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MF Global Rates Commentary: "Market Starting To Punish US For Fiscal Irresponsibility"
Are the bond vigilantes stirring? From MF Global:
3ML V OVERNIGHTS AVERAGING 6-8BP, 2YR TEDS 20 HANDLE ARE A SALE, IT IS ABOUT SUPPLY AND CREDIT OR LACK THEREOF AND THE MARKET STARTING TO PUNISH THE US FOR FISCAL IRRESPONSIBILITY
If this continues, it is bad. Very bad.
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Hey TD, remeber when you posted the positions for bond vigilantes? You did it every Friday, if my memory is correct. Those were some of my favorites. Any chance you could get those going again?
With Ben at the helm monetizing everything that isn't nailed down, does it matter? Thats actually a sincere question 'cause I don't know the answer.
The BRIC nations could then begin (continue) buying everything that is nailed down....with the dollars they have accumulated in buying US debt.
Ben swears they are NOT monetizing anything...
You ain't seen nothing yet!
what would PIMCO do? Billy...hello?
Watching IYR and silver hitting a blow off top, followed by a nasty reversal today. Something big is going down. This market is done for.
Yep... Something big is happening and we don't even know what it is.. yet.. should find out soon though..
All they have left is fiscal irresponsibility. WOW is this ever going to end bad.
MF Global has less than a year before chapter 11. Same as Labranche.
http://www.businessinsider.com/a-deep-dive-into-the-mechanics-of-a-qe-tr...
Well, either this is right and $100 trillion of assets are wrong, or this is completely wrong.
What the Fed is doing is implicitly dropping the FF rate. The mechanics of QE are such that when inflationary expectations are realized, the $2+ trillion (and/or much more) in upcoming excess reserves will enter the economy, and M1 will triple. And that is not inflationary? Good luck. The market does not care about what the instantaneous maturity, risk or leverage transformation looks like, it cares about what happens at the end, ergo the term discounting. And now it is discounting endless money printing, nothing less. In other words, it is discounting that the money will eventually enter the economy, because in a closed loop only that will stop money printing! However, judging by the price of gold it is always saying the pieces of paper (when finally part of M1, M2 and M3) will be worth that much less when they finally do. Comparisons to like BOJ actions are irrelevant. The BOJ was rational. The Fed is the last backstop and will print to infinity if needed. Which is what is being discounted. It will generate inflation at any cost, even if that cost is hyperinflation. Nobody seems to get this. This post should be revisited in 5 years when banks have one quadrillion of excess reserves, as the Fed stops at nothing.
Capital Markets 101: the market is a discounting mechanism. Even if that means discounting the insanity of a madman.
This post will be revisited next week. I suspect the BOJ will rock the FX market. The catalyst? Defaulting of periphery nations, Greece/Ireland most likely will begin the ice breaking. Watching EUR fall as we speak... timed bad news, false flags etc. Then world war. This will end badly, is putting it nicely.
Treasuries down the curve selling off nicely too, with the USD rising. Perhaps an all-out rush into short-term maturities, turning them negative, with the long-end getting its Viagra on??
-Discounting the insanity of a madman-
I dont think that much QE can even be imagined!
LOL. So, Tyler's response to a clear articulation of how monetary operations work, and how they are not "money printing" is, in effect, "the market will be proven right about inflation as soon as there is inflation"
Great, thanks, that is so insightful.
By the way, was the market "right" in Oct-07? How about Feb-09? How about now?
The point is that the market is never right.
Tyler,
Money is created when banks make loans. The Fed is not "printing money" when it swaps reserves for treasuries. Banks do not lend their reserves. They create deposits via their lending, i.e. create money. If you don't understand this, then you should study up, because I am afraid you are doing your readers a disservice.
There are those who believe deflation is inevitable. There are those who believe that the Fed will create hyperinflation by pursuing inflation at all costs. It is fairly simple to understand which camp you fall in. As for my readers, especially those whom we told to get into gold in anticipation of the Fed's attempt to create reflation (without regard for whether hyperinflation does or does not follow), I am fairly confident they have received a "service" courtesy of what charts indicate is an 80% increase in said price.
But thank you for watching out for their interest (and, of course, Goldman's).
Here is some advice: start your blog, and highlight your thoughts on the matter. Who knows - at the end of the day, your readers may thank you for the service you provide them.
As to your point about money creation, here is M2
And lastly, assuming the whole "asset swap" argument for a second, what precisely is the net effect of the Fed effectively making assets with a yield of 4% or less, risk free (via its pari passu purchases)? Why a lowering of the FF rate by a like amount, which is ultimately what needs to happen to get to the Taylor implied rate of -4% (see Goldman piece on the topic and why well over $4 trillion in purchases may be necessary). Oh yes, the key word is PURCHASES. And where does that money to buy assets come from? Hmm? Well, it is does not really exist according to your logic, correct?
The question is not whether the Fed is printing money or not. Nobody, except people who nitpick semantics give a shit. The Fed has not created any real money in 30 years: the real money over the past 3 decades has come from banks, from the DTCC, and mostly from shadow banking, which after hitting a peak of $24 trillion is in total collapse. The only remedy to this money creation regime is the artificual purchasing of assets by the Fed on an ever thinner margin!
The question is what will the Fed do in the future, what assets it will buy, and at what levels. The BOJ's decision to purchase ETFs and REITs (and soon everything else), should give you an indication of where this is headed. The market is not discounting the Fed's money printing, the market is discounting the Fed's creation of bubbles. It is a self-fulfilling prophecy. And the last bubble is the inverse value of fiat, and Keynesianism itself. Anyone who claims they know what may or may not be after this event horizon is breached, is an irresponsible idiot.
What??? so are these latest Treasuries just knick-knacks on the mantle piece or they funding unlimited excess SPENDING
Tyler, I love the special attention you give my posts.
I love how the huffpo/yahoo faction is having an all out attack on zerohedge. No clicks from joey W. and vincent (where is vince since rosie asked him how is ass tastes)..Anyhoo, apologies and besides the point..all I care about is that gas is fucking expensive..food prices are rising and fed actions are supposed to make me feel wealthier..fuck that..fuck a bank...fuck ben shalom and fuck the end all do all Barry O...peacez!
oh, and silver female dogs..fuck the bullshit!
"The mechanics of QE are such that when inflationary expectations are realized, the $2+ trillion (and/or much more) in upcoming excess reserves will enter the economy, and M1 will triple."
You are assuming that the Fed will be successful in increasing inflation expectations to the announced target with QE2 yet will be unsuccessful in reducing excess reserves once the goal is achieved?
You need to parse this further in order for your derivative predictions to occur.
2 yr TEDS 20 handle?
Explain how thats a deal absent a major credit event. We have central banks flying around in an armada of B-52's dropping money everywhere, even where it's not needed.
"Explain how thats a deal absent a major credit event."
You answered your own question. B-52's are old... they don't always fly when you want them to.
On a tangent, GLD and SLV are starting to disconnect from the futures prices.
Chart: Dollar
Timmay!
http://99ercharts.blogspot.com/2010/11/dollar_5516.html
http://www.zerohedge.com/forum/99er-charts
Is anyone else getting the feeling the EE is signalling to Asia, "If you just keep dancing, we will keep the music going. Look, we will raise the dollar and lower PMs for you. Now dance!"
NASTY!!! NASTY!!! :)
This feels like we'll finally start to see the death spiral kicking in.
I wonder who will go down first. The US or the EU.
EXITING!!!
The EU is preparing for a default of Greece/Ireland followed by the other preiphery memebers, as early as next week. Then, the BOJ will intervene on the Yen's behalf with their own QE program, which will make the Fed's $600 BILLION look like a paper cut on the index finger. The US will immediately counteract with word of extended/increased QE. China will threaten to dump US T's but will ultimately do nothing. (They can't now for many reasons) Currency wars go viral. The EU steps in, tries to calm markets- damage is already done. Global markets collapse. Enter World War III.
Thanks Georgie.
Thanks Hank.
Thanks BO.
Thanks Timmy.
Thanks Alan.
Thanks Ben.
Thanks Larry.
Thanks all you shitheads who have borrowed, taxed, and profiteered the wee folk into oblivion.
See you on the other side.
This move in gc/si is getting g.n.a.r.l.y
The stock index futures will rise tonight, buy the close, just like always. By 2:30am cst all the US stock index futures will be up, happens 90% of the time.
Wow.
Down 20% in one fell swoop.
So? Who cares?
GSS going down was what they do when smaller miners have any whoops. Actually, if this pulls back much further I will be a buyer. Or if Gold and Silver start going back up, I will buy it immediately. This is a opportunity provided by CS and BMO.
The spin from the financial media will be, traders getting out of gold and going to stocks, I can hear it now.
Bond vigilantes ? I pray every day that there are some intelligent people out there dumping T Bonds into oblivion !!!!!
TLT has been on a rocketsled since 108...showing no real signs of abating anytime soon.
The 30s real crash was stocks AND bonds. There was relatively nowhere to hide. And cash lasted till the overnight devaluation
Thirty Year tomorrow.....remember...move along - nothing to see here.
Maybe there's a short squeeze coming here in silver !! EWWWWW this would be FUN !!
Looking at the long bond trading at or below 122.29, if it closes there or below for two days - LOOK OUT BELOW!
Something in the air comes...
Shake'n Bake BABY!
the market wasn't even down 1% and you fuckers think this is done, cooked, over....lol....come on, are you that stuck?!
Thank you
M.Auerback has a great 'must read'piece debunking the current state of the FED
and the 'yield curve'gaming ahead
Auerback: Amateur Hour at the Federal Reservehttp://www.nakedcapitalism.com/2010/11/auerback-amateur-hour-at-the-fede...
Like hell.
Ok, so where are Congressional calls for Ben Bernanke's removal from office?
He said, in plain English, with no qualifiers of any sort:
That, all alone, as a false representation before Congress, is more than sufficient to demand that Ben Bernanke step down right here and now, if necessary by charging him with Perjury.
http://market-ticker.org/akcs-www?post=171629
IImho, the odds for QE3 are thinning by the hour
Come join me on the deck chairs, I'm already on my second beer. The fires on the horizon are fantastic.
beer..you knuckle dragger...Riesling for me..cheers..pump that rage against the machine
A nice cold one, hell, this ship will never sink.
"Damn the torpedoes!" said Farragut, "Four bells. Captain Drayton,go ahead! Jouett, full speed!