jesus people! What kind of wonderlnd are you living in? It's time to get out of denial about the reality of the fate the USA is facing.
Another case of "if we don't like the data, we'll doctor the methodology". Does anyone reallly believe the government data?
indirect bidder is an extremely opaque term and does not equate to foreign purchases entirely although there is substantial overlap.....there is also no way of knowing whether the fed is shipping money to overseas banks like deutsche bank to bid for them....just another reason to audit and then abolish the private banking cartel.
ZH: "Oh what am I saying, I'm sure my fears are irrational and unfounded."
As our good friend Bernanke would say "What we have here is an overreaction" as he patronizingly replied to Karl Denninger's emailed question to him on the PBS public forum:
http://www.youtube.com/watch?v=Zxqcl8H-ta4&eurl=http%3A%2F%2Fmarket%2Dti...
I guess he was too polite to say something like "moronic bloggers".......they leave that to the CNBC henchmen.
I appreciate the excellent source of alternate news available here Tyler........it's a lifesaver.....and money saver.
I love how ancient crusty old seasoned market players scratch their heads and can't come up with anything to say about it.
How about IT IS A FRIGGIN SCAM!!!!!!!!!!!!!!!!!
How about that POS BERNANKE IS LYING HIS EVER LOVING ASS OFF!!!
BINGO!
The five year auction step back was a shot across the bow. Note who was in town during that auction.
Nonetheless, they talk and threaten a lot, but in the end will do nothing, we own them.
Some of our other enablers, we should be more worried about.
@anon #20507
Exactly. My business gives me the most control of all the options and that is the best chance I've got.
The new political norm is Leibnizian optimism.
This thing we once called "investing" has been reduced overtly to
1. playing a game on someone else's home field
2. under league rules designed to give them advanced knowledge of our plays
3. rules which are subject to change at the whim of the home team without advance notice, or even any notice at all
4. refereed by people who work for the home team itself.
5. The governing body for said league has been deeply captured, and also maintains an appelate system virtually guaranteed to ignore our complaints of unfair treatment
6. and the consequences of our losing this game are turning over our hard-earned wealth to the home team.
7. The consequences of winning this game are turning over an increasing portion of our winnings to the league's governing body.
Someone please tell me why we should play this game?
Wow! That sounds like when you play against the Indianapolis Colts...
Sorry, very much off topic.
Government Sachs wants YOU, to step right up and place yah bets!
I am not playing anymore, and not until some sanity comes back into this. 100% cash. Would rather go back into working at own business than trust hard earned money to this lottery. I am not fearing missing the rally, but happy to be out of it.
Enough is enough.