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POMO POst-MOrtem
With the first schedule of QE2 POMOs over yesterday, everyone's attention shifts to 2pm Eastern today when the New York Fed will announce the second line up of bonds to be purchased through the middle of January. As we have noted previously, we believe that this time around the Fed will buy materially more bonds than the roughly $105 billion acquired in round 1 due to the increasing amount of MBS prepays in November (although if mortgage rates persist higher this level of activity will likely tumble). Coupled with lack of bond issuance over the next several weeks, and we believe the pressure on yields will be moderated, as increasing demand is met with zero new supply, in essence allowing the Fed to accrue bond purchases in this USTreasury sabbatical. That said, here is a complete POMO post-mortem for those who keep track of what and when Brian Sack's team is busy monetizing.
First, a visual summary of all QE2 purchases since the program was implemented:
Next, a discrete breakdown of all QE2 purchases:
The same data, but in chart form.
A side by side comparison of total 2009 and 2010 POMO activity.
And lastly, for all you PIMCOs out there (now in desperate need for some good news after a massive drubbing in November), here is the table of bonds most likely to be frontrun, courtesy of Morgan Stanley's splining model.
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Ive been Pomorized (
At least i have honor and i recognise my mistakes. not at such bankers.
I feel its necessary to re-post this here at ZH.
I'm putting it on this thread as this will certainly be well read.
FRIDAY, DECEMBER 10, 2010
$1500 by 12/10/10 Well, nuts. We didn't make it. Since this site is about honest opinions and I enjoy the "atta boy, turd" comments that roll in when I'm right, I feel I must discuss the ultimate failure of this call.
First, some context. Last summer gold broke, and broke hard. After reaching a high of $1267 on June 21, gold corrected all the way back to $1163 on 7/27. That's 8.21% in 5 weeks. Ouch. By late July and early August, many of friends at ZH were apoplectic, dispeptic and, frankly, pathetic. Constantly goaded and ridiculed by trolls, some even gave up and sold their gold and silver.
I, your humble correspondent, knew that the secular bull market in the metals wasn't over. Not even close. We were simply in a corrective phase and corrections happen all the time. They are, in fact, healthy for the long-term life of the bull. Talk is cheap, however, so I knew I need to make a bold prediction. Put it out there and repeat it often in order to provide, if I could, some measure of confidence to those in need.
If memory serves me correctly, August 13 was the date I first issued my "1350 by Halloweeen and 1500 by 12/10/10" proclamation. On that day, gold closed at $1218.20 so this was, by no means, a lay-up. I was certain, however, that gold was in a long-term bull market and that the late summer correction had run its course. As it turns out, I was right.
Many have asked how I cam up with the numbers. It probably won't surprise you that it wasn't complicated. The $1350 price target was only about 6% from the high of 6/21 and maybe 16% from the low of 7/27, so it really wasn't asking much. Plus, 1350 was a nice round number and Halloween was an easy date to remember. We made it! Gold reached $1352.60 on 10/6/10, more than three weeks ahead of schedule. My reasoning behind $1500 by 12/10 was that gold would likely rally another 10% from there before some year end profit-taking. We almost got there. In fact, there was still hope just this past Tuesday when gold traded as high as $1432.50. Close...but no cigar. However, considering we've moved UP almost $300 from the lows in July, I still feel vindicated. The naysayers and trolls will always be there. Ignore them. Always ignore them.
So, where do we go from here. As you all know, Santa has maintained for years that gold will reach $1650 by 1/14/11. Wow, if he's right...whew, that would be great. As for The Turd, I'll just continue to play the percentages. If gold were to finish up 2010 around this level, we'll put another year in the books at +25% or so. This is about the average annual gain since the current bull market started back in 2001. With no end to QE and its incumbent currency wars in sight, there's no reason to think 2011 won't bring more of the same. $1400 + 25% = $1750
Hmmm....where did I hear that $1750 price target before??? Oh, now I remember...Goldman Sachs!
http://www.marketwatch.com/story/gold-to-peak-at-1750-in-2012-goldman-sachs-2010-12-01
Isn't it amazing that you can do some simple math and come up with a gold target but if you put a GS logo on it, people will voluntarily pay you millions in fees and commissions? Jeezo pete, this "industry" is such a sham. But I digress, that's a topic for another day.
For today, some BS economic "news" has provided the dollar with a little bounce and given Blythe the opportunity to raid gold once again. Two things we have going for us:
"There is a band of congestion support in silver coming in near the 26.75 – 26.45 level. From a technical perspective we would not want to see it violate 25 to the downside. Good technical action in the grey metal would be for it to hold above the recent breakout level near 27.90 and work sideways for a week or so." Ole Dan has forgotten a lot more about metals trading than The Turd currently knows so he provides some excellent advice here. Sit tight. Let's see what happens next.1) There should be a lot of support between 1370-75 and lots more at 1365. Blythe will fail and when she fails, she will have unwittingly painted a very nice double-bottom for us on the chart. Thanks, Blythe! Also, let's watch the $1374 closing level as that is still important on the weekly chart.
2) Silver is hanging tough. Currently $28.39. The EE'd have to take it through 28 to do any real damage.
Remember this, too, from Dan Norcini earlier this week:
+1 thx Turd for reminder.
The dollars going on a bull run. Prepare accordingly.
The market is setting up for a dollar reversal. No one wants the fun buck. China doesn't want it, Russia doesn't want it. They want Euros. The trade that is setting up is a land based trade. It will soon be very difficult to get oil and Natural Gas to America, and Russia and the ME are setting up their future trade partners now. Funny that it was the greatest oceans keeping AMerica safe, now it will compartmentolize the US, and make it isolated. The music at the party stopped in '08, it was only the silly US investors that kept dancing. The party's over.
Gold to new highs by the end of next week. Oil to creep near $100 per.
Every single sentence in your post is incorrect.
That's truly astonishing.
The market is setting up for a dollar reversal. (It is). No one wants the fun buck (They don't). China doesn't want it, Russia doesn't want it (Not even Bernanke wants it). They want Euros (They do). The trade that is setting up is a land based trade (It is). It will soon be very difficult to get oil and Natural Gas to America (It will), and Russia and the ME are setting up their future trade partners now (They did). Whereas America has spent the majority of the world's oil monie(They had), it will be the long continent of Eurasia that buys the majority of the supplies (Watch). Funny that it was the greatest oceans keeping America safe (They did), now it will compartmentalize the US, and make it isolated (It will). The music at the party stopped in '08, it was only the silly US investors that kept dancing. The party's over.
Gold to new highs by the end of next week. Oil to creep near $100 per.
The EU needed 3-4 trillion via swaplines over the last 2 plus years. Oil, Forex, Global trade all run on dollars, China, Russia, everyone will continue doing this every day. Getting more dollars through central banks for businesses in those countries. This is why the eu needed swap lines (4-trillion) banks on the wrong side of the dollar/euro.
The EU crisis has not stopped its in the early stages. This will continue going forward ...
The original bailout was shock and awe' once in a life time backstop. The eu is already in trouble ....
As Germany does better and better she will need a rate hike because of inflation but the pigs need low,low rates. Not good. So much for the great experiment ( the euro ).
As China moves forward with her rate hikes, you will see commodities get monkeyhammered over time. (monday)
The numbers in shipping railcar/trucking has been moving up all year. This will continue moving forward, this will push the dollar higher as more good news comes forth.
Dollar = Up.
+1
i appreciate all your efforts turd and i follow your blog as well. the info you have i find is realistic and accurate. the problem is, when were dealing with financial terrorist, they make whatever rules suit them.
the people whom are supposed to be policing this fraud and seemingly watching jersey shore and eating lead based paint chips..
if people had to play by the rules, by my calcs gold would be over $1650 now, easy.
It is clear they are moving out the yield curve, probably because they have to.
i think i'm moving out on my yield curve, too.
put yer eyeballs back in yer head, george
A space alien visiting Earth's human ant farm for the first time would look at these charts, tables and graphs and instantly come to a simple conclusion. Why do they go through all this trouble when they can simply send checks to every individual and business in the world?
Silly space alien, egalitarianism is so not what the ant powers that be are trying to accomplish. The elite ants want the workers ants to believe the policy being followed is intended to help all ants equally when in fact the policy is narrowly constructed to fatten up the few already fat ants.
Boy, those aliens really need to grow up and view the galaxy as it really is.
Silly aliens, trix(cks) are for ants.
BBVA will lose Venezuela Business- Expropiation
Can someone please remind me of what the purpose of QE2 was?
Wasn't it to lower T note/bond rates? That lower rates would help employment?
If that is true, where the hell is the overwhelming public outrage about the gross stupidity
of this fucked-up plan? Why is this incompetence ignored? Rates have skyrocketed up, not down. It's like Napoleon's Waterloo.
Someone, please get me up to speed.
Thank you.
Public answer : make more money available, cheaper to lend to businesses so they can hire and economy can grow.
Real answer: inflate the stock market, make money for the bankers and tive the illussion of a growing economy.
Reality, all this cash companies have on the side lines is in foreign accounts and would cost them taxes if they were to spend it here in the us to hire or build. Just looks good on paper. Just look at Ireland with googles money,
Qe2 has devalued the dollar, raised commodity prices, and is crushing the middle and lower class with costs for basic needs.
Qe2 has devalued the dollar, raised commodity prices, and is crushing the middle and lower class with costs for basic needs...
That's more bad information.
QE2 has NOT devalued the dollar. In fact, the DXY has risen in the past few weeks. Higher commodity prices have absolutely nothing to do with QE2 - commodity prices have risen due to the dollar carry trade.
Wrong.
The dollar is up because people are fleeing the euro.
Riots, austerity and bailouts don't help them. The dollar is less bad in their minds.
Get a clue!
The dollar is up because people are fleeing the euro.
Sure. That is one reason why the dollar is up, among others. I agree with that.
But that's not what your prior post said. You said that QE2 devalued the dollar. It simply did not.
The dollar has been in free fall since QE lite and qe2 look at dxy from June to now.
That's pure garbage. Now you're trying to back-peddle to QE1.
You said QE2 devalued the dollar. It did not.
Next you're going to tell me to look at the dollar chart for the past decade.
In a worldwide fiat currency debasement nothing "rises"... just falls at a different pre-determined pace. Ill admit though, its more credible than when you try and sell the "differences" between our political parties... and almost as funny.
+1
just falls at a different pre-determined pace
Sorry. But that's just conspiracy theory garbage.
If I wanted cnbc's opinion id watch it. Your comments are as enlightening as they are original.
In the aftermath of the first round of QE2, one cannot help but notice the renewed strength of the US dollar over the past few weeks.
lol
According to all those Republicans (the Jon Kyle/Mitch McConnell letter, and the other letter from 23 Republican hypocrites) - who have a new-found penchant for public letter writing - I thought QE2 would depreciate the dollar.
What the fuck happened?
And what the fuck happened to gold/silver? Especially this week? Both were suppose to be strapped to a rocket these last few days, according to a very credible cartoon and some overly paranoid green bean/ammo hoarders.
Why is the opposite of everything happening? Why isn't gold anywhere near $1500? Why the fuck is everyone wrong about everything?
That's what the bernank is asking.
DRYS up 5% today ? WTF ?
Ground Control to Ben Bernack
Ground Control to Ben Bernack
Take your pomo pills and put your groove' on
Ground Control to Uncle Ben
Commencing countdown, reflation on
Check ignition and may Timmay's love be with you
Ten, Nine, Eight, Seven, Six, Five,
Four, Three, Two, One, Liftoff ... go dollar, go ....
This is Ground Control to Uncle Ben
You've really made the grade
And the papers want to know whose shirts you wear
Now it's time to leave the blackhawk if you dare
"This is Uncle Ben to Ground Control
I'm dumping dollars through the door
And I'm floating in a most pomo peculiar way
And the markets look very different today .....
FAME...makes a man take things over! FAME...let's him loose, hard to swallow! FAME puts you where those things are hollow! FAME!
If only I chose Pepsi over Coke. Thanks for the laugh... as usual.
*Why isn't gold anywhere near $1500?*
This dribble was being said when Gold was 700, 800, 900, 1000, 1100, 1200 and 1300. now that's it's basically @ 1400 I would say... be patient slow learner.
Has the Govt cut spending? No.
Has Govt even cut the rate of spending? No.
Has Govt raised taxes to alleviate the debt/deficit? No.
Has Govt increased spending? Yes, extension by 13 months of U.E. benefits.
Has RedNeck Repugnicant learned anything about expotential functions? Apparently not.
Sorry, but principles matter. Those that choose to be foolish making predictions should know better and should label it as speculation, or else publish a software algorithm and a data set to run.
Gold will continue to function as a safe haven to all that see the writing on the wall and recognize it for what it is: A warning that the current financial system will collapse.
Please feel free to continue to question false predictions, but elaborate on the principles you think make the premises behind the predictions invalid.
Would make sense for them to do a larger one now that the waters have been tested.
Buy JOBS.
5 years from now you will be veeeeeeeeeeeeeery happy you did.
jp morgue is doing a poor job with PM take down lately...sigh...so expensive...
Pimpco needs a buyer for their MBS! Stop this treasury nonsense!
Fed's gettin' killed..."throwing good money after bad" on a grand scale now. Word is "they have a plan to print an actually cash flow positive businesses now....
SPX
Think taxes!
http://99ercharts.blogspot.com/2010/12/spx_10.html
http://www.zerohedge.com/forum/99er-charts
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Click this link. It's to a Google News search for the term "Bond Vigilantes" and as you can see, everyone is using it in response to the selloff in bonds. Here's Randall Forsyth at Barron's warning that the bond vigilantes might kill the tax deal! Here's economist Ed Yardeni saying they've been "woken up". Nouriel Roubini is saying the same thing.
But we don't want you to lose sleep, or have your holidays ruined by fears of an Ireland like meltdown, so we wanted to show you a few charts that will make you feel better.
First, the long-term 10-year yield. See that very, very tiny bump at the end. There's our "bond vigilantes" at work.
Next: 10-year chart of 10-year yields and the S&P. Notice anything? They tend to move hand in hand, but the 10-year has a lot of catching up to do. Just saying.
Next: The 10-year yield against our national debt. See any correlation? We don't, except, oddly, that as our debt has exploded higher, yields have only gone south. Huh.
And, finally, along similar lines, the 10-year against the annual deficit since 1980. Again, we don't se any real correlation.
Conclusion: Maybe our debt has absolutely nothing to do with the rise in yields?
If you come across a bond vigilante -- in a nightmare, perhaps -- show them these charts and they'll disappear.
Tags: Debt, Bonds | Get Alerts for these topics »Read more: http://www.businessinsider.com/4-charts-on-bond-vigilantes-2010-12#ixzz17jLbB2Mr
The problem that the government and the markets have, and the problem that The Bernank & Federal Racket...I mean Reserve...have, is that the general public has lost all faith in them as repositories of any trust, and foreign central banks know longer view our central bank as credible, given the meltdown in 2008 and the apparent inability of Bernanke to see it forming and/or do anything to stem it.
This is the largest wholesale change of opinion about U.S. institutions in history.
Bernanke has a deep crisis on his hands.
POMO's marginal returns going forward will be disastrous, and we've already begun to see bright red warning signs of this.
For his next act, the Bernank will monetize the world!
The map is NOT the territory! The Bernank will find out that FRNs, T-Bills, Bonds, CDS/CDOs, etc, are NOT real wealth or stores of value.