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Wonder Why Market Just Surged? One Word - POMO

Tyler Durden's picture





 

A boatload of bad economic news - check, full blown admission by all central bankers that the only way to preserve a broken system is by global market intervention - check, and stocks are... up? Instead of bashing your head in with a sledgehammer trying to explain this, here is your answer: POMO. The Fed just opened up to submitting bids for about $2.5-$3.5 billion in bonds dated 2014-2016, meaning there will be about $70-$100 billion in leveraged capital released by the Fed to the Primary Dealers to bid up all companies with a beta of 4.0+, as the Fed's number one task for the month of September is to get hedge funds, all of whom are now all in on the beta wave, if not above their high water mark, then at least to October 1 and prevent a tsunami of redemption requests.

Link to today's POMO.

 


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Wed, 09/15/2010 - 10:32 | Link to Comment firstdivision
firstdivision's picture

The market loses its POMO highs pretty quickly.  Can we say diminishing returns to the max?

Wed, 09/15/2010 - 10:36 | Link to Comment Kreditanstalt
Kreditanstalt's picture

Yeah...noticed that too...used to last a couple days, didn't it?  ~ almost like the value of the 'money' itself is somehow DISApppppeeeeaaaaar - r- r-i-n-n  -n---n--g----g---g-------g

Wed, 09/15/2010 - 10:48 | Link to Comment SheepDog-One
SheepDog-One's picture

Like heroin addict in downward spiral final stages, it takes so much more just to stay 'not sick' and then that hot shot does you in. FED policy is now nothing more than back alley heroin junkie story playing out.

Wed, 09/15/2010 - 11:01 | Link to Comment Dr. No
Dr. No's picture

Because no matter how much you stash, or how much you steal,
you never have enough.  No matter how often you go out
and rob and f*ck people over, you always need to get up
and do it all over again.

Wed, 09/15/2010 - 11:10 | Link to Comment RoRoTrader
RoRoTrader's picture

Yes, Dr. No.

Wed, 09/15/2010 - 11:38 | Link to Comment overbet
overbet's picture

Here is the real story of the day:

The NYSE has determined to cancel all trades in NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND 3 (NWI PRC), executed at or above $10.65 between 09:48:05 am and 09:50:52 am ET today.

This decision is not appealable.

They are busting trades of an algo error that occurred a mere 3.5% away from the market, not even close to the erroneous trade policy guidlines but during the flash crash investors had to eat the losses caused by the same system up to 20% Come the fuck on

Wed, 09/15/2010 - 11:57 | Link to Comment Dr. No
Dr. No's picture

The great thing about casino gaming is the fixed rules for payout.  If you hit blackjack, you can expect to get paid.  If you place your money on black, and the ball lands on black, you can expect to collet.  If a card or wheel is mis-played by the dealer, there are rules in for what happens to the existing bets.  These rules make casino gambling superior to NYSE investing in my view.   and did i mention free beer?

Wed, 09/15/2010 - 19:56 | Link to Comment StychoKiller
StychoKiller's picture

"...a keno girl that can suck the chrome off a trailer hitch and kick back." -- Willie Nelson ("The electric Horseman")

Wed, 09/15/2010 - 19:23 | Link to Comment nmewn
nmewn's picture

Veeedy intewestink.

Wed, 09/15/2010 - 12:50 | Link to Comment doolittlegeorge
doolittlegeorge's picture

"hey, hey I got somethin' to say...it's better to burn out than to fade away."

Wed, 09/15/2010 - 10:33 | Link to Comment mule65
mule65's picture

I can't tell the difference between fact and sarcasm anymore.

 

:-(

Wed, 09/15/2010 - 10:36 | Link to Comment bigdumbnugly
bigdumbnugly's picture

but tyler, bashing my head in with a sledgehammer just seems so much more real...

Wed, 09/15/2010 - 12:53 | Link to Comment doolittlegeorge
doolittlegeorge's picture

endless irony combined with Pretzel Logic is hard way to run anything.  "How is one to know when an irrational" whatever "has taken hold"?

Wed, 09/15/2010 - 19:28 | Link to Comment nmewn
nmewn's picture

It helps if you're a boomer...it makes perfect sense...it's the same.

For instance...nice close today ;-)

Wed, 09/15/2010 - 19:57 | Link to Comment StychoKiller
StychoKiller's picture

Welcome to the Fun House with its warped mirrors...

Wed, 09/15/2010 - 10:59 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

"We're not going to monetize the debt," Mr. Bernanke declared flatly...

http://www.washingtontimes.com/news/2010/feb/25/bernanke-delivers-warning-on-us-debt/

Wed, 09/15/2010 - 11:29 | Link to Comment D-Falt
D-Falt's picture

Oh, Please!

 

Option 2 involves telling our creditors "Tuff Shite!"

 

Option 3 involves actually reducing spending to the point where it can be paid in honest dollars.

 

Hmm, that leaves a humming sound, the sound of reality, the sound of trillions of happy, new dollars being born in the total absence of any underlying value to justify their creation.  And the Gubbermint said "Lux fiat!"

Wed, 09/15/2010 - 12:55 | Link to Comment doolittlegeorge
doolittlegeorge's picture

actually he said "we did not monetize the debt during the crisis."  his NY Fed Gov flatly contradicted him on CNBC although he didn't think it was a big deal and I agree.

Wed, 09/15/2010 - 13:31 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Then please post the retraction of this:

Rep. Brad Sherman, California Democrat, asked Mr. Bernanke directly whether the Fed would consider such a strategy, especially since IMF officials endorsed it.

 

"We're not going to monetize the debt," Mr. Bernanke declared flatly, stressing that Congress needs to start making plans to bring down the deficit to avoid such a dangerous dilemma for the Fed.

 

"It is very, very important for Congress and administration to come to some kind of program, some kind of plan that will credibly show how the United States government is going to bring itself back to a sustainable position."

http://www.washingtontimes.com/news/2010/feb/25/bernanke-delivers-warning-on-us-debt/

I do agree with you that Bernanke saying one thing and doing another is no big deal, as long as our definition of no big deal is business as usual.  Magicians always lie.  It is the foundation of their profession.

Prestidigiflation, bitches!!!!!

____________________________________

[Quickly rips the tablecloth out from under the dishes, crystal, silverware, and flowers]

...and the BANKS are still standing!

[Applause]

Wed, 09/15/2010 - 10:35 | Link to Comment Boilermaker
Boilermaker's picture

This is getting fucking RIDICULOUS.

Wed, 09/15/2010 - 11:03 | Link to Comment Turd Ferguson
Turd Ferguson's picture

Again, this below is all you need to know. I read this Monday afternoon and proceeded to cover all my shorts. 

http://www.zerohedge.com/article/primary-dealers-prepare-invest-27-billi...

Wed, 09/15/2010 - 11:37 | Link to Comment VFR
VFR's picture

more like fill your shorts Turd :-)

Wed, 09/15/2010 - 10:38 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Tomorrow will be more of the same, with another POMO scheduled. Followed by Monday, Wednesday and Friday of next week and then Tuesday and Thursday of the week following next.

The Fed has begun obsessive Viagra pill popping in an effort to keep things ....er.....inflated. To hell with a 4 hour erection. The Fed wants one 24/7/365. It seems the Fed wants to service those 72 virgins in this lifetime.

Wed, 09/15/2010 - 10:43 | Link to Comment Ragnarok
Ragnarok's picture

To hell with a 4 hour erection. The Fed wants one 24/7/365. It seems the Fed wants to service those 72 virgins in this lifetime.

 

How will the Fed take a Piss? :)

Wed, 09/15/2010 - 10:48 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

How will the Fed take a Piss? :)

 

No worries, Bill Gross has his lips wrapped tight...

Wed, 09/15/2010 - 12:23 | Link to Comment Cyrano de Bivouac
Cyrano de Bivouac's picture

R-That's just our problem, one 4 hour erection too many.

Wed, 09/15/2010 - 10:44 | Link to Comment Skeebo
Skeebo's picture

And ultimately it is a losing battle.  Markets are already beginning to pull back, we'll see short term market surges from the POMOs but that is about it.  Nothing sustainable out there.

Wed, 09/15/2010 - 11:07 | Link to Comment Kreditanstalt
Kreditanstalt's picture

Must be really helpful to my bullion holdings & silver stocks...take a look at silver price...

Wed, 09/15/2010 - 10:38 | Link to Comment sethco
sethco's picture

Can someone please explain, in layman's terms, the POMO process and how it injects market capital? I've a fair idea, but all the acronyms and financial shorthand gets confusing.

Wed, 09/15/2010 - 10:47 | Link to Comment Biggvs
Biggvs's picture

Long story short, the Fed buys treasuries, putting cash into the sellers' hands. Those sellers then use that cash to buy something besides treasuries.

Wed, 09/15/2010 - 10:52 | Link to Comment SheepDog-One
SheepDog-One's picture

'Something' besides Treasuries, but not necessarily equities? What if the sellers instead turn to buy pounds of gold instead of fluffy paper schtawks?

Wed, 09/15/2010 - 11:00 | Link to Comment MachoMan
MachoMan's picture

they'll only get one opportunity for big gold purchases...  and if they let it accumulate in the meantime, they'd better hide it well.  Do not bite the hand that feeds.

Wed, 09/15/2010 - 14:30 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

Can someone please explain, in layman's terms, the POMO process and how it injects market capital? I've a fair idea, but all the acronyms and financial shorthand gets confusing.

I disagree, for the most part, with the market capital injection thesis Tyler promotes, even assuming leverage.  I believe the POMO-pump of the equity markets is better explained by the following two points.

In the immediate to short term, rates move opposite of the price for bonds, so when The Fed buys bonds in the open market it (falsely) increases demand and decreases supply of USTs, so their price goes up, and their rates (yield/return/ROI) go down.  This causes money managers to look for yield elsewhere, such as the stock market.  Tyler calls this chasing Beta.  But it is not really new money, as much as it is a reallocation of money from FI to equities.

In the short to medium term, when The Fed does add money to the system (monetization), this clearly portends inflation, and so money managers will allocate capital to equities which tend to do better keeping up with inflation than bonds. 

Wed, 09/15/2010 - 11:01 | Link to Comment NOTW777
NOTW777's picture

more and more they appear to be buying PMs, healthy emerging markets and AG;  all the things Im trying to add to got popped quick this morning

keep an eye on the PGMs -  plat and pall had nice days yesterday (better than gold and silver)

Wed, 09/15/2010 - 11:03 | Link to Comment NOTW777
NOTW777's picture

check out TRV this morning

Wed, 09/15/2010 - 11:15 | Link to Comment Kreditanstalt
Kreditanstalt's picture

Oh!

Wed, 09/15/2010 - 11:14 | Link to Comment Kreditanstalt
Kreditanstalt's picture

Oh-oh...!

Wed, 09/15/2010 - 11:11 | Link to Comment Kreditanstalt
Kreditanstalt's picture

They'll never buy gold.  These are the establishment of the establishment: primary dealers...they want dollar-denominated paper YIELD.  They can only comprehend stuff that pays more paper dollars.  That's all.  They don't even know what "store of value" means.  They want interest, coupons, dividends, rates.

Buy gold?   Hahahahahhahah.......!

Wed, 09/15/2010 - 11:19 | Link to Comment Dr. No
Dr. No's picture

Why buy gold when they can lease it and sell it making a fortune in paper.

Wed, 09/15/2010 - 10:54 | Link to Comment sethco
sethco's picture

to buy equities, presumably.

Who are the sellers of treasuries, who are these "primary dealers"?

And is this a good deal for them, because yields are so low?

sorry about the pestering...

Wed, 09/15/2010 - 11:51 | Link to Comment RichardP
RichardP's picture

A correction to the first answer to your question above - as it may lead to some confusion.  The Fed does not put cash into anyone's hand.  Accounts are credited through electronic transactions without cash or precious metals (PMs) changing hands.

Wikipedia is your friend:

http://en.wikipedia.org/wiki/Primary_dealers

http://en.wikipedia.org/wiki/Open_market_operations

And pester away.  That's how you will learn.  But seriously, you might Google or search Wikipedia on terms or abbreviations you don't recognize.  That could answer your question faster than waiting for a response here.

Wed, 09/15/2010 - 13:01 | Link to Comment doolittlegeorge
doolittlegeorge's picture

pester away indeed.  "if the Fed is engaging in a theoretical discourse to whom is it speaking?"

Wed, 09/15/2010 - 13:00 | Link to Comment Battleaxe
Battleaxe's picture

Don't bother trying to figure this stuff out. Once enough people figure it out they'll change all the rules again anyway.

Wed, 09/15/2010 - 11:40 | Link to Comment bmusic
bmusic's picture

How does this help Main Street again?

Wed, 09/15/2010 - 12:57 | Link to Comment doolittlegeorge
doolittlegeorge's picture

MONEEEEYYYYY!!!!!!

Wed, 09/15/2010 - 10:38 | Link to Comment NOTW777
NOTW777's picture

lets have a battle - now we need yen intervention to knock it down; then rinse and repeat

Wed, 09/15/2010 - 11:10 | Link to Comment French Frog
French Frog's picture

if last night is anything to go by, then yen intervention will only drag the market higher

Wed, 09/15/2010 - 10:39 | Link to Comment Boilermaker
Boilermaker's picture

TD,

I struggle with this logic..."the Fed's number one task for the month of September is to get hedge funds, all of whom are now all in on the beta wave, if not above their high water mark, then at least to prevent a tsunami of redemption requests."

Wouldn't gunning the market actual prompt more redemption requests?  If everyone knows that it's being jacked by the FED...why wouldn't everyone want out while it's at the highs?

Am I stupid?

Wed, 09/15/2010 - 10:42 | Link to Comment jefftheshark
jefftheshark's picture

No, but the FED figures you are in the minority.

Wed, 09/15/2010 - 12:52 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

and greed trumps intelligence

Wed, 09/15/2010 - 10:53 | Link to Comment bada boom
bada boom's picture

Perhaps this is the same logic that someone has applied to retail / equity mutual funds.

ICI has shown that the market increase has not stopped the outflow.

Wed, 09/15/2010 - 10:59 | Link to Comment Boilermaker
Boilermaker's picture

Well, I know that my parents (60 years old) are waiting to liquidate their entire portfolio as soon as they get back to parity'ish.  They can't be alone.  I think all the boomers are just waiting to pull the trigger.

If it gets back to a reasonable level, they liquidate.  If it falls an unacceptable amount, they liquidate and save what's left.

Furthermore, I know they don't like the swings as it makes it feel way too risky (which it is, of course).

Man, what a trap.

Wed, 09/15/2010 - 11:19 | Link to Comment Kreditanstalt
Kreditanstalt's picture

That's the problem with those fund-managed portfolios.  A good trader should liquidate not "when he gets back to parity" - he may never do it - but when he has a better stock on which to spend the money. 

You can't order your fund manager to buy this-or-that now, sell this-or-that, or set sell stops, etc.

Buy and hold is DEAD.  No substitute in these markets for personal financial management!

Wed, 09/15/2010 - 11:26 | Link to Comment Boilermaker
Boilermaker's picture

My parents (and I assume 99% of boomers) aren't day traders.  They were sold the 'investor' dream.

They'll get out today, tomorrow, or at the slightest whiff of a serious drop.  I assume they aren't alone in their thinking even if it is flawed or unsophisticated.

Wed, 09/15/2010 - 11:24 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

If your parents held all the way down, then they can't be helped.  Have a low pain tolerance.  Down 10% and A,B, See Ya. 

Wed, 09/15/2010 - 10:53 | Link to Comment SheepDog-One
SheepDog-One's picture

Boilermaker, Im also getting tired of trying to apply logic to all this utter insanity! If it was me in there, I'd be doing everything I could to get the hell out! Not play musical chairs with these insane maniacs!

Wed, 09/15/2010 - 10:43 | Link to Comment Turd Ferguson
Turd Ferguson's picture

Don't fight the Fed.

The Fed will pump and pump in its desperate attempts to stave off real economic problems such as this one:

http://www.cnbc.com/id/39177278

Ben The Impaler in his final acts of skewering the middle class.

Wed, 09/15/2010 - 11:50 | Link to Comment Youri Carma
Youri Carma's picture
State Pensions Face `Death Spiral' as Underfunding Grows Vid http://www.youtube.com/watch?v=w4Zb-V2CaL0 U.S. Home Prices Face Three-Year Drop as Inventory Surge Looms 15 September 2010, by John Gittelsohn and Kathleen M. Howley (Bloomberg) http://www.bloomberg.com/news/2010-09-15/u-s-home-prices-face-three-year-drop-as-inventory-surge-looms.html
Wed, 09/15/2010 - 10:40 | Link to Comment Robslob
Robslob's picture

Welcome to your managed market...Volume Identicle last 2 days?

http://finance.yahoo.com/q/hp?s=^GSPC+Historical+Prices

Wed, 09/15/2010 - 10:42 | Link to Comment Tense INDIAN
Tense INDIAN's picture

forget about shorting the market till the elections

Wed, 09/15/2010 - 11:52 | Link to Comment fiddler_on_the_roof
fiddler_on_the_roof's picture

That is what I am thinking, actually even till end of this year, after which capital gains tax is bumped up 5%. I am also positioned that way in my play money.

Wed, 09/15/2010 - 10:42 | Link to Comment Biggvs
Biggvs's picture

What are you guys complaining about? JPY intervention, slower growth, and a big drop in mortgage refinancing (-10%) are all bullish! Green shoots! Bartender, another round of Lafite bombs (Jager is so last quarter). Let's get this party started. </sarcasm>

Wed, 09/15/2010 - 10:44 | Link to Comment Turd Ferguson
Wed, 09/15/2010 - 13:03 | Link to Comment doolittlegeorge
doolittlegeorge's picture

i just ordered a Lafite bomb and you're telling me I just made a fool of myself!

Wed, 09/15/2010 - 10:43 | Link to Comment bada boom
bada boom's picture

Can the POMO amounts be validated.  Or, is the Fed just saying they were paid back in full?

Wed, 09/15/2010 - 10:43 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

Boiler maker,

 

You are not stupid for starters. I think T-bone is right about the running and gunning FED....Fed buys back bonds and broker dealers start playing Paula Abdul! (straight-up now tell me....tell me!)

Normally about 5-6 years ago a 3-5Billion mark wouldnt make much difference but now that the Fed is 'bopping their own baloney'(i.e. playing with themselves) the $$ makes a diff...

 

btw...a hedge techinically is suppose to be a loss...thus a hedge! It hurts and it sucks but that is insurance for you. It costs...

 

If all goes according to plan, a hedge will be a loss.

 

"straight-up now tell me are you gonna love me forever??? oh oh oh...OR IS THIS JUST ANOTHER HIT AND RUN???"

 

Wed, 09/15/2010 - 10:51 | Link to Comment Boilermaker
Boilermaker's picture

Well, I get all of that.  But, at some point, everyone HAS to call bullshit, right?  I mean, the increasing and accelerating nature of the OBVIOUSNESS of the intervening has to start alarming equity holders, including the "big fish".

I mean...come on, the boomers are going to jerk out their money as they approach parity and / or acceptable losses so they don't take further risks. 

Man...I don't get it. 

To me, at least, pushing the market up is just about the worst thing you can do if you don't want people to bail-out of it.

I'll return to drooling and pay attention to my coloring book.

Wed, 09/15/2010 - 11:46 | Link to Comment centerline
centerline's picture

I don't think it is the boomers that are the big issue here.  I think it is all the dying pension funds.  Unfunded liabilities - private and public.  They must seek high returns no matter what at this point or they tank - cash flow.  Rather than determining return based on risk, they are forced into risk based on return.  When the shoe drops on this one, it is going to be a mess.  The only way to avoid (err -delay) a catastrophy here is to bouy the markets.

Wed, 09/15/2010 - 14:42 | Link to Comment PhattyBuoy
PhattyBuoy's picture

I resemble that remark ...

Wed, 09/15/2010 - 13:06 | Link to Comment doolittlegeorge
doolittlegeorge's picture

stop the logic and dream the love because "all I can do is dream you, all I can do is dream you."  although this may accelerate the trip to the funny farm, you may be arm and arm with a real "activist" in the process.

Wed, 09/15/2010 - 13:32 | Link to Comment traderjoe
traderjoe's picture

I don't think any of it makes sense, but the PTB are cornered. They can't really revive the economy (there's too much debt and it's the logical end game of a fractional reserve system anyway). So, they simply manage the decline, hoping that something magical happens (like a technology). At the very least they buy more time. How much time? Dunno. They've been at it for awhile. Could be years, months, days. Dunno. 

Most actors in the system actually think they benefit from the system - or hope that they will get to that point. That's the illusion offered by the PTB that keeps the sheeple quiet. Even large investors benefit from the system. 

There will be a tipping point someday that that will start the run (as everyone hopes to get out first), but dunno when or why. Until then it's a controlled collapse...

Wed, 09/15/2010 - 10:46 | Link to Comment Mark McGoldrick
Mark McGoldrick's picture

I sincerely doubt that the Pomo Indians have any influence on this market, although I have always been highly suspicious of their fire-dances. 

Wed, 09/15/2010 - 11:05 | Link to Comment Chuck Yeager
Chuck Yeager's picture

The Pomo people are one linguistic branch of Native American people of Northern California, including the original speakers and all their descendants. The historic Pomo language family territory was large, bordered by the Pacific Coast to the west, extending inland to Clear Lake, and mainly between Cleone in the north down to Duncans Point. One small group, the Northeastern Pomo of the Stonyford vicinity of Colusa County, was separated from the core Pomo area by lands inhabited by Yuki and Wintuan speakers. Numerous Pomo tribes have been federally recognized.

See that? FEDERALLY RECOGNIZED Bitchez!  The POMO office has been found.

 

Wed, 09/15/2010 - 10:48 | Link to Comment shc
shc's picture

nevermind...delete this.

Wed, 09/15/2010 - 10:48 | Link to Comment Chemba
Chemba's picture

Tyler,

when you established zerohedge were you hoping that the forums would generate insightful, analytically based discussion and debate about the financial, economic and investing topics posted?  Or did you expect the forums to just be a place with +90% ranting and parroting of uninformed gibberish and nonsense?

It's really too bad that it was probably meant to be the former but has devolved into the latter

Wed, 09/15/2010 - 10:55 | Link to Comment Turd Ferguson
Turd Ferguson's picture

Yes, Chemba, I much prefer your original and informed gibberish.

 

Wed, 09/15/2010 - 11:07 | Link to Comment MachoMan
MachoMan's picture

Apparently he hasn't ever been part of an internet forum...  with success comes a flood of ridiculous and retarded people...  it happens to EVERY internet forum.  Just a stage of the life cycle of internet forums.

Wed, 09/15/2010 - 11:43 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture
Gibberish, chembazzzzzzzzzz!
Wed, 09/15/2010 - 14:07 | Link to Comment Rusty Shorts
Rusty Shorts's picture

Gibberish Bitchezz

 

I'm not Chemba

Wed, 09/15/2010 - 10:55 | Link to Comment bigdumbnugly
bigdumbnugly's picture

sounds like there's a niche out there for you chemba.   after u start up your own website and forum i will check it out once i am sufficiently up to speed.  see ya then!

Wed, 09/15/2010 - 11:25 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

He was probably hoping that a former Goldman intern who is highly adept at memorizing textbooks and chasing empty coffee cups would come to this board and offer some faux insight regarding the lowest levels of the firm.

when you established zerohedge were you hoping that the forums would generate insightful, analytically based discussion and debate about the financial, economic and investing topics posted? 

I have no idea, but I don't think so.  After being ostracized and forced to walk the plank, he decided to return and torch the ship.  Hell hath no fury like a scorned pirate. 

Wed, 09/15/2010 - 10:57 | Link to Comment SheepDog-One
SheepDog-One's picture

Chemba, the Zerohedge king of gibberish.

Wed, 09/15/2010 - 11:03 | Link to Comment homersimpson
homersimpson's picture

Chemba and Abiggs should get a room. You clowns always try to point out you're smarter than us ZH readers. Yet you're still here thumbing your nose at us acting like you're more sophisticated. WE GET THE POINT - NOW SHUT YER TRAP.

 

Wed, 09/15/2010 - 11:06 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

Fair enough...although I have to side with TD....I am sure he intended the best of this blessed site; HOWEVER, a funny thing happened on the way to wall street...we happened to slip into a bear market that nobody wants to acknowledge and that makes it harder and harder to make money the "old fashioned way"...hence we have people doing literally anything possible to keep the status quo which is a rotting maggot-infested beast.(much like my trash cans! have not seen that many maggots since Poltergiest in teh 80s!- jeez, im dating myelf now).

 

My point is that TD and this site adapted to the bullshit going on....fine, fine line between manipulation and intervention....

 

Ignorance is blissful Chemba....but this site not only recognizes the pink elephant in the room but it pours it a cup of coffee and shares a steamroller or two with him!

You never see the other sites being real..."the show must go on" is their mantra and instead of leaving well enough alone they make it worse.

forewarned is fairwarned...

Wed, 09/15/2010 - 11:10 | Link to Comment SheepDog-One
SheepDog-One's picture

Chemba is just a bigmouth yapping fraud.

Wed, 09/15/2010 - 12:06 | Link to Comment espirit
espirit's picture

Probably Erin B-cup in drag getting even for being blessed here at ZH.

Wed, 09/15/2010 - 11:58 | Link to Comment Youri Carma
Youri Carma's picture

I think that the mixture of Intellectuals, Lunatics, Trolls and what have you can be a nice one. Otherwise it gets so lonely at the top ;)

Wed, 09/15/2010 - 12:12 | Link to Comment AccreditedEYE
AccreditedEYE's picture

Chemba, get up from the iPad they gave you and go pour Lloyd his coffee. Keep dreaming and one day maybe The Squid might make you a real administrative assistant when you grow up. Does it get frustrating at bonus time when they hand you a finsky?

Wed, 09/15/2010 - 10:49 | Link to Comment MBB
MBB's picture

Eventually this strategy will fail and there will be no bears or shorts left to catch the falling market.

Wed, 09/15/2010 - 11:05 | Link to Comment John McCloy
John McCloy's picture

There aren't anymore shorts left or bears in the market aside from my stupid self. The Fed and PDs already extracted all they could from that golden goose over the past year. Most bears probably are either long capitulated and out of this market fed up with thr manipulations or long because they have been lulled into a sense of security which is false which was Bena goal making our situation even more dangerous and susceptible to a collapse. You are correct though and the FED and PDs have more usess stock paper than they could choke on.
So sure the markets can stay up but the only catch is none if them can ever sell their holdings. We are in new bubble without the Dow back to 14k. Diminishing returns and souring economics = time to poop pants on the horizon.

Wed, 09/15/2010 - 10:49 | Link to Comment 101 years and c...
101 years and counting's picture

Simple thought here.  Funds are liquidating due to redemptions.  A fund manager would have to be a retard to not sell their positions into these Fed/PD ramps. 

The best part:  the PD's are the only ones left holding this big pile of stanky shit.

 

 

Wed, 09/15/2010 - 10:59 | Link to Comment SheepDog-One
SheepDog-One's picture

YES! The FED and PD's are the king bagholders of all time! Thats the real point here.

Wed, 09/15/2010 - 10:56 | Link to Comment mtremus
mtremus's picture

Take a look at the Vix this AM.  Up almost 4% while the market attempts to go green.

Suckers goin DOWN

Wed, 09/15/2010 - 11:01 | Link to Comment SheepDog-One
SheepDog-One's picture

Failure of this rice paper market is innevitable, not bullet proof as many think.

Wed, 09/15/2010 - 11:03 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

I hope your right, my vxx dropping like a stone ...

Wed, 09/15/2010 - 11:17 | Link to Comment mtremus
mtremus's picture

Correction. VIX now up over 4%

Wed, 09/15/2010 - 11:52 | Link to Comment Tense INDIAN
Tense INDIAN's picture

even the iNDIA VIX is up 4.46%

http://vix.co.in/

....and the INDIAN markets are going parabolic:

http://www.stockezy.com/markets/nse/

Wed, 09/15/2010 - 11:03 | Link to Comment tom
tom's picture

If the Fed really does speed up its Treasuries purchases, this so-called "QE lite" could matter more than I thought it would. The first four weeks of the program was about $13 billion, chump change in the grand scheme of things.

It's not QE as long as it doesn't increase the monetary base, but it must have some indirect impact on stocks. It means that as the household sector deleverages vis-a-vis the Fed's mortgage holdings, the Fed compensates by injecting liquidity into the financial sector. I think that liquidity goes mainly to the conservative side of the financial sector, and most directly boosts MBSs and corporate bonds.

Wed, 09/15/2010 - 14:49 | Link to Comment RockyRacoon
RockyRacoon's picture

Hey, Tom.  Here is a follow-up on one of your posts: #578501

A reply from Dr. Housing Bubble:

Thanks for sending that over.  I referenced an article from Real Estate Channel.  The Equifax figures are what they cited.  I think the poster misread the article.  When we talk about the $112 billion reduction we are referring to actual lines, not amount.  I think this comment refers to the nominal value of HELOCs outstanding.

Also, that $1.1 billion figure is insane and even makes things worse!  Home equity loans are just as bad.  

Best,

Dr. HB

Wed, 09/15/2010 - 11:22 | Link to Comment Hard1
Hard1's picture

 

Well: ASIDE FROM THE FED THROWING USD THROUGH POMO, THE JPY INTERVENTION ALSO GENERATES A LOT OF DOLLARS AND THESE NEED TO BE PARKED IN SOME USD ASSETS WHICH MAKES POMO SQUARED. 

 

From Morgan Stanley:

 

 

Purchases Tended to be in Coups in the 1.5-2y Duration Bucket, Not Bills

Looking back at Japan’s previous intervention history, which peaked in the late 2003 / early 2004 period, we can overlay the amount of coupon UST and T-Bills bought by Japan over their monthly intervention amounts according to monthly TIC data. In the table below, you can see they were almost exclusively buying coupon USTs, and so we didn’t even put T-Bills on the graph below b/c these were so insignificant. One caveat however is that coupon USTs only refers to Treasuries with an original maturity exceeding 1 year, but in fact could be very short-term paper with only a few months remaining to maturity (TIC data unfortunately does not provide a further maturity breakdown). However, anecdotal evidence suggests that they targeted the 1.5 to 2y duration sector of the curve (prior to 2000, they were mostly in T-Bills), and so we’re likely to see them start off concentrating around this point this time as well.

 

 

…But Purchases Extended out the Curve When Operations Grew in Size, Flattening 2s5s

However, once Japan’s purchases started getting very large in 2H 2003 / early 2004, they did start extending out the curve as the front end could no longer accommodate their purchases. This is not only apparent from anecdotal evidence but bears out in the price action of the curve at the time. Attached is a price action table I’ve put together that details how the rates, curves, and butterflies reacted during the different months during the 2000-2004 intervention period. The table below summarizes our findings – showing the 1-month moves in rates / curves / flies on average over this period, only during months that saw an intervention of any size, and during months that saw an intervention of at least some minimum size:

 

 

What we can see below is that the 2s3s and 2s5s curve tended to flatten, and increasingly so when the interventions grew larger. What’s interesting is that the size of the flattening was largest in 2s5s, and so helps confirm the evidence that they did extend out to the 5y point and did so increasingly so when the intervention sizes grew larger. The belly also tended to outperform, with moves again proportional to the size of the interventions.

 

Thus, holding all else equal, this should be a bull flattener for the intermediate part of the curve (but shouldn’t really have too much impact on the back end of the curve, as the interventions don’t tend to be concentrated there).

 

Comments / questions / concerns appreciated.

 

 

Wed, 09/15/2010 - 11:56 | Link to Comment tom
tom's picture

You're misunderstanding something, Japan is taking dollars or dollar assets eg Treasuries off the market and pumping out Yen.

Wed, 09/15/2010 - 11:07 | Link to Comment Leo Kolivakis
Leo Kolivakis's picture

Hope you're buying those dips while I'm away. Speaking of POMO, Greek TV unveiled the latest steamy Bennetts commercial. Nice to see a UK motorbike insurance company which knows how to target its audience. Here is the Bennetts photo shoot 2010:

Wed, 09/15/2010 - 11:07 | Link to Comment SheepDog-One
SheepDog-One's picture

Fuck off an die Leo.

Wed, 09/15/2010 - 11:18 | Link to Comment Jeff Lebowski
Jeff Lebowski's picture

That made me laugh...

I must be at the age where I care less about dopey 22 year old eye candy in bikinis and more about the Ducati in the video...  (video of me on my Hayabusa attached)

http://www.youtube.com/user/rkempf1?feature=mhum#p/u/5/j7aAddte9Lk

Wed, 09/15/2010 - 11:49 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Did you make that last corner?

Wed, 09/15/2010 - 12:00 | Link to Comment bigdumbnugly
bigdumbnugly's picture

you want hot, leo?  put my goil olive oyl in that shoot and you got something.

Wed, 09/15/2010 - 12:28 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I agree. Hot HOT HOT!!

 

Wed, 09/15/2010 - 13:20 | Link to Comment bigdumbnugly
bigdumbnugly's picture

be still my beating heart!

i am swooning

Wed, 09/15/2010 - 13:27 | Link to Comment bigdumbnugly
bigdumbnugly's picture

btw cd you one-eyed runt.  what are you doing with a picture of my goil?

Wed, 09/15/2010 - 13:51 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

LOL

Judging by the time stamps, it only took you 7 minutes to figure out I was ogling your goil. Who says your nothing but a muscle bound stupid buffoon? :>)

BTW your girl friend's picture is all over the Interwebs. You'se gotta problem mate and it ain't me. :>)

Wed, 09/15/2010 - 14:29 | Link to Comment bigdumbnugly
bigdumbnugly's picture

well, that's OK then i guess.

as long as you don't have any of those negged ones.

Wed, 09/15/2010 - 12:48 | Link to Comment Jeff Lebowski
Jeff Lebowski's picture

I did...  Not that I haven't seen the road or racetrack from my back and/or upside down before, because I have...  :)

Wed, 09/15/2010 - 12:29 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Yep. Eye candy usually ends up costing ya way too much if you go in for a taste.

Wed, 09/15/2010 - 11:14 | Link to Comment Clycntct
Clycntct's picture

Leo you need to send this to Bernokio.

Cause this proves that+P QE does not devalue the P$

Wed, 09/15/2010 - 11:22 | Link to Comment homersimpson
homersimpson's picture

No need to generate another ponzi scheme. We get the point on the "dips".. except you're still underwater for the most part based on your advice.

Wed, 09/15/2010 - 11:07 | Link to Comment SheepDog-One
SheepDog-One's picture

Another thing I dont get about these 'POMO's', who in their right mind would buy new issuance bonds out to 2016? I wouldnt touch that crap with BORROWED ZIRP money myself! Buy bonds that pay off in dollars, when its certain the dollar wont be around much longer but we'll have IMF Bancor's, already priced .65 cents to the dollar at the USPS? I admit, Im not an Ivy League trained Wall St criminal so 'I just dont get it' I'm sure!

Wed, 09/15/2010 - 11:40 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Another thing I dont get about these 'POMO's', who in their right mind would buy new issuance bonds out to 2016?

The Wall Street criminals have been guaranteed they'll be the last men standing. Worse, if they don't participate, they'll be cut off. When you're a FRN junkie with a direct connection to the biggest crack dealer in history, to be threatened with cutoff is worse than death.

Everyone believes they'll be smart enough and fast enough to survive when all around them the other smartest guys on wall street will fail. Supreme confidence in your ability is the ultimate requirement for the fast action of Wall Street but it also assures us of a spectacular crash at the end. But even then, as long as everyone else is buried in the same smoking rubble pile, there's always a chance you'll be the first Phoenix rising from the ashes.

Wed, 09/15/2010 - 11:43 | Link to Comment mtremus
mtremus's picture

LOL

Wed, 09/15/2010 - 12:25 | Link to Comment espirit
espirit's picture

The banksters borrow at zero percent interest, then buy with a guaranteed rate of return.  Free money!

Wed, 09/15/2010 - 11:16 | Link to Comment Johnny Yuma
Johnny Yuma's picture

Just a gap fill... 

Wed, 09/15/2010 - 11:23 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

Drive it like you stole it

Wed, 09/15/2010 - 13:11 | Link to Comment doolittlegeorge
doolittlegeorge's picture

but first "Drink Scotch Whiskey all night long..."

Wed, 09/15/2010 - 11:47 | Link to Comment dcb
dcb's picture

I think it is becaquse they know the big boys have to window dress for the end of quarter and they want them to be able to do so without dropping the market. that being said it would be much better to drop back ot trend to confirm the baseline trend line a third time and then have more buying. I can not understande why they try to do this stuff when the market should fail. short covering rallies do no extend rallies. that is all they are doing right now.

 

 

Wed, 09/15/2010 - 13:14 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Really, POMO is a much bigger program than has been advertised, and is really all-out QE 1-1/2. Unlike QE 1, wherein a specific targeted number was identified and adhered to, this one has not been identified with a specific target (E.g., $2 Trillion) but rather as using dollars from a specific source (the repayment of MBSs in the Fed's balance sheet).  However, as many have noted, this is a bit trickier to track. What this does is create tremors that are the precursor of an impending hyperinflation earthquake, with gold - as the seismic detector - steadily tick, tick, ticking up.

Don't forget the effects of levering up those POMO dollars with all but no interest, non-recourse loans from the Fed. The POMO effect is at least 20 times the stated amount of the repurchase.

My personal game theory on QE is that in order to avoid currency chaos the amount of QE must be specified and that quantity strictly adhered to. I think you get one, maybe two shots at that type of QE. But "undisciplined QE," in uncertain amounts, and for an uncertain duration, is unchartered waters.  We are now in those waters. Moreover, in addtion to this steady drip of reinvestment of MBS payments under QE 1-1/2, you will next see QE2 layered on top as the next "specific, disciplined" monetization.  Thus, you will have 2 programs running at once, one ostensibly limited, the other, potentially unlimited. 

Wed, 09/15/2010 - 13:17 | Link to Comment doolittlegeorge
doolittlegeorge's picture

i had a buddy who had never been to the Opera so me and my gang of grils took him to Le Figaro.  In his exuberance at recognizing Mozart he shouted to a totally silent crowd "I KNOW THIS SONG!"   Three old ladies turned around and "shushed him" and I quietly informed Tom this fact by whispering "you have been shushed."  I relate this because if what you say above Ned Zeppelin is true then indeed "the most valuable lesson has been learned by this Fed."

Wed, 09/15/2010 - 13:27 | Link to Comment giddy
giddy's picture

It's guns AND butter bitchez!

Wed, 09/15/2010 - 13:37 | Link to Comment frosty zoom
frosty zoom's picture

¡saca el pomo!

vamos a ponernos bien pedos...

Wed, 09/15/2010 - 13:49 | Link to Comment sbenard
sbenard's picture

Honest question:

Could someone tell us what the long-term consequences of this will be? Another bubble? Loss of confidence in the Fed, the government, or the Dollar?

I have wondered for months. My gut tells me it won't be good, but I don't see the future well enough to anticipate the ripple effects. Is there someone that does?

Thu, 09/16/2010 - 06:17 | Link to Comment Eric Cartman
Eric Cartman's picture

Who's the dickhead junking every single commet? That fuck should be banned from ZH! We don't want douchebags here.

Thu, 10/07/2010 - 06:13 | Link to Comment Herry12
Herry12's picture

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