Wonder Why Market Just Surged? One Word - POMO

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Wed, 09/15/2010 - 10:32 | 583092 firstdivision
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The market loses its POMO highs pretty quickly.  Can we say diminishing returns to the max?

Wed, 09/15/2010 - 10:36 | 583101 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 | 583136 SheepDog-One
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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 | 583176 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 | 583207 RoRoTrader
RoRoTrader's picture

Yes, Dr. No.

Wed, 09/15/2010 - 11:38 | 583289 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 | 583340 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 | 584283 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 | 584260 nmewn
nmewn's picture

Veeedy intewestink.

Wed, 09/15/2010 - 12:50 | 583445 doolittlegeorge
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"hey, hey I got somethin' to say...it's better to burn out than to fade away."

Wed, 09/15/2010 - 10:33 | 583094 mule65
mule65's picture

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

 

:-(

Wed, 09/15/2010 - 10:36 | 583103 bigdumbnugly
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but tyler, bashing my head in with a sledgehammer just seems so much more real...

Wed, 09/15/2010 - 12:53 | 583448 doolittlegeorge
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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 | 584265 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 | 584284 StychoKiller
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Welcome to the Fun House with its warped mirrors...

Wed, 09/15/2010 - 10:59 | 583098 hedgeless_horseman
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"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 | 583267 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 | 583452 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 | 583468 hedgeless_horseman
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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 | 583099 Boilermaker
Boilermaker's picture

This is getting fucking RIDICULOUS.

Wed, 09/15/2010 - 11:03 | 583185 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 | 583282 VFR
VFR's picture

more like fill your shorts Turd :-)

Wed, 09/15/2010 - 10:38 | 583105 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 | 583118 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 | 583134 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 | 583388 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 | 583125 Skeebo
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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 | 583199 Kreditanstalt
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Must be really helpful to my bullion holdings & silver stocks...take a look at silver price...

Wed, 09/15/2010 - 10:38 | 583106 sethco
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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 | 583132 Biggvs
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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 | 583150 SheepDog-One
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'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 | 583170 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 | 583619 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 | 583179 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 | 583184 NOTW777
NOTW777's picture

check out TRV this morning

Wed, 09/15/2010 - 11:15 | 583208 Kreditanstalt
Kreditanstalt's picture

Oh!

Wed, 09/15/2010 - 11:14 | 583210 Kreditanstalt
Kreditanstalt's picture

Oh-oh...!

Wed, 09/15/2010 - 11:11 | 583213 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 | 583234 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 | 583157 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 | 583313 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 | 583464 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 | 583462 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 | 583296 bmusic
bmusic's picture

How does this help Main Street again?

Wed, 09/15/2010 - 12:57 | 583455 doolittlegeorge
doolittlegeorge's picture

MONEEEEYYYYY!!!!!!

Wed, 09/15/2010 - 10:38 | 583107 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 | 583206 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 | 583111 Boilermaker
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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 | 583122 jefftheshark
jefftheshark's picture

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

Wed, 09/15/2010 - 12:52 | 583446 Ned Zeppelin
Ned Zeppelin's picture

and greed trumps intelligence

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