What Will The Fed Buy Next?

co2010's picture

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LDW's picture

From the non-financial analyst's perspective, it just seems the like the Fed is scrambling - like there's no rhyme or reason to their methods. - Heath Jordan

Downtoolong's picture

Other: Real Physical Residential Housing. Just kidding, or perhaps dreaming. Let’s face it, the Fed and Wall Street have no interest in supporting the true physical housing market. You can’t short it, you can’t trade it with computer algos, and there is no housing futures market which they control that all physical and exotic derivative prices can be indexed to. Without these three characteristics, the physical housing market has no value to them at all, which helps explain why the banks are dumping their foreclosed homes on the market at whatever price they can get. 

The Real Fake Economy's picture

well even the MSM has caught on, so this can't be good for investors.  if the MSM has caught on, so much for Bernanke's supposed plan of wanting to make everyone feel "wealthy"



Scipionz's picture

A printer... the old one is slow a little for the new job!

Asimov's picture

Other:  Foreign currencies when the dollar goes apeshit because of the stupidity backfiring like we're already seeing in the treasuries market.  Like we saw in the treasuries LAST time there was QE.  The goal is to push rates down?  Bullshit.  Rates went up last time, they'll go up this time too.

CitizenPete's picture

Narayana KocherlakotaPresident Federal Reserve Bank of Minneapolis


The Fed cannot literally eliminate the exposure of the economy to the risk of fluctuations in the real interest rate. It can only shift that risk among people in the economy. So, where did that risk go when the Fed bought the long-term bond? The answer is to taxpayers.

To see this more clearly, suppose hypothetically that the Treasury wants to borrow $1 billion today and is choosing between two ways of doing so. One way is to issue a 20-year, zero-coupon, inflation-indexed bond. The bond requires the Treasury to repay $1.5 billion in real terms in 20 years (roughly a 2 percent real yield). Under this plan, taxpayers face no tax risk, but the buyers of the bond can lose a lot if real interest rates rise greatly. The other way is to issue $1 billion of one-year indexed bonds and then keep rolling over that debt for 20 years. Now, taxpayers have to repay a lot more than $1.5 billion in 20 years if short-term real interest rates end up being high.

Basically, if the government uses short-term debt, it exposes taxpayers to interest rate risk. If it uses long-term government debt, it exposes the bondholders to interest rate risk. QE is a special case of this general principle: When the Fed buys long-term government debt from the private market, it shifts interest rate risk from bondholders to taxpayers.

What is the ultimate impact on the overall economy of this shift in risk? In the baseline models used by central banks, all bondholders are taxpayers. In these models, QE is essentially shifting risk from one pocket to another. As a result, the increase in tax risk (what I’m calling the fourth effect of QE) completely undoes the decrease in interest rate risk (the third effect of QE). QE ends up having no effects, except for those associated with any new forward guidance that it signals.1




On commercial real estate bailout.  The now famous 5 minute interview clip of Elizabeth Warrens' interview with Charlie Rose. :






hidingfromhelis's picture

Holy crap!  How did that video make it past the censors?  Phenomenal video that is really telling about just one of the many issues we face going forward.  Gotta love her straightforward style of addressing issues.  So, when is she going to get Brooksley Born'd? 

Regardless, I still think it's muni's that will be the next "asset" class purchased by the fed, but I don't think it will stop there. 

Lucius Cornelius Sulla's picture

How can anybody know what the FED has on its balance sheet?  There is no transparency.  IMHO, I doubt that they have bought any paper that is not fully backed by the Treasury.  That would imply that the only MBS they own is GSE paper.  Before buying Muni or any other paper I'm pretty sure they would make a Treasury guarantee a requirement, which must be approved by Congress in some form or other.

zero intelligence's picture

Don't forget that AMBAC just went kerflooey. I suppose that should have been priced in for now, but maybe there were hopes of some sort of Federal bailout etc. on their insurance obligations.

Basil's picture

I feel certain that they're going to buy up my personal debts, with a billion dollar extra so that I can juice up the French economy

obamaphobe's picture

Other---- Passports with new identities and plane tickets to Russia.

Burgerbuilder's picture

Other: Liquor stores and fast-food joints.

Jim in MN's picture

Other: Xanax, Prozac, Oxycontin, Deconal, Jack Daniels and a new pit bull puppy to soothe the nerves.

Rodent Freikorps's picture

I went "other" for gold and golden haired, indentured female servants from eastern Europe.

Better value than the rest.

Beanie Baby Bubble's picture

Eastern European. Definitely.


I feel like I've seen your logo somewhere before...



Rodent Freikorps's picture


Try these.


Miss Nov. would make me consider giving up gold or real estate.

Beanie Baby Bubble's picture

Put me right between July and August.

WeR138's picture

I voted "crack".

blindfaith's picture

well, while we are on the subject of crack...how about the FED buy some KY lube so it makes fucking America in the ass a little quicker.

agrotera's picture

AS IF THEY AREN'T frontrunning "everyone else" already through all their agents !

E pluribus unum's picture

If they buy enough Congressmen, they can buy whatever they want for whatever price they want. I vote for the Fed monetizing about 535 members on Congress. Now STFU and pump your $4 gas and remember Hope & Change bitchez!

putbuyer's picture

You are on the money. It never changes. People become sheeple. I always feel that we have got a small chance of hope - now. We have more guns and bullets now more than ever. We are ready. Enough!

Here you go for the sheeple mind.


Jones79's picture

other:  a fleet of dodge challengers for fomc board members, geithner, and friends

putbuyer's picture

On the other side of the coin, it would be appreciated if ZH would do an analysis on the dumb money in and the smart money out of corporate junk bonds. It is a bursting bubble?

desgust's picture

zerohedge  - cos too dangerous!

bob_dabolina's picture

As long as the FED is providing the liquidity to the market haven't they already purchased all those assets vicariosuly through Primary Dealers?

Isn't that what the very essence of QE is?

dark pools of soros's picture

i think ben will start buying lots of old Pokemon cards.. gotta collect them all!

Cistercian's picture

 Why buy them, when he can print them himself!

Highrev's picture

Glad to see Munis winning. It confirms that ZH readers aren't just a bunch of dopes. ;-)

Mentaliusanything's picture

If mapped on a bell curve ZH readers IQ,s would be P90+

Warning - The Surgeon General warns that reading ZH Daily...............

Has been known to expand your Intellect, increase your anger, Make you follically challenged, increase alcohol consumption, induce violent outbursts of hysterical laughter, grind your teeth, ignore sheeple, stop you drinking Koolaid, stop you watching MSM and "reality shows", induce lateral thinking, make you give up social networking, giggle at I-Fools, give you a social enema and tempt you to take illicit drugs to dull the pain of self realization. This product is marked S8, restricted to prescription only. Use only as directed.


Yancey Ward's picture

A fleet of Chevy Volts. I would buy the Dallas Cowboys or the New York Yankees,but that is just me.

Frank Owen's picture

I voted other. I think the Fed through one of their squid arms will buy "xtranormal" and any similar software developers and shut them down because of horrible videos such as this one explaining the Federal Reserve's quantitative easing policy:


We're really cruising along through an Orwellian five fingers scenario now...

Please watch the vid and pass it on. This must have been posted on ZH somewhere but it seems relevant to this thread.


bbqporkwings's picture

other: maalox, prep-H, and a bennie cap with a propeller...

the grateful unemployed's picture

bubble in muni bonds, pass it on

Black Forest's picture

Voted "Other": The whole Solar system.

Iceobar's picture

They went high tech ages ago....3D

"Debbie Does Dallas"

Djirk's picture

What would PIMCO do?

the_magician's picture

Other: Nothing. Enough is enough.

mt paul's picture

the fed should buy ...

fresh afgani opium 

Jendrzejczyk's picture

Other: Hope they "buy the farm".

jimcg's picture

Don't they already own all of those?

palmereldritch's picture

Other: Contrail Detectors

ThisIsBob's picture

I suspect they will be buying whatever The Goldman would like to sell.

Acidtest Dummy's picture

They will buy FRNs: 10 old FRNs for one new FRN.

lizzy36's picture

Let me know when the get to Bre-X.