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Meet The Fed's POMO Desk... Which Doesn't Even Have Bloomberg Terminals
Over one year after Zero Hedge made POMO, and the Fed's open market operations group a household name, and Brian Sack a household curse, the NYT has finally decided to write an expose on the people who are charged with enforcing America's transition to central planning. And they just happen to be the grizzled 40 year old Mr. Sack, a 34 year old supervisor, two 29-year olds and a 26 year old ... who goes to NYU. Yes, ladies and gentlemen, these are the people who are gifting billions in commissions to the Primary Dealers on a daily basis. You see, the FRBNY whiz-kids have a "computer algorithm that works out which [offers] to [lift]. The computer compares
the offers from Wall Street against market prices and the Fed’s own
calculation of what constitutes a “fair value” price." In other words, taxpayers are getting raped during each and every single POMO but that's ok - the Fed's algorithm, probably created by yet another ex-Goldmanite, determines that said raping is "fair" and with absolutely no transparency anywhere in the process, except of course the Fed telegraphing in advance what bonds will be monetized, there is no way to ever check... Because that kind of mutually assured destructive disclosure would mean the financial world would promptly implode in a case study of total protonic reversal. After all, only smart people (and we are talking Wall Street smart) can handle the responsible truth... of daily Primary Dealer Subsidies.
Behold what the nerve center of 21st century central planning looks like. Note the abundance of Bloombergs:
Blake Gwinn, left, and James White in the operations room at the Federal Reserve Bank of New York.
As for the lovely pre-cleared narrative of how a few people run the world on behalf of Wall Street, pardon, revive the economy, here is the spin, courtesy of the NYT's Graham Bowley.
In a spare, government-issue office in Lower Manhattan, behind a bank of cubicles and a scruffy copy machine, Josh Frost and a band of market specialists are making the Fed’s ultimate Wall Street trade. They are buying hundreds of billions of dollars of United States Treasury securities on the open market in a controversial attempt to keep interest rates low and, in the process, revive the economy.
To critics, it is a Hail Mary play — an admission that the economy’s persistent weakness has all but exhausted the central bank’s powers and tested the limits of its policy making. Around the world, some warn the unusual strategy will weaken the dollar and lead to crippling inflation.
But inside the Operations Room, on the ninth floor of the New York Fed’s fortresslike headquarters, there is no time for second-guessing. Here the second round of what is known as quantitative easing — QE2, as it is called on Wall Street — is being put into practice almost daily by the central bank’s powerful New York arm.
What exactly is the Operations Room task? Why to gift huge bid/ask spreads to the Primary Dealers of course, making sure that bonuses of traders in the govvie desks of the PD crew are well padded, and those same people continue to cooperate in the pumping of the ponzy pyramid. But in NYT speak, this is known as getting the "best possible price" - too bad this is the best possible price for Goldman, not for Joe Sixpack, who is unaware that the bent over Vaseline treatment proceeds daily with every single POMO, which directly funnels tens if not hundreds of millions of dollars to the Primary Dealers (we don't know - you see the Fed does not disclose the asking prices that ultimately are lifted, contrary to what the NYT will have you believe.
Each morning Mr. Frost and his team face a formidable task: they must try to buy Treasuries at the best possible price from the savviest bond traders in the business.
The smallest miscalculation, a few one-hundredths of a percentage point here or there, could unsettle the markets and cost taxpayers dearly. It could also embolden critics at home and abroad who say QE2 represents a dangerous expansion of the Fed’s role in the markets.
“We are looking to get the best price we can for the taxpayer,” said Mr. Frost, a buttoned-down 34-year-old in a striped suit and rimless glasses.
Unfortunately, the best price for the taxpayer is one which results in billions in commissions to Primary Dealers at the end of any given QE program (and there will be many after the current one is done).
Louis V. Crandall, the chief economist at the research firm Wrightson ICAP, said Wall Street bond traders were driving hard bargains. The Fed has tipped its hand by laying out which Treasuries it intends to buy and when, giving the bond houses an edge.
“A buyer of $100 billion a month is always going to be paying top prices,” Mr. Crandall said of the Fed. “You can’t be a known buyer of $100 billion a month and get a good price.”
Nevertheless, Mr. Frost and his team have been praised on Wall Street for creating a simple, transparent program. Neither the Fed nor Wall Street want any surprises. The central bank is even disclosing the prices at which it buys.
Mr. Frost and his team work out of a small, beige corner office with arched windows that used to be a library. There, at about 10:15 most workday mornings, one of them pushes a button on a computer. Across Wall Street, three musical notes — an F, an E and a D — sound on trading terminals, alerting traders that the Fed is in the market.
On one recent Tuesday morning, what Mr. Frost and his five young colleagues did over a 45-minute period might have unsettled even a seasoned Wall Street hand: they bought $7.8 billion of Treasuries.
As for the actual people who push the buttons to see of this symphony of taxpayer rape, meet 26 year old Tiffany Wilding (who will graduated from NYU in 2013), 29 year old Blake Gwinn and 29 year old James White. These are the people who every day (and in some cases twice daily) proceed to monetize billions in bonds.
The real work is done by three traders who are referred to during the operation as trader one, trader two and trader three. They sit at a long table against the wall, tapping at seven screens.
On one recent morning, trader one was Tiffany Wilding, 26. While she reviewed the stream of offers and then the prices finally accepted by the algorithm, trader two, Blake Gwinn, 29, double-checked her decisions and trader three, James White, 29, made a duplicate of everything in case the computers crashed.
All the while, Mr. Frost stood behind his colleagues, ready to intervene — and even cancel the Fed’s purchases — at any sign of trouble.
Too bad the only sign of trouble is if the Primary Dealers are not extracting their daily allotted ten/hundred million pounds of flesh.
And between the talented Mr. Sack, and the NYU students who actually execute the billions in dollars, there is the mysterious Mr. Frost:
Mr. Frost — a Rutgers math grad who has worked at the Fed for 12 years, lives in the Borough Hall area of Brooklyn and takes the subway each day to work — is fairly well known within the dealer community. He and his team talk to the big banks most days.
The job carries great responsibility and is prominent within the Fed.
So prominent and so responsible... yet his entire QE2 operation has been an abysmal failure - note the rates on the 10 Year today, and 2 months ago when QE2 started. Oops...
Mr. Frost, and his boss, Brian P. Sack, insist the program has succeeded. Mr. Sack, 40, joined the Fed 18 months ago to run the entire markets group. He has a Ph.D. from M.I.T. and worked most recently for a Washington consulting firm. In 2004, he wrote a paper with Ben S. Bernanke, the future chairman of the Federal Reserve, and another economist about unconventional measures for stimulating the economy in extraordinary times — just like large-scale purchases of Treasuries.
“We didn’t know then that the Fed would be putting it to the test,” he said.
He said the Obama administration’s $858 billion tax compromise with Congressional Republicans in December complicated the macroeconomic picture.
But the biggest reason for the rise in interest rates was probably that the economy was, at last, growing faster. And that’s good news.
“Rates have risen for the reasons we were hoping for: investors are more optimistic about the recovery,” said Mr. Sack. “It is a good sign.”
And there you have it: to "prominent and respected" puppets within the Fed, evidence of the the adverse outcome is proof that the desired outcome has been achieved.
With lunatics such as this who needs Kool Aid... and who cares if teenagers with a penchant for Jersey Shore push the "Buy" buttons (also known as Any Key) at the heart of US central planning. After all it is more than clear by now that even Snooki knows to BTFD.
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See how the POMO robots do money printing at the Fed....let the xtranormal bubble continue:
http://www.youtube.com/watch?v=Twya4ORl62w
Ah gee, gimme a break. The klowns are just now trying to start pricing in QE3. Front running the front-runners is getting way old. Though I like the daily swings in REE and AVL. Won't risk the capital to do FCX.
I am curious about the "have to get the best price for the taxpayers" comment by that Fed Reserve lackey who is quoted in the article.
What price is he talking about?
I raised this before, but if he's referring to the amount paid, including commissions to primary dealers, his statement is illogical prima facie, as the best 'price' would only be had buying directly from Treasury, where no commissions would be involved.
Also, is he expressing the notion that taxpayer money is used in this bond-buying, stealth monetization, and unjust enrichening of the primary dealers?
The Federal Reserve has its own balance sheet, financed by its own capital pool, and its money is separate and distinct from taxpayers' monies.
Am I not interpreting this correctly? Is he NOT saying what I perceive him to be saying?
It is possible he is just a lying sack of shit.
I was thinking this also. I believe what he means is taxpayer is paying the interest so he is trying to get the highest bond price which would mean the lowest interest.
Well if a Ph.D. and a couple of students are running the POMO program at the NY Fed, then, our currency is indeed doomed. This is like a little leaguer trying to hit a major league fastball.
Buy hard assets.
Am I the only one here that lost his ass on SRS? Went to the store to buy a loaf of bread - it cost me 30K fiatscos. Had a limit in at 113.66? It hit a high of 113.64 while I was gone.
Came back to an 89+ print. Stuck with it, in disbelief. Nuff said. Was a newbie back then. The horror. 40 fukking minutes. Been fighting for 110 fiatsco increments since.
Yeah, me if I recall correctly. Right at the March 2009 lows. My timing was impeccable, in a bad way.
...always the algos. We just follow what the algo tells us...
Hey, YOU!
(mofo edited and made this comment worthless, so enjoy:
http://www.youtube.com/watch?v=ZfVJSLC3lO8)
Tiene algo, man!
War Eagles baby!!! SEC Rules NCAA Football.
Gotta admit, my rules on where my dick can go where no lesbian has gone before needs amending.
Auburn win, I guess? Good, it was an Aburn fan that found my Wif's cell phone in the taxi, and called 'home', which resulted in him (Shaun M.) not getting drink cash for his flight home, cuz he did not identify himself on the envelope in which he placed the lost Crackberry at the hotel desk. Thank you, Shawn M, for being a decent person! (Don't know the spelling of Shawn, was just the intermediary.)
Poor guy flys outta AZ at 1am, AZ time. Hope Atlanta is open for his arrival in GA.
Robo you're back on yer game.
Oregon cheerleaders are much better, especially that Kelsi Metzler or whatever her name is.
These kids have a incandescently brilliant future on Wall Street.
"Mr. Frost and his team have been praised on Wall Street for creating a simple, transparent program."
So transpaerent in fact that the banks are playing the Fed, milking them on a daily basis at the expense of the taxpayer.
I can't wait for the xtranormal bears to discuss this article.
Ya know, Tyler, this is a shining example of a government agency cutting operational costs to the bone. Austerity!
OMG, just laughed and puked at the same time! Owww! Fed.....going again!
http://www.youtube.com/watch?v=QM7LR46zrQU
The America financial system employs fking incompetent idiots and is ruled by incredibly arrogant and stupid thieves and terrorists.
The only good news is this fking system is not viable and will collapse very, very soon.
LULZ! Godzilla to the rescue....with their lost 2 decades and all. Japan defo knows what it is doing.... http://www.bloomberg.com/news/2011-01-11/noda-says-japan-plans-to-buy-eu...
Everyone wants a redhead in the harem. It is a status symbol. I guess the world expects them to go on sale soon.
Best trading tune out there:
http://www.youtube.com/watch?v=cETrNUB9Aog
Today's Biflation News:
WSJ :"Downturn's ugly trademark: steep, lasting drop in wages
http://online.wsj.com/article/SB1000142405270230424870457557421389777083...">
Article points out wages are no longer sticky. Only happened to such an extent during Great Depression, easily eclipsing 1981-82. More than half who regained employment reported cut in income.
Over 12 months ending September 2010 wages grew 1.5% with consumer prices 1.1% according to gov stats. However we know that CPI is more than 40% influenced by housing, which has seen declines. So in reality, cost of living is up more than wages. Never mind the cost of staying in the middle class. That has risen even faster.
2nd best:
http://www.youtube.com/watch?v=a7FqUNlEdwA
Drinking is bad for you:
http://www.youtube.com/watch?v=FP2YYc39_TA&feature=related
I'm sure there's a joke to be cracked about something in this whole article, but sadness has sudenly enveloped me for some reason...
Livestock movement:
Pork bellies surge.
Sheeple (live, whole) plunge.
Here’s a fun fact for you all…
The TMPG (Treasury Market Practices Group) sets the “standards” by which the Treasury market operates. These “standards” are not official rules, but rather suggestions. 2 years ago, rules were put into place that would “help” protect the treasury market from potential “gaming” that could occur. Shorting of Treasuries, strategic fails and various other games the market played after 9/11 had taught the treasury market operators that with ZIRP, brokers would rather fail on trades and keep securities for other purposes (repo collat, etc…) rather then actually keep the markets flowing. I saw this first hand as I worked on chasing the primary dealers down on botched trades in the weeks that followed 9/11. I was knee deep at BNY and their recovery effort.
With that inside view I learned more about the market than most. …and when the TMPG put these new rules forward, I was able to pick them apart for new ways they could be gamed. I personally contacted them repeatedly with “suggestions” of how to address one such loophole that I have personally seen used. …snd what did I get back??? A boiler plate reply from a lady who new less about the TMPG rules then me. Not only did she poorly read the rules of theirs that I copied and pasted for her, but she replied inaccurately, and copied and pasted some of the exact thing I had originally pasted. I was infuriated that I actually wasted my time trying to help them with a loophole that was being used and costing clients money.
(truth is, when claims are paid, they the payees are not bound to pay a claim. They can dispute it. …but they generally don’t because they “view” these “suggestions” as if they were rules, and the VP’s to the clerks that handle these types of claims don’t realize this, nor do they mind paying the claims since it ain’t their money. It’s the Pension fund, mutual fund and various other conglomerates that are getting hit.
So what is the simple loophole??? Here it is people. World. Pass this along for $1,000 plus gains at a clip.
Pairoffs are extremely common in larger institutions. ..and not all pairoffs are 1 for 1. Quite often, pairoffs will be nets of buys and sells. I will be broker X for this example.
Broker X sell 2 lots of 5mm shares of fake T-Bill 912828xx1 to pensionsuckersfund101. Broker X then buys 10mm shares back from pesionsuckersfund101 at a small loss in the same day. Let’s say my net sells = $9,999,950.00 and my buys total $10,000,000.00 for a $50 loss. (On a daily basis these have become the market norm for daily turns) Here’s the rub… Broker X can now withhold delivering 1 of the 5mm pieces to the pension Fd. (realistically, You can spread your buys amongst different brokers as long as your buys back from those same brokers are for larger sums. Market wide you will find pension funds trading their entire box of many of these treasuries so if you short them on your delivery, they can’t make their delivery back to you because they are short the position) So Broker X never even needs to owns Cusip xx1, but yet 10mm shares in 2 lots, but then buys the 10mm back in 1 lot. )
…back to the rub, Broker X just delivers 5mm shares and since they are short for whatever reason, don’t deliver the 2nd piece of 5mm, then more often then not the pensionfund will wind up failing on the larger 10mm.
The problems then roll in. TMPG has set a $500 claim limit. The 5mm fail will fall short of being claimable, while the 10mm failing trade will be charged a claim. So I, Broker X, can intentionally, do a trade at a loss, enticing any treasury trader to trade with me, and then intentionally or “unintentionally” fail to make partial delivery to you. …and then for my gaming the system I am awarded a claimable amount of cash. Here’s the kicker… So you say, “why doesn’t the pensionfund make a partial delivery of what they have by sending the 5mm they got leaving you with equal fails thus no claim…” Well the idiots at the TMPG have also botched this one up by actually writing in their “suggestions” that I (Broker X” do NOT HAVE TO ACCEPT ANY PARTIAL DELIVERIES” I can actually reject it just to get the claim on something I’m intentionally botching…
The incompetence is amazing!!! I asked that my issues be pushed further up the ladder, but have never seen anything in the way of progress.
You see, the theory is that this will fix itself. If I Broker X am doing deals like this, the Pensionsuckerfund101 would stop doing business with me… But the reality is, the 2 traders doing both sides of these trades don’t know anything about the claims and operational side of the bank. On the pensionfund traders books, he looks at broker X as the sucker that just lost $50 bucks and he could always look to make more off of him. The claims are all done long after the fact and after netting with fees and daily subscription/redemptions are lost. …but in the meantime their nice little $1,000 gains. …and in a tightly traded market with razor thin margins, these could add up. In addition, with a security as valued as the US Treasuries, you would hope that outright gaming couldn’t exist. ..and yet it does. …and when the TMPG are told about loopholes they turn a blind eye, even though they acknowledge in their website that they keep the options open to add or revise the standing “suggestions”.
What a tragedy.
All the best,
Miss America – Rich H
P.S. I didn’t proof or edit this so it’s not as well written as it should be. My apologies, but I’m tired.
This boat is gonna sink for many reasons - yours is just one among many. I'm saying that since around 2005 - and tried to fight it. In the meantime I see it coming closer day by day and in the meantime 100% convinced nobody is able to stop this anymore. As sure as world turns around this boat is gonna sink. All you can do is to try to protect yourself and yours - and escape as long as still possible. As the door is closing rapidly. It will be closed once the number of foodstamps have crossed the boiling point.
Nancy at her finest:
http://www.youtube.com/watch?v=whXeb7Ohfkk
Tiffinay wilding can pump my curve anytime she wants!
Very un-professional.
Seems computer on photo has a built-in floppy drive (pre-2007). It is not always a sign of age, because crypto keys in central banks *are still distributed on floppy disks* (not USB flash drives). This computer in the corner with monitor turned off is probably a dedicated node for final clearing/wire money transfer in the end of the day, with built-un hardware crypto module, it has a special sticker on the face (seems along with dedicated phone to the clearing house - near it), but who knows....
It is well-known that the *professional* trader has to sit in a *proper chair*. Here is a professional chair, mostly used by traders around the globe:
http://en.wikipedia.org/wiki/Aeron_chair
http://www.hermanmiller.com/Products/Aeron-Chairs
A couple of links to professional approach to trading/programming working place:
http://www.flickr.com/photos/steve_price82/sets/72157615999415092/
http://www.biscade.com/office/
Jesus fucking christ. It's one thing to get fucked by the Fed. It's something else to get fucked with such blatant contempt. This fucking team of fucking scrubs is what they're using to implement the POMOs? I mean, have enough fucking respect for the peasants that you at least try to look like some motherfucker who knows what he's doing is pulling the trigger on 10 fucking figure trades. At least act like you're trying to fool us while you're fucking us. An NYU student? Fuck you all and the horse you rode in on, FRBNY.
China is pulling a Nathan Rothschild on Europe and the world.
The Federal Reserve is providing China with the liquidity to buy up Europe and the entire world.
Didn't China just buy a sea port in Portugal?
It is a complete, utter, magnificent, total *JOKE* that these chimpanzees are "looking for the best prices" on these bonds. Are you kidding me? This man can actually make that statement and still have a career?
What the f*#k does "price" even mean when you create money out of air? What the f*#k right do these losers have to buy ANYTHING? They don't work for money. They don't produce anything.
This whole thing, and what this country has become, is like something out of the Twilight Zone. Unbelievable.
I have to admit that even the very first trading desks in socialist ex-USSR's banks in 199x looked much better than this one in FRBNY. (I personally have installed a couple of them, in addition to 100+ banking local- and wide-area networks).
Those were Reuters Dealing2000/SWIFT or proprietary desks. The workplaces in socialistic ex-USSR were organised much better, including the design, lighting and chairs.
This one ia s joke. Don't tell me that this IS a trading desk. Nop. This is a place for pocket socialistic distribution.
Australia is flooded.
Miners are in big trouble like BHP, Rio Tinto, AAL
maybe they'll come up with shakespeare? sigh...
The way I see it, back in 2009 and 2010 the PD's were buying up all the bonds. Now they are selling them back to the FED. After the PD's are done selling and FED done buying... interest rates are going to start heading higher fast. After rates hit 10+%, the economy will completely collapse, PD's will still be flush with money and park it in government earning 10+%. Thats my take.
This is so damm mind-boggling. The entire system is fraud upon fraud upon fraud. I don't feel like playing the game.
This is so damm mind-boggling. The entire system is fraud upon fraud upon fraud. I don't feel like playing the game.
Only problem with not playing is inflation. This truly is a messed up system they have us in.
When it comes to screwing the American taxpayer I'm pretty sure they stopped using any lubricant about 30 years ago.
Rest assured this POMO me now Pumps will pass. As the all new VOC ratio indicates an uptrend. Check it out.
http://oahutrading.blogspot.com/2011/01/all-new-voc-ratio.html
so according to the NYT, this is the new committee to save the world?
Is this ridiculuous naiivite or intentional deceit?
They can't even where suits, what sort of goverment peeps are these?
The NYT author writes as if he's authoring a suspense novel, with FED protagonists (and SuperHeroes) defending the American Way and keeping the planet safe for all mankind!!!
Work it, Graham! You may believe we are all kindergarten-level intellects out here in the flyovers, son, but we can still smell complete bullshit when we come across it.
Good, now we know who to haul before the court.