You're now on the archive server. Commenting has been disabled.
Rosie On Bernanke
"We really fail to see how it could possibly be that the same central bank official, who, over a span of a decade, presided over two massive bubbles and their busts, can be viewed as being a positive force for the markets. Perhaps there is some solace in knowing that the same person who created this awesome and complex $2 trillion Fed balance sheet will be around to dismantle the largesse since he’s probably the only one that knows how."
»
- 5226 reads
- Printer-friendly version
- Send to friend
Similar Articles You Might Enjoy:
- Rosenberg On The Impact Of The Tax Package And How The Gridlock Over The Debt Ceiling Should Be Traded
- Rosie On Gold Redux
- Q&A With David Rosenberg: The Bearish Outlook
- Rosie's Must Read On A Hope-Based Rally Now, Followed By Shock Therapy Later
- In Preparation Of The Fed's Last Doubling Down: David Rosenberg Believes QE3 Will Be Nothing Short Of "Operation Twist 2"
That is exactly why he is a positive force in the markets.
Next 1-4 years = BUY BUY BUY
After that it's collapse time for the fools holding the bag.
So naturally, reappointment of Bernanke is a sign that the bubblicious times will continue for a while longer.
If you think there is any way they can keep this multitude of hyper-leveraged ponzi schemes going for another four years, you truly have been smoking green shoots.
It's all going to collapse into a smoldering, deflationary heap by 2012 at the latest and bring Ben Shalom's "reputation" with it. Just desserts to one so arrogant.
Look how long the dot com bubble persisted.
Hard to underestimate
Look how long the dot com bubble persisted.
Hard to underestimate the
dude, you kinda over-posted
Cheeky -
You are deathly quiet today...
Looking forward to your thoughts here. Just don't do the math thing - way over my head.
The huge ramp in that bubble really only lasted from Oct 99 to Mar 00, it wasn't that long a time frame, corresponding with the Greenspan Y2K cash flood. Sure, there was some ramp in late 98, but half of that was catch up from the fall earlier in the year.
Check out the NASDAQ:
Jan 1 1998 - 1500ish
Jan 1 1999 - 2300ish
Oct 1 1999 - 2800ish.
Almost a doubling in 1.5 years. Now the Y2K cash really gets pumped up.
Jan 1 2000 - 4100ish
March 10 2000 - 5000ish
Almost a doubling in 5 months.
The duration of the bubble will depend on how long the excess liquidity is available. I think that is at least until the end of the year.
Watch the MBS purchases for clues.
Still using my CapGemini mousemat...
"TransMillenium Services - The Smart Solution to the Problem of the Century"
What a fucking load of old crap that shit was. At least most of the money was probably wasted on real consulting.
Dont underestimate the people in power's ability to keep the scam going.
Do not overestimate it either. Ben can only buy the "top-notch" MBS out there (and there is only so much of it left)...unless of course he's suicidal and wants the dollar dead and I have a hard time believing that.
Do you mean conflicted, rating agency-based "top notch" MBS?
Seems like there will be plenty more to buy... and BB wont let a pesky little thing like dollar devlauation stop him.
Believe it.
The Fed is fully aware what sham ratings are for MBS's, so that is why I believe they make their own judgements on the worth of the paper they are buying. I can't point to much evidence of this at the moment, but I have read a paper a few months ago, and maybe things have changed since then, that they steer clear of any junk MBS and only buy the best around. This in my eyes defeats the whole purpose. The MBS buyback is mostly psychological in its impact since the banks remain burdened with the worst loans and most of the foreclosures while their best performing assets are traded in for a less valuable dollar.
Wrong, see my other post, he is buying agency MBS, fully guaranteed by Fannie and Freddie.
And he has a LOT more to buy.
The "wrong" part is referring to what exactly? Just because it is possible for him to buy more MBS does not mean he will do it.
"Ben can only buy the "top-notch" MBS out there (and there is only so much of it left)."
That is what is wrong. He can buy agency MBS, and there is a lot of it left, and more being created every day.
You do understand the difference between agency MBS and private label MBS, don't you?
Sure I see your point of contention, but that remark was only meant to demostrate the finite nature of the amount of MBS purchases he can make...isn't there a self imposed limit for the scale of the MBS bauback program as well? I'm not saying it can't be changed, but for any exapnsion of MBS purchases Ben would have to make an official policy extension.
There is a self-imposed limit, but that can be changed at any time, as long as it is announced. And currently, it is an additional $500B on top of the $750B already purchased, so there is some time before a decision to extend has to be made.
The agency MBS market is about $5T, and growing (as loans churn out of private label into agency) so there is a lot more BB could buy.
As mentioned, I estimate when all is said and done he will own $2.5T - $3T of agency MBS.
Nice work, ghostfaceinvestah...
Uncle Ben hasn't slowed down the pace of actual agency MBS purchases so far this year, and clearly has the authority (capacity) to buy much more.
Beats the hell out of me why he would stop now. No matter how one rates agency MBS, they are essentially worthless assets. Otherwise, the private sector would be buying these puppies right and left. That giant sucking sound you may be hearing is called "wealth transfer"-- it's leaving Fannie Mae/Freddie Mac and coming directly to a taxpayer home near (in) you.
Exactly. He hasn't slowed the pace, nor can he. You could view it as a wealth transfer, and it is in many ways (see my post below - Fannie actually took whole loans off their portfolio, packaged them up, and sold them to Zimbabwe Ben).
Another way to look at it is a bail out of the banks. Not all of the loans in the newly minted MBS are new purchases or refis of old agency loans. many of them are refis of crap loans that were on the books of the banks.
The FHA/Ginnies are a particularly nice dumping ground.
And the private sector would clear the market at a certain price, but it would be lower (and thus rates higher) than they would today.
One other thought - at some point between the Fed, Treasury, FHLBS, and Fannie/Freddie, the government is going to own a pretty big chunk of outstanding mortgages in the country.
At some point do we see a massive principal foregiveness? With any non-govt holder of mortgages getting a tax break to follow suit?
Bernanke is buying agency MBS. he holds about $750B of the total $5T outstanding.
Even Wikipedia can get you the information.
http://en.wikipedia.org/wiki/Mortgage-backed_security#Market_size_and_li...
Some people have gotten much wiser since being burned by the dot com bubble...
(note i didn't say 'all')
The cycles are speeding up.
yes indeed they are:
http://en.wikipedia.org/wiki/Timewave_zero
Let's see if I understand your logic: Bernanke's Jewish, so it's all part of a global conspiracy. That about right?
You don't need a global thingie to make a conspiracy. Just a few key players working in concert, let's call it paradigmatic simultaneity.
Obama needs the bubblicousness to fund is socialismiciousness. Obama had no clue about the collapse (or did and said nothing about it during his campaign), and clearly it is not going to interfere with his visions of HOPE and CHANGE.
www.JoeSixPack.me/orig_letter.html
The definition of insanity is more of the same while expecting different results. As long as everyone else thinks the same way, the insanity has plenty of company.
I've often said that insanity is defined by the majority, not by any objective standards.
+1; exactly
I think our leaders are our leaders and our Gods are our gods because A. They are crazy as hell. B. They don't like being alone.
Certain part of a mouse's brain controls the feeling of please. We figured out how to stimulate that part of the brain and an experiment was performed regarding this. A button was placed in the mouse's cage that when pressed by the mouse would lead to said stimulation and would thus evoke pleasure in the mouse. Even though there was ready access to nourishment in the cage, the subject mice all died from starvation.
CNBC show thus title in web-page
Recovery Sign: Hedge Funds, Trading Desks Are Hiring Again
Guys are you kidding me?
We're only hiring snakeoil salesmen and salestraders. Basically the bottom feeders of the bottom feeders. Risk takers and such are not still welcome. Kinda pathetic. Industry has not cut nearly enough capacity btw - Wall St could fire 50% of front office staff and be no less productive. I wouldn't touch NY real estate with a bargepole. Along way to decline.
bernanke = EPIC FAIL
200 econ phds at the fed, access to every insider information in the WORLD and you miss the $56T bubble and destroy some $14T in wealth.
what good are you for? and who pays for these guys?
It's not just some random act of incompetence that central banks create these bubbles. The depressions are created intentionally, each worse than the last.
My theory is they need him around to work with Turbo Timmay to figure out a way out of this Fannie/Freddie mess. Once he stops buying MBS, what happens to that market? Very few investors are willing to buy agency MBS, let alone agency debt, at current levels. the real market clearing price on MBS is probably 100bps north of where we are today. Will the housing market be in good enough shape by Jan to support mortgage rates 100bps higher? If not, what is the solution? The Fed continues to buy MBS?
No business model short of full faith and credit backing will get people to buy MBS at today's levels.
Expect many different "leaks" on Fannie/Freddie business models in the next few months as Geithner throws out ideas to see what will stick. Witness the WaPo article from a few weeks ago - the suggestions were not very well received, so the Admin backed off pretty quickly.
Thus a manipulated market will eventually fail because the price presented/offered is a price no one would willingly pay without the offer of a carrot or the threat of a stick.
Or both.
Note the Hatzius note from GS yesterday that the Fed could expand its balance sheet to $4T if need be. That is your solution to the GSE problem in a nutshell. Wathcing the RPechter call for strongerdollar and even Cheeky calling for a long dollar, short commod/indicies euro trade might be wishful. Despite gold having "underperformed" it is striking how strong hands now copntrol the trade. The quedtion is will any dollar strength be used to sell capping the much talked about "wink, wink" dollar rally - uhm I thought the markets were forward looking ? Isn;t that the CNBC stock market mantra
I hadn't seen that, i will look up the note.
I agree, I actually think the Fed will be forced to buy MBS until they own at least half of the agency market, which would be about $2.5T of $5T roughly. i.e. I think they need to buy the new issuance market until at least mid-2011. In Feb Turbo Tim will release his plan for Fannie/Freddie, but that will be ripped apart and dissected and debated for months, so it will be mid-2011 minimum before any resolution.
Until that time, Bernanke will be forced to buy MBS.
If it plays out like I think, we could easily see S&P at 1200 before the end of the year, and at 2000 by the end of 2010, on the back of nearly $3T of liquidity that can't be extracted from the system (including agency debt and USTs).
agree on that..wait until the next stimulus measures come after a better than expected 3Q GDP print. The inventory to shiopments ratios still look very elevated across the DG and Business Inventories space. So the much heralded restocking can only asume one thing: a massive ramp in demand., which simply isn;t going to materialize barring a $5,000 check mailing campaign - although its only a mere $1.5T
Oh yeah, there is absolutely no fundamental basis for this market ramp, it is all liquidity driven. Look at the Zimbabwe stock market in 2007, it went ballistic.
As I said, watch the MBS market for signs liquidity provision slowing down. The liquidity won't be withdrawn, but just a stop to new liquidity should tip the market. That would be the time to go short.
If it works out like I think, and he keeps printing dollars to monetize MBS into 2011, a highly leveraged short could literally be your retirement ticket. By that time the market should be juiced so high, the downside potential would be enormous. Think a leveraged bet against the NASDAQ in March 2000, that kind of downside potential.
In the meantime I am sticking with my commodities positions in case the dollar collapses, which it might.
ghostface,
What is the projected net issuance of MBS and/or agency debt in 2009; i.e. how much less is net issuance than the ~$1.5T the FED is purchasing this calendar year?
Don't follow agency debt much, but they have about $1.8T outstanding, not sure how much of it rolls per year, but BB is buying $200B of it, so it is material, but not sure how much it is of new issuance.
Total agency MBS issuance in July was 166B, down from 235B in June. Total issuance will probably be in the $2B range (June was an unusually high month due to the low rates a few months eariler).
So Bernanke is buying a pretty big chunk (70%) of the new issuance this year.
However, even that understates things, since he is buying more more Fannie/Freddie than Ginnie (since Ginnie has full faith and credit and thus has a bid). As a % of new Fannie/Freddie issuance, he is buying around 80% of that.
Even funnier is FNMA securitized a lot of their whole loan portfolio in order to sell it to BB. These were seasoned loans that they probably never thought they could sell at par. Thanks to BB, they did.
He IS the market.
ghostface,
Thanks for the reply. Of the $2T MBS to be issued this year, what does that mean in terms of net growth of the MBS market? I'm assuming that a lot of that $2T is refi, and there is retiring of earlier vintage MBS.
It is right to think QE for MBS is a means to rotate FCB holdings from MBS/agencies to Treasuries? The most recent TIC data showed an increase of Chinese holdings of Treasuries, including 10/30's (foggy memory here, but I think that is right).
Is the refi component of the MBS market destined to shrink, and along with a continued slow pace of home sales (relative to 00's) will it lead to a secular decrease in the size of the MBS market?
I'm trying to imagine an exit strategy for QE, where it continues until FCBs have sufficiently swapped MBS/agencies for Treasuries. Then with a smaller refi market leading to a smaller MBS market, the FED can have a similar impact on the mortgage spread with a much smaller marginal purchase.
Of course, even if the above picture were accurate, it might chart a course to ramp down FED purchases of MBS/agencies, but if $1T budget deficits do become the norm, the FED will need to redirect its QE fire-power to Treasuries, since FCB rotation will have run its course.
I realize this is a very simple view of things! Just trying to make sense of this some how!
I'm thinking Obama reappointed Bernanke sooner than expected before Uncle Ben becomes persona non grata due to either a Fed audit or economic meltdown.
I think it had more to do with accepting a union official from the AFL-CIO to run the Federal Reserve Bank of NY. Helicopter Ben would say it makes sense if it means he's still the Chairman.
Yes. I was completely speechless when I saw that.
Whiskey Tango Foxtrot.
Or engineered market collapse.
At some point, the Treasury is going to appreciate a massive flight to quality trade.
"...Witness the WaPo article from a few weeks ago - the suggestions were not very well received, so the Admin backed off pretty quickly."
Excellent and accurate observation. I remember reading this and poof....it vanished!
Thanks. It seems to be how Turbo Timmay operates (which is further proof to me he is not qualified for the job): he has ideas "leaked" to see the market reaction, then has them denied if they don't fly. Same thing happened with the PPIP.
One would expect that the cash-for-MBS program is also essential in supporting the indirect bid in T auctions.
Correct - cash is fungible.
Servicers also provide a stronger bid for UST when rates drop, so there is that linkage as well.
Sqworl can fix the pr on this.
He really won me over on the HealthCare thing.
A small step for a man, a greap leap backwards for mankind.
It's more like, "Houston, we have a problem".
The accolades, praise, right-ons!, high fives, fist bumps, and general positiveyness of Bernanke's re-appointment seem eerily similar, if not verbatim, to the good cheer and the garlands of roses tossed onto the other bald guy who caused this mess in the first place: Cue the tape of The in'screw'table Dr. Alan Greenspan being carried on the shoulders of The Banksters, and portaged across the Potomac on the arms of nubile virgins, in his more halcyon days.
since the politicians will not install pure economists (thus lose power over them) you have to take the best of that group, and of the koolaid peddlers the politicians love it is clear the Bernanke is the least moronic. and if i hear yellen i will intellectually smack you, that entire bag of idiots ruining the west coast needs fired, not promoted: scoreboard!
http://www.chrismartenson.com/blog/shell-game-how-federal-reserve-moneti...
....since he’s probably the only one that knows how"
I really don't think he knows how. We are winging it boys!
In fairness to Bernanke, he has done exactly what he said he would do.
Alphabet programs, QE, reckless currency debasement.
We are worse than a junkie hooker crawling back to their pimp.
Yes, he outlined it all pretty well in his deflation speech.
After his March 18th announcement that made it clear he was going to follow that script to a T, it was a pretty easy trade to go long commodities (as a way to go short the dollar).
"If Stupidity got us into this mess, then why can't it get us out?"
Will Rogers
Hussman's Weekly on Ben:
“Our forecast is for moderate but positive growth going into next year. We think that by the spring, early next year, that as these credit problems resolve and, as we hope, the housing market begins to find a bottom, that the broader resiliency of the economy, which we are seeing in other areas outside of housing, will take control and will help the economy recover to a more reasonable growth pace.”
Ben Bernanke, Federal Reserve Chairman
On Friday, investors took great cheer in an optimistic statement by Ben Bernanke suggesting good prospects for economic growth ahead. We might be inclined to place a sliver of credibility in Chairman Bernanke's assessment – if not for the fact that the quote above wasn't from last week at all, but rather, hails back to November 8, 2007, just before the recent recession began. You might recall that the S&P 500 was pushing 1500 at the time. The implosion of the global credit markets was still just a slight rumble.
Exactly. Winging it. They're going to keep inflating and borrowing and calling it a gazillion different things.
The new SS along with new furher?
http://www.govexec.com/story_page.cfm?articleid=43460&dcn=todaysnews
I think a drug analogy is most apt.
The market was on crack, and then its dealer skipped town and it was left hanging. It panicked.
The Fed, who had turned a blind eye to the dealer working on its corner for too long, realized that the market had a serious problem and needed to get off crack.
And, as anyone sensible knows, the only way to get someone off crack is to supply them with vast amounts of the substance of the likes of which the addict could only dream.
So the Fed started working the corner itself, and the market was satiated. Well, at least satiated in that "I got my fix so I don't care what happens tomorrow" sort of way.
Happy that the market was in dreamland, the Fed happily announced that the market was now off crack with minimal withdrawal symptoms thanks to its superior dealing powers.
So the Fed got the market off buying crack by giving it even more crack essentially for free. And the head dealer just got reappointed for his medical miracle.
But something tells me that the market won't be too happy when the Fed tries to give up its dealing and the old dealer doesn't come back around.
That's when things could get withdrawal-like ugly.
He ain't done yet.
Bernanke is a pig.
http://www.livescience.com/culture/090826-stock-market.html
World's Stocks Controlled by Select FewWASHINGTON -- A recent analysis of the 2007 financial markets of 48 countries has revealed that the world's finances are in the hands of just a few mutual funds, banks, and corporations. This is the first clear picture of the global concentration of financial power, and point out the worldwide financial system's vulnerability as it stood on the brink of the current economic crisis.
A pair of physicists at the Swiss Federal Institute of Technology in Zurich did a physics-based analysis of the world economy as it looked in early 2007. Stefano Battiston and James Glattfelder extracted the information from the tangled yarn that links 24,877 stocks and 106,141 shareholding entities in 48 countries, revealing what they called the "backbone" of each country's financial market. These backbones represented the owners of 80 percent of a country's market capital, yet consisted of remarkably few shareholders.
Interesting article....where is the methodology.
Otherwise you can print anything these days and pass if off as 'proof' of .....
Thanks anyway.
they can't possibly allow an audit of the Fed.
simply because it will be apparent to the middle class that all the fed does is send money to the rich and the poor, but not them.
I wish BB is the last fed chairman.
ben bubblilicious bernanke = tripple B
Weren't we suppose to see FDIC 2nd quarter results on August 25th? What happened, did they postpone it?
For what it's worth, this article says that the BRIC countries have given the US until early November to reign in their QE. The rally might have a couple months left to go:
http://jsmineset.com/2009/08/19/the-countdown-to-the-implosion-of-the-dollar/
"The punishment of wise men who decline to participate in government, is to be led by a government of unwise men." -Plato
Are the robots turned off today? The market is doing more than just moving sideways.
BB knows where all the bodies are buried. They simply cannot allow anyone else lifting up the curtain.
i wonder how the markets would react if bernanke dropped dead of a heart attack.
They would shoot to the moon...pump and dump on Crack...lol
So, what Rosie ?
Market to 1100, 1200 ?
ZZZZZZZZZZZZZZZzzzzzzzzzzzz
So what if the Fed balance sheet is crap? They take in garbage and give out dollars.
The garbage gets taken out to the dump. The dollars remain in circulation.
This is not like the Fed has to honor anything when they issue a dollar. There is a promise to pay exactly nothing.
This is what the balance sheet looks like:
Fannie paper putative value: $1T
Cost in dollars to issue $1T in fed paper: $1M to buy fannie paper
Fannie paper value: $1M
Fed balance sheet: zero
Where is the problem? Oh the bagholders. Those idiots hold dollars.
To your point, hasn't the Fed been marking down their Maiden Lane positions? So the balance sheet sinks. Big deal. The dollars printed are still out there.
Sure, the M2 has stayed steady. In overall size. But that masks a lot of movement - M2 in the hands of the little people has shrunk, M2 in the hands of the financial elite has risen.
By the way, for those of you that don't know the fed, the fed has been given the right to infinitely naked short the dollar.
As long as there is toxic garbage, the fed can buy it. Clunkers, AIG, BS, Lehman, Fannie, Freddie, treasuries, first time buyer mortgages, swaps, used toilet paper, old vacuum tubes, cadmium batteries, lead painted walls, asbestos ceiling tile, dust bunnies, squashed roaches, lawn sausage. Come one, come all to the fed dump.
I'm prob dreaming in lala land but if Bernacke could get voted out by Senate (as we write our Senators), who would be a good IN? Who would you trust in these times that has the ideas that produce a more real world accounting?
Buy Buy Buy PragmaticIdealist?! Only if you're shorting the dollar out the wazoo so that the dollar demise doesn't offset your stock market gains.
The issue with Bernanke is that the book hasn't been written yet-- and he essentially has 4 more years of writing.good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Another way to look at it is a bail out of the banks. Not all of the loans in the newly minted MBS are new purchases or refis of old agency loans. many of them are refis of crap loans that were on the books of the banks.good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
The PTB are convinced no one can prevent further worsening in the economy for the foreseeable future. The only reason Bernake was re-chosen was to have a Republican choice to blame. While the media gives us the pathetic delusion that Obamma was more or less forced into resubmitting Bernake due to the notion that since only he understands what he did, he is the only one that can undo it. Political bullshit all and what's worse? ... Just plain ignorance of what should be done with the economy. I am living in a country of idiots who elect the ignorant.