FOMC Minutes: More MBS Purchases Coming

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Wed, 01/06/2010 - 15:27 | 184690 Hondo
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I believe the fools have driven us over the cliff already.

Wed, 01/06/2010 - 16:38 | 184794 Shameful
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We are living in a Looney Tunes cartoon...so everyone, no matter what do not look down!  After my study of Wile E. Coyote (super genuis) you only fall when you look down.

Wed, 01/06/2010 - 17:11 | 184850 cougar_w
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"you only fall when you look down"

This will the the title of a book someday.

Wed, 01/06/2010 - 15:33 | 184698 Anonymous
Anonymous's picture

You've got it wrong, they're selling the USD because the Fed isn't worried about inflation. Rates are staying low.

Wed, 01/06/2010 - 15:48 | 184720 lsbumblebee
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The staff intrepreted high unemployment to be the result of so many jobs that people simply can't decide. The staff forecast for inflation was unchanged, stating that rising prices were an illusion. The staff noted hair growing on our palms.

Wed, 01/06/2010 - 15:54 | 184725 Slewburger
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Inflate or Die!

Wed, 01/06/2010 - 16:01 | 184739 NoBull1994
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Rosie not looking so good....  again.

Wed, 01/06/2010 - 16:20 | 184765 Scooby Dooby Doo
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I attend a play last year called "Confidence". As I sat in the audience the actor came out on the stage and sat in a King Edward chair. After about 5 minutes the curtain went down, and 1 minute later it came up.

Mountains of neatly stacked bundles of currency surrounded the actor as he sat in the King Edward chair. He stood and cried out(in a very regal tone) "I have 700 billion dollars, it was just given to me by the Fed".

The audience gave him a standing ovation. Then they sat and watch him sit in his chair for the next 2 hours.

Question, will inflation affect the members of the audience?

Thu, 01/07/2010 - 11:23 | 185414 trav7777
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Answer: yes.

There is more of them and they will demand it. 

People do not understand what will happen if the deflation proceeds into second gear.  That is what happened in GD1 and the response was brute force inflationary devaluation, by 60%.

The electoral dynamics make the election of someone who will print money and actually heli-drop it inevitable.  The mechanisms of this are already in place through UE benefits and rising gov't employment.

When the productive economy has been destroyed, and everyone is a gov't worker, ONLY printing will provide nominal revenue.  There will be no tax base.  We're kind of already there in a way.

The government will avoid de jure default by any means necessary.

Wed, 01/06/2010 - 16:24 | 184775 Oso
Oso's picture

Fed has lost control.  QE 2.0 coming up.  What are the goddamn senators and congressman doing as oil lurches upwards, blaming A-rabs???

Wed, 01/06/2010 - 16:39 | 184797 Bam_Man
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The ongoing purchase of Agency MBS IS QE 2.0.

See my comment below.

Wed, 01/06/2010 - 18:49 | 184983 Assetman
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Senators, you say?  Look at Christopher Dodd as an example... they are planning their exit strategies.

Do you really think the Fed is going to wait for "significant economic deterioration" to see more MBS purchases.  They see what they want to see, so even 4% GDP growth may translated into "economic detrioration".  Of course, Uncle Ben will still see no inflation when oil is at $125/bll and gasoline is a $4/gal.  Putz. 

If the Fed is intent on continuting to subsidize losses through overpaying for MBS, there is going to be significant political damage before we get to November.  The Dems are going to lose their seats and a few incumbent members of the Red Pill Party will get theirs as well.

We'll look back at this and discover that Dodd was pretty smart for getting the heck out of Dodge and getting a nice ranchero next to GWB in Paraguay.

And yeah, I think it will be $ denomiated oil prices that will be the breaking point from a J6P perspective.  They may not understand the intricacies of the massive bailout, but they do understand filling up their truck with $4 a gallon gas.

Sat, 01/09/2010 - 12:03 | 188386 berlinjames02
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Actually Dodd will probably move to Ireland. He already owns property there, which he bought for roughly half the market value from a 'friend'. Dodd negotiated the 'friend's' pardon pardon from President Clinton in 2001.

I am unsure of the extradition agreements between the US and Ireland. I wanted to post this for Marla's poll, but I was in transit at the time.

Schade.

http://online.wsj.com/article/SB123681364667801647.html

Wed, 01/06/2010 - 16:28 | 184779 Brett in Manhattan
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Buying MBSs? I thought the housing market has already bottomed and the future is so bright Bernanke has to wear shades?

Those MBSs should be selling like acid at Woodstock.

 

Wed, 01/06/2010 - 16:29 | 184780 Anonymous
Anonymous's picture

"The Desk was continuing to develop the capacity to conduct RRPs using agency MBS collateral and anticipated that this work would be completed by the spring"
I guess the Fed is much more of a "green" eco-friendly orgnaization that I ever thought. Talk about recycled garbage. Jesus Christ.

They have thrown a shit-ton of money at the mortgage market to support price levels in order to disrupt any price discovery of the related securities of the bank's balance sheets. If this is the leg of the table that is supporting the banks from imploding, they how in the hell is the Fed going to be able to pull that away?

I am not a sophisticated investor, but I can't see how they will have the will to remove their support. Right?

Wed, 01/06/2010 - 16:36 | 184789 Sancho Ponzi
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I say let's demolish all of those hideous 3500-5000 sf McMansions people can no longer afford and build some nice, energy efficient 800-1200 sf urban homes. When things get screwed up, sometimes it's better to cut your losses and start over.

Wed, 01/06/2010 - 17:06 | 184842 Anonymous
Anonymous's picture

I will immediately buy a house if they build with 1200sf which reduces cost by half.

Thu, 01/07/2010 - 11:26 | 185416 trav7777
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still too expensive.

housing prices need to fall by half at least and then normalize around that.  Homeownership should not imply lifelong debt peonage

Wed, 01/06/2010 - 16:38 | 184790 Bam_Man
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Of course they are going to continue buying MBS.

Where do you think the money is going to come from to absorb this year's $2.5Trillion+ in new Treasury issuance?

The Fed will own (monetize) the entire Agency MBS market if necessary to keep Treasury auctions from failing.

And no one will be able to accuse them of "monetizing Treasuries".

Wed, 01/06/2010 - 17:48 | 184906 buzzsaw99
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good point

Wed, 01/06/2010 - 17:57 | 184919 ghostfaceinvestah
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Only $4T to go, why stop now?  they can probably add another $1.5T this year, another $1.5T in 2011, and by 2012 they will only have to reabsorb the runoff.  Why not?

Wed, 01/06/2010 - 16:38 | 184793 bugs_
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Soon our balogne won't even have a first name anymore.

 

Wed, 01/06/2010 - 16:38 | 184795 TheGoodDoctor
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What a joke. They knew they were going to have to buy more but said the program would be ended. I don't know what to believe anymore.

Wed, 01/06/2010 - 16:42 | 184801 Bam_Man
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Hint: Don't listen to what they say. Watch what they do. And think like a criminal.

Wed, 01/06/2010 - 17:56 | 184918 AN0NYM0US
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Don't listen to what they say. Watch what they do.

 

my initial reaction was to agree but in fact they have been doing what they said they would do at least that is what Tepper believed:

That was the case in early 2009, he says. Shares of banks such as Citigroup Inc. and Bank of America Corp. were collapsing on rumors they would be nationalized. On Feb. 25, the U.S. Treasury put out a white paper and a term sheet on its Web site for the government’s Capital Assistance Program. They said the preferred stock the government was buying in the banks would be convertible to common shares at prices far above where they were trading -- 37 percent higher in the case of Citigroup and 21 percent for Bank of America, according to Bloomberg calculations.

For Tepper, 52, that meant it was time to buy. “If the federal government was putting out this paper, they weren’t going to nationalize the banks,” he says

http://www.businessweek.com/news/2010-01-05/tepper-turns-panic-to-profit...

 

 

 

Wed, 01/06/2010 - 18:56 | 184989 Assetman
Assetman's picture

Interesting comment.

What they are doing: Buying MBS.

What they are saying: Will buy more MBS.

Does this mean that the Fed really won't buy more MBS-- or wait for very significant economic deteriroation, before actually putting the talk into action?

Who really knows?  And don't you just think that all the confusion with the doublespeak is exactly the way the Fed wants it.  So far, it's kept most asset values in a pretty tight ranges-- even though the ripoff of taxpayers continues in full force.

Wed, 01/06/2010 - 16:46 | 184808 HEHEHE
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I thought they said they were ending all their silly prop up programs by March:)  How silly of me to have believed them.

Wed, 01/06/2010 - 16:52 | 184816 mrmortgage
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FED has/will continue buying. Real bank/insurance rates for 30Y paper are in the low to mid 6% range for the MOST qualified borrowers with ample equity(20%+ min). The notion of 90-100% loan to value people getting rates in the low to mid 5% is a gift from the FED/US Citizens otherwise they would be laughed out of their local bank or be charged a rate of 6.50-7.50%. I know because we are backed by a credit union and have rate sheets from several dozen other institutions.

 

QE and housing is a policy instrument that has to continue otherwise the wheels on the bus will fall off. 

thegreatloanblog.com

Cheers.

Wed, 01/06/2010 - 17:03 | 184836 jm
jm's picture

Kicking the can like this just makes it a matter of time before the wheels go.

Seems that they don't really care what mortgage rates look like at this point, as no one can buy when the cost of living eats up collateral needed to secure a loan in the first place. 

 

Thu, 01/07/2010 - 11:30 | 185424 trav7777
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This is the Fed's problem.

Dollar devaluation needed to stave off the deflationary implosion will make real assets, such as oil, increasingly expensive, thereby reducing free cash flow for credit service.

There is no two ways around that housing prices HAVE to fall.  The problem is that the synthetic economy used too many of them as material event triggers in the derivatives.

Only runaway inflation could convince someone to lever up right now.

Wed, 01/06/2010 - 17:06 | 184841 faustian bargain
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Yeah but who wants to keep rolling when you're headed for a cliff.

Wed, 01/06/2010 - 17:30 | 184880 cougar_w
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If rolling is how you measure success, you roll.

The lethal failure is not that they do not see the cliff, because they probably do. The failure is that they do not know how to do anything except roll.

My guess is that all empires expire in exactly this way.

cougar

Wed, 01/06/2010 - 16:57 | 184826 Anonymous
Anonymous's picture

I'm beginning to like Greenspan more everyday. At least he raised interest rates because of fear of inflation. These clowns don't acknowledge shit.

Wed, 01/06/2010 - 17:06 | 184843 Anonymous
Anonymous's picture

The FOMC is hell bent on destroying the currency and therefore the economy. Now they want to buy even more MBSs. Duh! whoever saw that coming. Oh the economy is doing fine now - got Bernanke man of the year didn’t it? BUT we need more houses! so he is going to keep buying MBSs and print more money. Nothing, absolutely NOTHING has been learnt from the experience of BLOWING BUBBLES IN THE LAST TEN YEARS.
ReturnFreeRisk

Wed, 01/06/2010 - 17:26 | 184868 cougar_w
cougar_w's picture

[absolutely NOTHING has been learnt]

You are incorrect, sirrah. What has been learnt is that you have to keep blowing bubbles.

Welcome to the nightmare. As it is with life itself, nobody is getting out of this alive.

cougar

Wed, 01/06/2010 - 17:16 | 184859 Anonymous
Anonymous's picture

We have all failed to stop them or even slow them down. We get what we deserve.

Wed, 01/06/2010 - 17:20 | 184860 cougar_w
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"banks might seek, as the economy improves, to reduce their excess reserves quickly and substantially by purchasing securities or by easing credit standards and expanding their lending"

Wait. Isn't that what they WANT the banks to do with all the excess money? How else does monetary injection work to boost the economy?

They make it sound like a problem to watch out for. So I guess they never really intended the $700B to hit the economy after all. They should get their story straight.

Wed, 01/06/2010 - 17:20 | 184862 john_connor
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Maybe the Mayans were right.

Wed, 01/06/2010 - 17:28 | 184874 john_connor
john_connor's picture

It is about time to exit this country stage left.

Wed, 01/06/2010 - 17:33 | 184884 cougar_w
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Or you can relax and let the country exit out from under you, stage right.

Same outcome either way.

cougar

Wed, 01/06/2010 - 17:41 | 184896 john_connor
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Oh I am relaxed, and I will be more relaxed when I am sitting on an island somewhere before the country exits from under me.

Wed, 01/06/2010 - 18:51 | 184984 Bam_Man
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The more physical gold I buy, the more relaxed I get.

Try it. It might work for you too.

Wed, 01/06/2010 - 18:10 | 184937 Shameful
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What island in the sun did you have in mind if you don't mind me asking?  I'm still eyeing Singapore and hearing good things.

Wed, 01/06/2010 - 18:34 | 184968 SteveNYC
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Australia. Big island, not a lot of people. Perfect.

Wed, 01/06/2010 - 18:59 | 184991 Assetman
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They have their own housing/debt issues, just not a perverse as the US.

I'm thinking New Zealand.

Wed, 01/06/2010 - 19:01 | 184996 Shameful
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Oddly enough that's the place I talked my parents into.  I don't like the long term outlook but they don't want to learn a new language and I think the Aussie Dollar will hold up better then most.  Now just waiting on my mom to transfer there :)

Wed, 01/06/2010 - 21:28 | 185119 john_connor
john_connor's picture

New Zealand and Singapore are candidates.  I have to do more research but the idea of doing this is gaining traction in my mind. 

Wed, 01/06/2010 - 22:08 | 185154 deadhead
deadhead's picture

grand cayman.

 

Thu, 01/07/2010 - 11:33 | 185431 trav7777
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World record household debt and an economy that depends upon China building empty cities.

They basically already spent 10 years' worth of expected growth.  Look at Australia's metrics and you see a country that has significant structural issues.

Find an energy exporter; all things revolve around that.

Norway or Brazil are my list, each with significant advantages and disadvantages.

Wed, 01/06/2010 - 17:33 | 184885 Anonymous
Anonymous's picture

I don't get it.. Let's say the fed buys these things, then the people who sold it to the fed take that money and buy stocks/bonds/treasuries, etc.

ok - got that part.

Now, what would cause this to have to stop, short of the fed being audited? Why can't that circle just continue forever?

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