More Inside Data Leakage By The Fed?
Harley Bassman, who used to run Merrill's successful RateLab and is now a prop trader, has sent the following note to clients. Note the bolded text: "The market has become dispeptic about the Payroll event. It is unclear if the FOMC is the BIG event (irrelevant of the data) or do the core inputs matter more. In a nutshell, will tomorrow's data shed any light on the next FOMC ? Last week the options market did now know what to think about QE2. That has all changed....or at least a few large customers have changed our collective minds. Massive option selling has reduced the cost of risk by over 12% in in two days. At least a few customers "know the number" of the FED." Our question: when, if ever, will the market become a level playing field, where everyone acts on the same information? How long will such wholesale approved and encouraged insider trading be permitted for the select few? And, lastly, when will the world rid itself of the Fed once and for all?
We don't even care what, if anything, Pimco or whoever it is that gets this first look does with the information. After all these people at the very top, are now just merely just trading with each other. Basically they have all signed "big boy" letters with each other, confirming they all have non-public information originating from Ben Bernanke himself. But this is precisely why nobody else, and here we mean the actual investing public, wants to be part of the market: people know they have no chance to make money when every rule in the game is geared against them, and when the entire system is preset to steal every last penny of the capital at risk.