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Exclusive: 4 Dealers Respond With "$1+ Trillion" To Fed Reverse Inquiry Into How Much QE2 Is Necessary
Yesterday we made a big stink over the Fed's reverse inquiry into the PD community over how much QE2 it should launch. Today, we find out what the distribution is: as Merrill's Harley Bassman points out: "Four dealers are predicting a $1+ Trillion buy program." It is good to finally know what the bogey is.
From Harley Bassman's note, just distributed to clients:
I was feeling just fine about the world today.....until I was handed a survey of dealer opinions about next week's QE2 event (aka the FOMC meeting).
Four dealers are predicting a $1+ Trillion buy program with a smattering of $900bn and $600bn votes tossed in. This would not have bothered me too much if not for the revelation today that the FED was asking dealer opinions.
This reminds me of how I tell my kids that our family is a democracy: They each have one vote.......and I have five !!! Why is the FED asking ??
They are supposed to already have the answer.
The result:
std px Nvol breakeven Terminal Breakeven Sep 28 Low
FVZ 1-00 97nv +/- 23½bp T5yr ~~ 1.01% to 1.48% 1.10%
TYZ 2-02 126nv +/- 27½bp T10y ~~ 2.39% to 2.94% 2.39%
USZ 4-00 131nv +/- 28½bp T30y ~~ 3.76% to 4.33% 3.66%Considering the uncertainty, I would NOT call these options rich. Two points for at one month straddle on TYZ is a much better long than short.
Keep in mind this is a number most likely over a 6 month period. Double for full year impact.
At this point, if the Fed does something so stupid as demonstrating independence (whether from D.C. or the primary dealers), and does not announce $1 bn in QE2, well... welcome back gravity.
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I don't think the Fed's inquiry is sinister at all. I think they are truly flummoxed about their strategy (beyond 'create inflation'). The slowdown has arrived, even though they are printing like crazy. Right now, the economy feels like January 2008 all over to me, which turned out to be a bad omen. And the more articles I read from 'experts' about why things will just keep getting better smacks of desperation right now.
Would buying a few 10 year t-bond futures be a nice simply way to frontrun?
Would buying a few 10 year t-bond futures be a nice simply way to frontrun?
Better to just buy gold, gold stock (GDX) or a commodities ETF (DBA)
Good idea. I could get wiped out if it went against me. Those moves are hardcore. a few ticks in price and you're up or down 60 something bones.
The Fed can't let the market crash, (not in the way that would have the public begging for 10 trillion of QE), because things are so fucked-up and fragile that the whole situation could go chaotic.
So on November 3rd it will be a 100 billion a month, steady as she goes, FOR AS LONG AS IT TAKES.
The FED is lost because no matter how much they print, it's nothing compared to the loss of wealth and asset value decline of stocks, 401k's, homes, derivatives, MBS, CDOs and any other tool that pretends to have more value than its worth.
So far, they have managed to move only a couple of assets up in value to near 2007-8 levels. Stocks and commodities.
The biggest wealth bubble, homes, went to shit and is still going to shit.
If it ACTS like money, it IS money. And even if the FED can print 3-10 trillion is doesn't even compare to the 100s of trillions lost to money heaven in asset values across the globe. And if you levered up on derivatives and crap, that money is not coming back.
And if the FED prints a ton, it will not add to m3 or money velocity, as money supply overall is declining. And if you consider assets in the money pool(it acts like money, you can borrow off of it, so it's money) the FED will not stimulate anything except highly speculative yield chasing. In a delevering event, that GOES to money heaven too.
Basically the market is working. The retail player has left the stock market and brokerages are laying people off. The political establishment has been caught cheating with the banks on everything. People are hoarding, even with printing. That's deflation.
You can have a currency crisis even in a declining supply of money because people figure out that 1 dollar to 200 trillion dollars=zero faith. In Japan, there is no way they can pay off their debt demographically. This is the best case scenario for the US now. Japanese slow death.
This is the end
Beautiful friend
This is the end
My only friend, the end
Of our elaborate plans, the end
Of everything that stands, the end
No safety or surprise, the end
I'll never look into your eyes...again
Can you picture what will be
So limitless and free
Desperately in need...of some...stranger's hand
In a...desperate land
Lost in a Roman...wilderness of pain
And all the children are insane
All the children are insane
Waiting for the summer rain, yeah
There's danger on the edge of town
Ride the King's highway, baby
Weird scenes inside the gold mine
Ride the highway west, baby
Ride the snake, ride the snake
To the lake, the ancient lake, baby
The snake is long, seven miles
Ride the snake...he's old, and his skin is cold
The west is the best
The west is the best
Get here, and we'll do the rest
The blue bus is callin' us
The blue bus is callin' us
Driver, where you taken' us
The killer awoke before dawn, he put his boots on
He took a face from the ancient gallery
And he walked on down the hall
He went into the room where his sister lived, and...then he
Paid a visit to his brother, and then he
He walked on down the hall, and
And he came to a door...and he looked inside
Father, yes son, I want to kill you
Mother...I want to...fuck you
C'mon baby, take a chance with us
C'mon baby, take a chance with us
C'mon baby, take a chance with us
And meet me at the back of the blue bus
Doin' a blue rock
On a blue bus
Doin' a blue rock
C'mon, yeah
Kill, kill, kill, kill, kill, kill
This is the end
Beautiful friend
This is the end
My only friend, the end
It hurts to set you free
But you'll never follow me
The end of laughter and soft lies
The end of nights we tried to die
This is the end
A trillion here and a trillion there. Its chump change in Weimar America.
*Weimart*
The best trading idea is option strangles in all markets : indices, bonds, currencies, commodities and let the maniacs announce their bullsh1t policies as much as they want.
Just throwing it out there but what if QE2 is actually a ruse? Consider that economic turmoil might consolidate a Democratic party. QE2 doesn't arrive and we have a full scale reset on the markets. Clear the system and start afresh. Is this too extreme? Maybe they've finally got this and have ramped the market up to such highs in order to bring them crashing down.
What better way to force a collapse and control its outcome. Just a thought.
each 4 dealers want 1T for each so they can have their big bonuses at the end of the year. so GS high side estimate may be right after all.
QE2 in exchange for a federal cap on consumer credit card interest?
Yeah, right. Consideration? Never mentioned in the media or by a single politician. In fact, not even the tea party
has promised to amend the Federal Reserve Act to remove this power.
Untouchable, even in passing conversation on cable news...
QE2 is a bailout. It's not a boat or a queen. They have taken the language now. No one is discussing the
word "bailout" anymore, except in past tense. The tea party just revolted on sitting Senators over the past bailout, but they don't discuss the CURRENT
bailout? Bizarre. Alice in Wonderland. Hello. How are you. I am fine. I need a queen, a boat, or a bailout.
Bloody Mary was named after a queen. Another bloody bailout. Obama looks sheepish.
They go over a Trillion the whole deal is off the dollar crashes, oil to $100, gold who the F knows and the biggie rates actually rise cause the complete loss of faith in fed and pending inflation. Stocks el tanko.....
That comment was directed at B9K9
Tyler, or anyone. That is 4 out of 18. What was the mean and average? Does anyone know?
I'm going to make an educated guess that the average is between $600 and $700 bn.
Greenberg's Law: Never ask a barber if you need a haircut.
Bernanke's Law: Never ask a banker if you need a handout.
"You cannot serve both God and Money"
WOW!
In the fashion of our wonderful administration, the FED recently indicated that they would be "transparent" in their communications. Yesterdays wsj article was a hint that the number would disappoint. If we truly were going to see a number north of a trillion those in the know would have this market ramped up already. Either way it goes there will not be a bid or offer available that you will want to hit. My guess is 50b per month for the next six months.
T-Party!
http://www.youtube.com/watch?v=PTU2He2BIc0
thank you cocaoblini - -
Are Things Happening or What V?
Just checking the avatar.
Is anyone able to confirm that Joaquin Phoenix is going to cast as Ben Bernanke in the sequel to I'm Still Here ~ The Story of the Federal Reserve? The story is all over this website and there's some mumbo jumbo about P Diddy being a code word for "Primary Dealer." Here's a link: http://tradewithdave.com/?p=3095
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