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Primary Dealers Scramble To Sell All Recently Auctioned Off Treasurys To Fed
Primary Dealers know all about fight or flight. And boy are the flighting. After yesterday more than half of the POMO consisted of one single CUSIP, with the bond auctioned off just a week earlier accounting for well over 50% of the entire operation, today the New York Fed, following our ridicule that Brian Sack allows such bond flipping it is virtually borderline criminal churning decided to add the most recently auctioned off CUSIP, the PLP8s of 12/15/2013 on the exclusion list, meaning PDs were stuck with their holdings in the name. The Fed, however, did not prevent any of of the previously auctioned off securities from being monetized. And what a selling frenzy those were: of today's $7.2 billion POMO, 75% of the operation consisted of the monetization of the two most recently permitted securities: the 3 Years auctioned off in November (PU8), $3.4 billion worth, and October (PB0), for $2 billion. This is a stunning rush to get the hell out of dodge, and confirms that Primary Dealers can not wait to sell every single piece of paper purchased recently via the PD auction take down. What this also means, is that any pretense the Fed had that it was not monetizing debt directly is now gone. Brian Sack should just expand the SOMA allocation per auction, and add the Fed as a legitimate 4th bidder party: after all nobody is fooled by the Treasury->Primary Dealer-> Fed charade any more. And at least that way, the PDs will stop collecting commissions on arbitrary bid/ask spreads.
The chart below explains everything.
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"And at least that way, the PDs will stop collecting commissions on arbitrary bid/ask spreads."
Then they would just have to invent some other way to transfer taxpayer dollars to the PD's.
Ponzinomics. Crony Capitalism. Fascist Manipulation.
Take your pick as to what you want to call this garbage.
The law of diminishing returns cannot be ignored.
But you can get separate bedrooms.
The first PD that tells the FED "No more" and dumps everything wins. I wonder who it will be.
tick tick tick tick.....
That's the sound of your life running out.
Take care, Blythe.
http://www.youtube.com/watch?v=M955Us5eJuk
Who's there?
"After all nobody is fooled" AGAIN!
there I fixed it for ya.
I posted yesterday's note about this to my Facebook, hoping my friends will pick up on the fact that we are paying all these bank fees -- you don't have to understand the intricacies of the POMOs and MOMOs to figure that out -- but zero response so far.
They're not even renting this stuff any longer. They're just sniffing it and throwing it back.
They will have a TSA agent at every bank entrance; get felt up by sister Janet or pay a toll.
That's it. I'm going to abandon the witch costume next Halloween and dress up as a TSA agent. It's scarier.
So when does this all start to affect the dollar's value? It seems no matter what happens, the dollar has remained strong.
Could we see prices rising across the board with the stock market rising too but the dollar remaining at current value?
What other fiat currency will survive a dollar crash?
That's the Trillion Dollar Question now isn't it.
I've personally been hypothesizing the idea that growth is limited by energy availability. Since oil production has capped, world growth cannot exceed energy use (i.e. not all countries can exponentially increase building and resource consumption due to limited energy availability). I believe the idea has already been pushed around a little bit and so I am not the first one to think of it.
I think the next movie will be a new reserve currency based on the value of China, Russia, United Arab Emirates, and Opec nations. But thats just my guess. If we don't see a new reserve currency based on a basket of currencies maybe we will see a reserve currency based on energy availability. As it stands now, there are too many countries who are losing out due to the U.S.'s gross negligence as the reserve currency controller.
The EURO of course.
Rothschilds, Russians and Chinese make sure of that.
Dollar compared to what? The dollar is trash but so are most all other world currencies. Commodity prices are still strong considering how weak a lot of demand is worldwide. So mean that either the common man is now having a love affair with copper (was it featured on Jersey Shore?) or with the excess currency is bidding up assets. We had a turn around this week, but I'm sure with all the CBs printing up a storm it will amrch back up.
I see your point, but as I said in the post directly above, the world will reach a brick wall in terms of energy availability. We can all continue this game of printing money to keep things going but if they can't get past peak oil then demand will outstrip supply which will mean something will have to give.
Not exactly. More accurately, in terms of CHEAP energy availability. While wind power is a scam, solar keeps getting cheaper, and nuclear would be cheap if not for the radical greens keeping it down with federal regulation and paperwork. Also don't forget long haul trucking and transport like FedEx, UPS, and USPS could switch to natural gas.
We don't have the infrastructure to support a natural gas trucking and transport industry. It may come to a point where we are forced to switch. That is the brick wall I'm talkning about. Until it becomes economically viable to use natural gas over oil, it won't happen. It will have to be significantly economically viable. And by the way, EVERYTHING requires oil to produce. You can't just make claims that the magic of Solar power will fix everything because that is grossly inaccurate.
I don't think solar is magic, nor do I think it will "fix everything". The problem with solar is that transmission is expensive, and solar works poorly in cloudy areas. But I do think it has its place. Rather I think nuclear plus solar will work. But I don't think even together they will solve transportation needs -- electric vehicles use rare earth batteries and those are expensive, and generate pollution to manufacture.
However I do think we could convert long haul trucking to compressed natural gas (CNG). It is very high octane. And it would mean only modifying truck stops as well as fleet stations (FedEx, UPS, USPS). Thus no need to modify all the gas stations. Mileage is similar but cost is about 2/3.
Converting all long haul (18 wheeler) and fleet trucks/vans to natural gas would eliminate 100% of demand for overseas oil -- we could meet our petroleum needs just from this hemisphere mainly from USA, Canada, and Mexico. This has positive strategic implications.
Fuck yeah TD....keep holding these fuckers' feet to the fire
Priceline.....down? How can this be? The end is nigh! Repent!
Bye bye Chase, -3.6%. ABC ya, wouldn't wanna be ya.
He! THIS ISN'T A BUY AND HOLD MARKET, WHAT DID YOU EXPECT!
Let's introduce the HFT to the bonds market!
What a circle jerk. We need a graphic.
and naked chicks. Lots and lots of it!
+1000
POMO is no longer even helping gold...or Illinois
ES down 9 handles, wow. Without checking, I know it's been a while and it is surreal to see this, albeit extremely mild in nature. Ha ha, can you tell I'm now very demented?
Day one for spx, day 5 for gold. It's just the beginning
...maybe so,,,a slow bleed is much more preferred anyway.
You better hope so. It'll be the first slow motion crash in stock market history though.
I was thinking something like 2008 as an historical reference.
Ahh those were the days my friend. I will always look back fondly on the cliff at the end of the world.
Nice....! '08 seems like a blur to me now. This time, I want to sit back and enjoy the true apocalypse. Much better prepared.....
Money leaving stocks, leaving PMs, leaving bonds..
Ok, so it just evaporates into thin air?
I am but a lay person here but I believe it is going under the Sealy Posturepedic mattress.
Fuel, Food stores, Amo, Dry goods...
Bang Dae Ho
Bang Dae Bid
Bang Dae Pomo
More Classic Tyler
I'm sorry... That is just too funny...
Didnt G. Lira have something to say about this?
From 60 Minutes Interview
Bernanke: Well, this fear of inflation, I think is way overstated. We've looked at it very, very carefully. We've analyzed it every which way. One myth that's out there is that what we're doing is printing money. We're not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way. What we're doing is lowing interest rates by buying Treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster. So, the trick is to find the appropriate moment when to begin to unwind this policy. And that's what we're gonna do.
No follow up from Scott Pelley regarding "We're not printing money."
Maybe next time they should have Andy Rooney interview him and ask things like "Do you think a beard makes you look smarter?"
The Bernank is engaging in disingenious Clintonian speak ( depends on what your definition of is is).
He is not "printing" money". He did NOT say we are not "creating money". The Bernank is very honest he would never lie. But he will answer the question or respond to an issue in a way that is most helpful to him.
So in the next interview when they ask him about this (after a few months of double digit CPI numbers that are starting to look distrubingly exponential) he can say
"Well we weren't printing any money, the amount of paper dollars we produced everymonth did not change. What I said was true. Now we were creating money, it is much more cost effective than printing. Perhaps in retrospective the approach was flawed. I thought I could stop inflation easily. It always worked in our computer simulations, the numbers looked good, we used the best Wall Street financial experts to create them. No one was more surprised than me when things kept getting worse......"
You get the picture, they are so clever aren't they, --not "printing" money" snicker snicker.
Just like Obummer telling Americans with regard to obummercare is that we will be able to keep our current plans if we want. His lie is he knows our plans won't keep us! And we will be forced to buy the government plan.
what a fucking blatant liar. I hate wordsmith attorneys.
It might be technically true that The Fed is not minting new pieces of actual paper made from actual trees.
Could someone comment on what The Fed is actually the fuck doing? We say "adding zeros to a field in a spreadsheet" which is probably closer to the truth. But is that what they are actually the actual fuck doing?
My sense is that they are loaning money they don't have (that multiplier thing) to banks who also don't have anything, taking broken bank assets (MBS, CRE, whatever) as collateral. Like you and I both lending each other a million dollars neither has and taking each other's broken wristwatch as collateral. It works fine until you try to spend the money, then they laugh at you and if you persist they throw you in jail or St. Sebastian's Hospital for the Mentally Disconnected. Except that Fed fake money can overlap with and look just like real money (which is also fake, but roll with me here). Ben holds the broken wristwatch forever knowing it can never fetch a price above zero and if he ever tried it would revert to a market value (0) and blow up his (fictitious) balance sheet. That might blow up the banks' balance sheets as well, depending on how Ben gave them their fake money, so everyone does the wink-wink and sits back, happy with the way it worked out.
I think. I mean I really don't get it.
The Bernank is a liar either way.
All this stuff is settled in 'book entry' form. There is no actual 'treasury bond' any more. The book entry system is run by the fed. So when the Primary dealers sell a treasury bond to the fed. It is electronically transfered from the dealers account to the feds account. This transfer is done on a "DVP" basis, 'deliver versus payment'. So the dealer does the wire transfer to the fed of the electronic bond and at the same instant, the dealers cash account is credited with the money. Money that the fed creates out of nothing. The primary delaer can then take that money from their account and do whatever they want with it. See the Fed is like the owner of the casino. A casino can create as money 1, 5, 20, 100, 1000 whatever size they want chips as then want. The fed is like that, they own the biggest casino in the universe, the US Monetary system. They can create money by creating more 'chips'
The Fed is fucking with the definition of money that's for sure.
By bidding for UST's they have created a bubble of unprecedented proportions. Huge amounts of government debt now sit on the balance sheets of the various financial institutions, whilst private credit languishes. The issuance of government debt has exploded over the last few years, globally, not just in the US, so much for debt deflation.
How much are the primary dealers making(stealing) on these flips?
Everyone must know by now that the FED has to auction off 150 billion worth of Debt each and every month,to account for the US annual deficit of US 1.35 trillion plus the annual 414 billion of Interest on the 14 trillion national Debt.
That all adds up to an annual Budget Deficit of 1.8 Trillion US Dollars
or 1800 Billion US Dollars for the US Budget Deficit per year !
An that only just keeps the American show on the road to fucking oblivion!
Divide that 1800 Billion US Dollars annual budget by 12 month and you come out
looking for 150 billion each and every month,Debt Auctions to usual S&M Hostages (PD)
and hopefully they won't ask for more than 3% to hold the 10 year notes....
Life is a bitch when you get pimped by big fat Bang da Hoe !
Saint Bernanke was right. The US should start to think about the US deficit in the near future.
I keep asking myself why US citizens willingly made such mess out of it.
If only they had listened to him more early, he wouldn't need to save them...
SPX clicked below Tuesday's low. (Insert Twilihght Zone music here)
Oh good, YOU are a perfect candidate to
Buy the fucking dip.
Buy the fucking dip, bitches:
http://in.reuters.com/article/idINIndia-53993020110107
Gold price dip triggers physical buyingSINGAPORE/MUMBAI (Reuters) - Asian buyers rushed into the market after prices fell from record highs to look for bargains, betting on growing demand and a bright price outlook for the rest of the year.
Premiums in Hong Kong had risen to as much as $1.50 an ounce over London prices, from 70 cents to $1 at the end of last year.
"Supply is tight in the physical market," said a Hong Kong-based dealer. "Two days ago when we had the big drop, premium went up to $1.50, but today it is a little quieter ahead of the U.S. employment data."
imo if the bond market were down they would not be doing this. A quick flip for some fast cash is all it is. Nice to get the notional price without having to actually dump them on the market. Next they will sell 100 million shares of AAPL at $335 to the bag man, er, sach's man, er sack man, er taxpayer. Crony fascism at its finest.
I'm pretty sure right now they're wishing they'd held some of those bad boys as 5's are up more than half a point.
That's a lot of cheese on a few billion bonds...
The electronic futures exchange establishes a single-day volume record on Wed., Jan. 5th, showing it's on a growth path, says CEO. By Ivy Schmerken More from this author
Before joining Aite Group, Schmitt served as sales process manager for Bank of America's Global Wealth and Investment Management groups, including the former Premier Banking & Investments group.
More �
January 06, 2011
Tags: ELX Futures, Derivatives, Exchange,ELX Futures, L.P. set a new single-day volume record for U.S. Treasury futures contracts with over 100K contracts traded on January 5, 2011, according to the electronic futures exchange. The 30-year Treasury bond also set a new record with over 21K contracts traded. ELX’s end-of-day electronic market share exceeded 12% in the two-year Treasury futures contract and 5.5 percent in the 30-year Treasury bond. Overall market share was 4 percent at the end of the trading day. These new records follow a solid 2010 year-end performance that showed a 14 percent jump in average daily volume (ADV) in U.S. Treasury futures contracts year-over-year and several record-breaking milestones in ELX’s Eurodollar futures contract, including a 38 percent increase in ADV per month since its launch in June 2010. In a statement, Neal Wolkoff, CEO of ELX Futures, commented, “ELX has kicked off the year with new records in our U.S. Treasury futures contracts. After ending 2010 on a high note, ELX has carried the positive momentum into the New Year, and we feel confident that we are on a growth path. It’s an exciting time for ELX and this only cements our reputation as a competitive alternative in the futures marketplace and shows the growing commitment from our market participants.” http://www.wallstreetandtech.com/articles/229000241?cid=nl_wallstreettech_daily
All of this comes down to one bottom line: they are trying to take Americans’ money for themselves. I mean, what else could it be? You want proof, Americans are losing their money, the investment banks through their representative, the Fed, are becoming filthy and obscenely rich. And, frankly, considerably richer than they publicly admit, or were, in October of 2008 when the now world’s richest investment bank, Goldman Sachs, was broke
If Bernanke says he’s not printing money, it’s just an accumulation of words. Treasury and the Fed create an endless stream of investment vehicles with complicated names and processes that the average investor cannot comprehend in order to find value in the American landscape wherever they can, to transfer it to the investment banks. How many words and alphabet soups have we coined in the past five years that are just meaningless? The banks get richer, unemployment continues, American grow poorer—
Will There be QE3, QE4, QE5…? by Philippe Bagus | Jan 4, 2011
Ercerpts:
Recently, Ben Bernanke indicated that Quantitative Easing II (QE2) might be followed by QE3, etc. In an interview at the beginning of December, Bernanke was asked, "Do you anticipate a scenario in which you would commit to more than $600 billion?"
Bernanke's answer was startling. "Oh, it's certainly possible," he said. "And again, it depends on the efficacy of the program. It depends on inflation. And finally it depends on how the economy looks."
The answer is interesting because it not only indicates the possibility that the Federal Reserve (Fed) will purchase more government bonds but also implies that Bernanke thinks that inflation and QE are different concepts, because otherwise his claim would be a meaningless tautology: more inflation depends on inflation…
However, the fact that the new money is created electronically does not mean that QE2 is not inflationary. QE2 is inflationary in several ways:
First, base money (bank reserves) increases. When the Fed buys a government bond, it creates money that it transfers to the bank selling the bond. At the end of the operation, the bank has more bank reserves and the Fed owns the government bond.
Second, the quality of money tends to decrease.[3] The average quality of assets that the Fed holds decreases when it buys government bonds. The percentage of gold of total assets that could be used in a monetary reform decreases, while the percentage of government bonds increases. Moreover, these bonds are for a government that is ever increasing its debts.
Third, prices will be higher than they would have been otherwise. Prices would probably have fallen substantially without QE1 and QE2. The injection of new bank reserves inhibited a credit contraction and falling prices. In fact, one aim of QE2 is to bid up asset prices.
Money flows into the stock market, bidding up stock prices. In March 2009, when QE1 started, the Dow Jones was below 7,000 and rose to 10,800 until QE1 expired. When the Dow fell below 10,000 again, markets began to speculate about the possibility of QE2, and a new rally started.
While the newly created money flows to asset-price markets, consumer prices might not surge strongly. But sooner or later, these investments will flow out of asset-price markets and start to bid up consumer goods' prices.
Fourth, the exchange rate will be lower than it would have been otherwise. Market participants will value the dollar lower, given that the base-money supply increases and the dollar's quality decreases. This devaluation is another aim of QE2. It is a way to give exporters an advantage. The devaluation is not as crude an instrument as a tariff but has similar effects. It makes consumers poorer. They have to pay higher prices for imported goods.
Consequently, QE2 is, despite Bernanke's words, inflationary. In fact, it is a euphemism to call the policy QE2.
Reprinted from Mises.org.
just declare hyper inflation is coming and get it over with.
NOBODY CAN PRINT THEIR OWN MONEY TO PAY PETER WHO ROBBED FROM PAUL TO PAY PONTIUS.
something along those lines..
there is too much fucking debt and nothing to show for!
it will blow up and it will be nasty.
stocks are safer than treasuries.
PMs are safer than stocks.
when the mother of all meltdown happens, cash is good to wipe ass or heat the home.
that's all.
interesting, it would appear that the PDs lost money on both the PB0 & PU8 issues? PB0 issued in October around 99-25+ but was trading around 98-28 today during the POMO window, and PU8 issued in November around 99-24+ but was trading around 98-23 this morning. Of course, no one really knows what price Sack is paying, either.
FAQ's at the FRBNY site: Will the Desk release operation pricing results?
Yes, the Desk will begin to publish information on prices paid in individual operations at the end of each scheduled period, coinciding with the release of the next period’s schedule. The Desk plans to publish the first pricing information on December 10, 2010, which will cover the operations included in the November 10, 2010 schedule. For each security purchased in each operation, the Desk will release the weighted-average accepted price, the highest accepted price, and the proportion accepted of each proposition submitted at the highest accepted price.
==
The free market prices these securities (based upon the supply of, and demand for, loan funds).
well whack me
over the head
with a stuffed badger ....
and tell me
i'm naughty a platypus..
I may be too late on this one but here's my question anyway, for anyone who can answer. How much risk are Primary Dealers really exposed to in the "possible" occurrence of the U.S. bond market tanking? Do they have enough flexibility to be able to dump most of their holdings back on the Fed?
I am asking because my supposedly safe, non-American bank is also a PD and I have never been able to get a straight answer out of them as to what the ultimate risk is to me and my holdings for which they are trustee (as if I really expected them to.)
Any thoughts?
As a side note, I have begun attempting to diversify holdings across institutions, however they all have risks of one form or another.