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Stocks Slide Following Permadove Chuck Evans' Attempt At Math
Moments ago, GETCO's rampathon algos did not like what they heard coming out of the mouth of the Fed's biggest permadove, Charles Evans.
That thing was math, and it was as follows:
- IF FED CONTINUES TO BUY ASSETS AT CURRENT PACE THROUGH YEAR END,BALANCE SHEET WOULD BE 'VERY LARGE' $4 TRILLION - FED'S EVANS
Supposedly this was news to someone although it wasn't news to our readers who knew since September that not only will the Fed's balance sheet hit "a very large" $4 trillion by 2014, it would hit a "very larger" $5 trillion by 2015, when the Fed may realistically start abandoning QE.
Obviously it was the concern creeping in Evans voice at the size of this number, that forced various vacuum tubes to give up the day's gains.
To think: all the Fed had to do was engage in simple first grade math to show just how ludicrous its own policy is getting.
But wait, there's more.
Because for all the jawboning by the Fed, the reality is that even if it were to halt QE, the resulting plunge in stocks would force Bernanke, or Yellen, or satan forbid Geithner, to reactivate it post haste as it is the only weapon in the Fed's arsenal.
So here is some even more critical math. Since the Fed will most likely continue to monetize debt at some ungodly pace for the next 18 months or more, with or without tapering and brief intervals, what it will run up on is what we wrote about nearly a year ago: the exhaustion of monetizable bonds in the private market.
Indeed, as we explained back in September, at the current pace, the Fed would end up owning a ridiculous 65% of all TSYs in the 6Y-30Y bucket, meaning liquidity would be severely limited as a result of the Fed's endless bond monetizations in this most critical and formerly liquid of bond markets. Now when one assumes that the Fed may indeed reduce the amount of deficit funding it needs and thus forcing the Fed to buy even more bonds from the secondary market, this number rises to a mindblowing 70%!
For those who forgot, here is the math that matters:
In terms of outstandings, we expect the Fed to end up owning more than 33% of the total market by the end of 2014, which is also significant since many mortgage investors tend to reinvest paydowns. These investors would need to be persuaded to sell MBS to the Fed, which would require tighter spreads.
Treasuries: Fed will own a 45-50% in the long end in a year
...
Table 3 and Table 4 simulate the Treasury universe during the course of 2013 and 2014. Fed ownership across the 6y-30y portion Treasury curve is likely to reach about 50% by end of 2013 and an average of 65% by end of 2014. Given the current issuance schedule, we believe it is very likely that the Fed changes its purchase buckets through the next round of Treasury purchases. In particular, the Fed will begin to run out of issues in the 8y-10y bucket and will be forced to buy newly issued 10y notes should they choose to maintain the same distribution.
That's right: there is a possibility the Fed would end up owning over two-thirds of all Treasurys with a maturity over 6 years by the end of 2014, especially now that the US suddenly needs to issue less primary debt than expected previously.
Extrapolating further: 80% by 2015; 90%+ by 2016 and #Ref! by 2017 and onward.
And that, ladies and gents, is the real math that the Fed does not want to talk about.
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That's nowhere near large enough. The fed is currently targeting aleph 0 . Then will come aleph 1 ,2... on to infinity and beyond!!!!
http://en.wikipedia.org/wiki/Aleph_number
4T is nothing. Off you go to 10T and then on to 16T, unless the debt goes to 20T first.
T'is a race between Debt and Federal Reserve Balance sheet. Fed is playing catch up.
There is always Quadrillion after Trillion.
Large, larger, largest. What's a few trillion amongst friends?
To QEnfinity and Beyond!!!!
A trillion here, a trillion there, pretty soon you're talking real money.
FED just added the word largerest to the dictionary. The first context in which it was used is "... growing still more the largerest reserve balance..."
MACD on the $INDU looks to me like it's reached it's peak and about to roll over. Not much room to rise...
http://stockcharts.com/h-sc/ui
Fwiw - Matrix metrics in Bizarro World.
the market is never going to go down ever again.
In fact, I'm changing my username to long-longy at the nearest opportunity.
so we were free, then came the fed 1n 1915,
then they confiscated all our gold and silver replacing it with promissory notes,
then they made the demand notes unredeemable for anything,
then they devalued the worthless notes to millions of times of dilution,
then they sold all our gold to china. leaving us all debt slaves.
one day the words the fed and treason will be synonymous.
1913, but you are right.
1913 was the first year of the personal Income Tax too.
Coincidence? Nah. The FED is treasonous now and has been since it's establishment.
What else but Treasonous do you call a non-governmental agency of bankers that punishes savers and the responsible while devaluing the currency and mis-allocating capital and resources to discourage investment in people and benefit banks?
http://en.wikipedia.org/wiki/Federal_Reserve_System
FED = crooked cabal of concupiscent bankers.
As a coin collector let me correct you a tad. Gold coins virtually disappeared after the Civil War, to be used for foreign exchange since it was seen as inviolable. Thus continued until WWII. The government has frequently collected coins for the purpose of resizing coins to reflect a change in value. In any case, no one considered it strange. The public overwhemlingly preferred paper money due to ease of use. Trust in the dollar was universal since any bankd would exchange paper for gold money at any time.
If I ran the Fed, and I was gonna be that heavily invested in one single thing, I would have chosen gold instead of IOU's
But gold is not money....don'tcha know?
But, it gets worse. You can unload a $2 trillion balance sheet over a reasonable time frame. But how do you unwind a $5 trillion balance sheet? Even at just $250 billion a year it would take 20 years.
We're looking at a 2035 Fed exit. And that's if things go *well*.
Maturity.
I don't see this becoming a problem until the balance sheet is 100% of GDP.
None of this is a problem. It becomes problametic only if ;
- US loses reserve currency status.
- Loses fiath and belief by world wide investors in the "full faith and credit of the US government." US not able to pay interest on the debt.
- A black swan event causes disruptions in world commerce, that the major powers cannot fix.
Rollover.
It's all just talk of winding down the Fed balance sheet. We're being psychologically eased into the new normal balance sheet......whatever that amount is when they say "now".
Yep, there's that fucking MATH showing up again to fuck everything up..........
Who the hell invited him, anyway?
Almost forgot.
For all of the "Don't fight the FED'ster's" out there, with a friend like MATH, who needs enemy's??
Math speaks when not spoken to, out of line, and very loudly, LOL!!
"it would hit a "very larger" $5 trillion by 2015, when the Fed may realistically start abandoning QE."
Wait, what? What is supposed to change by 2015 that makes it "realistically" the right time to stop QE? What is the magic that happens in 2015?
Presumably that's about when the BLS will be reporting 5.0-5.5% unemployment(no doubt with no real improvement in total labor force numbers), and potentially 3.5+% GDP 'growth'(with maybe a tiny bit of underlying number fudging.. but who'll notice.. or care).
Ha, that's why they MUST start buying stocks (openly), like the Bank of Israel.
Because they do not want to distort the BOND MARKET !
Math? Who on Wall Street, or at the Eccles building, does math anymore? I thought math had been outlawed?
If doing math is the new trend, I would recommend folks start getting ready for...unpleasantness.
Math is irelevant.....resistance is futile.....sci fi meets reality
This is the 'new math'. It works different. It's better.
Yes, but oil did NOT slide
Oil, and I mean right and proper crude with 5.6 million BTUs in a barrel (not anemic condensate and NGLs like comes out of shale), traditionally increases its output from the ground when price goes up, because harder to access bubbles become profitable.
Well, that was the old normal. In the new normal, when price goes up, you smash consumption because of the lack of slack now. Raise price, lose consumption, people can't buy it. If consumption is down, you don't drill those smaller bubbles, because by the time you get budget for them the price falls from the consumption fall.
Hence, and this is very serious stuff, oil output from the ground is ceasing to show price response. Raised price doesn't raise output.
Everyone buying this 'dip' before Elevation Tuesday? /sarc
Quick, get Benny and the Inkjets back on stage!!
Ba Ba Ba Benny and the Jetsssssssssss!
Certainly there will be buyers for all those assets, it's not like they were marked to "fantasy"... ...oh wait, nevermind.
In the absence of voluntary buyers we will see compulsory buyers. Many, many compulsory buyers.
What is Paul Krugman take on this?
Simple, that we have not learned the lessons of the last 30 years of economics. That we should also be increasing our budget deficit simultaneously with the FED's QE. When challenged about it already being way over 1 trillion a year, his answer is that it doesn't matter...
Not nearly enough money has been printed. Double it. Triple it. It'll solve all the problems.
You been reading way the fuck too much Krugman. LOL
A buncha my CA liberal buds really and truly believe that crap.
If it don't work exceptionally well then tax, regulate, preempt, expropriate and redistribute the stuff.
And if it works great, has enough rich person fatty tissue in it to tax, regulate, preempt, expropriate and redistribute.
Land of Milk and Honey
Bruce Krasting ran a piece awhile back suggesting Ben might raise rates before he walks out the door - in part to give the new Chairman some room to move. Maybe the stars have aligned for such shock and awe.
what stars.... the fucking asteroid that will be headed straight for our financial system?
so I guess Yellen who is basically Helicopter Ben but operating from a Super Stallion military chopper is gonna stop....yeah... sure dude!
Now, now, it's just speculation. I have no illusions that the Fed is ever going to stop printing - they have to stay at 0% until they simply can't anymore. I am suggesting - the Fed needs a politically acceptable excuse to keep upping QE - It's hard to convince people you need to print endlessly if everyday is a new all time high.
They MIGHT just crush the markets for a month or two just to rationalize "saving" them with even larger QE. Everyday could be a 5 billion Pomo - why not?
You pessimists!
Yellen schmellen watermellin...
She ain't gonna get the job. Timmah is your new money Lord
Timmah of the Fix It Again Fame
Timmah has the experience
Timmah he who paid not his due taxes
Timmah who has trouble tying his pajama bottoms
Timmah of the concerned, insecure looks
Timmah of the Center of the World Financial Stage
Just think how perfect he and John Kohn Kerry will look together on the Earth's Central Platform, Saving Mankind from Itself, Clueless and Lost ...
Captians of the Shit
From what I've read - Yellen is, get ready - "too dovish". Not that whoever gets it won't print like there is no tomorrow; all about optics - the policy will stay the same.
Buying and leveraged at least 10 to 1 if not 70 to 1 as the European banks are!
FFS we are now back positive! this is just total bollox
there is no real price discovery, that is fu all the markets...
But we're not WAY positive, so in this market that's kinda the same thing as being down
If you wear a tin foil hat, this was the plan all along. The Fed/Banksters end up *owning* everything and our economy falls back to hoof-it-everywhere Medieval times.
* Problem for the "owners" is that things will become so bad, order will have to be restored by some kind of military authority and title will probably not survive the forthcoming mayhem.
Congressman* James Traficant R OH http://www.afn.org/~govern/bankruptcy.html
*Tinfoil hat optional
@monad
I have bad hair, but I wouldn't trade it for that coif. "Beam me up, Scotty!"
Not to worry. Tomorrow is Tuesday. The 19th in a row rampalooza is on mf'ers!!!
BY THE FRIGGEN DIP
To go with the friggen nachos? I prefer popcorn.
What? The Fed has a balance sheet? Shocking.
Na, it's all make believe. Mark to fantasy.
How about that missing 9 trillion in off balance sheet.
No wonder there was opposition to auditing the Fed. It would make Eron look honest.
every dip has been bought very fast. sell everything you own, go full margin and chase equities higher because we are in a new secular bull ( <---------SARCASM )
stay strong, buy gold.
It is only electronic digits... right?
I mean... it is not like it is real fiat?
Ha, ha!
Real Fiat.
Best oxymoron I've seen since 'honest politician'!
All credit is due to Martin Armstrong.. he wrote in early January about the Fed minutes then:
"The news pundits call the minutes from the Fed’s December policy meeting showing a growing concern about further increases in the central bank’s $2.9 trillion balance sheet since 2007-2009 a “surprise” for Wall Street. Quite frankly, how could anyone take QE3 seriously as being open-ended when it was announced before the elections? Come on! You have to be joking not to have seen through this timing.
Of course the Fed will slow or to stop purchases well before the end of 2013, citing concerns about financial stability and the size of their balance sheet. The elections are over. They did their job. It is time to get real. The Fed is concerned about the bond market – not main street America."
QExist? QEnding? QExtinction?
QExecuted
QEquities
QExtraction, Bitchez.
QEnema
hedge funds make biggest bets against gold because they are all long the shit out of miners = HEDGING for hedge fund. dumb ass MSM
If we take the wealth of China as it is today, we'd need 1.2 planet earth to provide the resources. If we take the consumption of the US as it is today, well we'd need many planets...
Therefore, things can not go on and a correction is needed. What type of correction? I don't know but I invite all of you to look at the historical charts of US GDP per capita and US military spending as a percentage of GDP or in total per capita numbers. While GDP per capita has being going down for the last 20 years non-stop, our military spending has been going up in GDP terms or in real terms.
The key is that without a major war our population is becoming a lot poorer than before and growing poorer by the day. And this is an inevitable fact. The only problem is that our elites don't want to become poorer. This is increasing inequality. Their challenge is how to manage us, sheeple to stay quite while they slaughter our wealth (to the ones that have any, they can't take much from the wellfare people) one by one. If we rebel in an organized way (namely tea party or equivalent) and take control it is game over for them, they either loose their wealth too or they get subjected to a nasty war with no guarantees that they will remain on top afterwards.
In a very simple picture that is the situation and there is NO way out of it.
QE is just a failed attempt on Bernanke's part to avoid a war. I saw this in 2007 and wrote an open letter to him explaing in detail why it was going to fail, but it is like trying to explain what will happen 20 chess moves ahead to a beginner chess player. You just can't.
Sad to see that we are going the foreseen path and that his hubris is making things worse for everybody.
Until next time,
Engineer
Anyone else noticing the shills have been chimping out more than usual on the internet this month?
I see ZH has been hammered especially hard and has new rules.
I mean you can almost taste the desperation it's that thick, I've lost count of how many times I and other users have suddenly been called 'insane' on various websites I usually devote time to read and comment on this month alone. They aren't even trying though now, just hit and running never to be seen again once you start talking hard numbers or history.
I sure hope they are getting paid to do it. I meah how stupid do you have to be to actually do it for free.
Something has got them scared though.
IF FED DOES NOT CONTINUE TO BUY ASSETS AT CURRENT PACE THROUGH YEAR END,HOUSE PRICES WILL PLUNGE AS INTEREST RATES SOAR - NEVER ONE ROACH
Satan is willing...Timmay is warming up now.
These clowns in Washington running the show continue to amuse me. I just can't reconcile that they got to the position they are in by being stupid... but maybe it's a case of being "promoted to your level of incompetence"? Do they really, really think that printing and pumping money into the system will suddenly work this time because they're so smart, rather than causing a crash and burn or zombie system - like every other time in the past??
just print 8 trillion, problem solved bitchez
seriously! Why the fuck 85billion a month....
the sad thing is, down 20 pts or less is continue a ''slide'' in this ponzi scheme.
no matter if we finish down or not, we know tomm we will be up at least 300 pts because it is tuesday.
its funny how friday we had a triple digit gain on absolutely no news, yet no one wants to take profits from that.
cant make this shit up
longer avg maturity means less chance of default: UK says so. Bullish
Good thing the IMF thinks the US is reducing debt too fast. Does this mean it is nonfinancial corporates turn to deleverage? $1 trillion or so to get back to 2008 levels
They can't stop buying Treasury Department debt. If they stop, the Congress will have to stop sending out Social Security checks or eliminate the Army, Navy, and Air Force, or stop all Medicare payments, or all of the above.
So is the jump in Gold and Silver short covering in the paper markets or an indication of demand for physical (or both?).
All I heard last week was that price support for physical was broken and spot prices could only go lower.
Perhaps the paper shorts are getting burned by millions of weekend physical buyers?
September 2015 ... the next big crash. Why? No Jubilee. No Jubilee, God ratchets up the punishment until they relent.
2001, 2008, 2015, 2022, 2029
2029 is an interesting year. It is the year that Apophis makes an appearance and has a chance of hitting the "keyhole".
Most of the world's masses have been trained not to really believe in th eearth's actual history, the bible, external forces and such. But let me tell you something. Those in power believe.
You said there would be no math.....
Okay. What is the problem? Treasurys are useless paper, and the hated fed is buying them. Let the fed choke on its useless paper. Buy more, Ben.
Funny.
Bob Pastrami talking about "escape velocity" for the FED on CNBC.
"Escape velocity" - as in so many trillions in debt that economic collapse is inevitable?
Yeah, like that Bob.
Death Star time!
Monday's slide will lead to Tuesday's gain.
That CNBC Clown Joe Kiernan had Richard Fisher on this morning. He was pretty clear in saying that QE has failed to provide the results the FED was looking for in regards to employment and the trickle down to Main Street. He said QE defineltely helped to make Buffet richer and that he's NOT alone in this view on the Board. He continued to make the case that the reason QE isn't working is because of congress and President and their lack of fiscal policy. It seems highly likely, along with the remarks over the past few weeks, that we will see Tapering in June, albeit small and a full exit by year end. When more than one Fed representative starts talking about QE and Financial Stability and the fact that they are monitoring markets you have to wonder if they ni fact do see some bubbles and are starting to fear the consequences of the long term impact of another financial crisis on the markets and economy. Even more at play here might be the secret war being waged by Japan, in their attempts to outdo Uncle Ben, on the US in reprisal of the impact of QE on their companies P&L. Big Ben didnt think about the consequences of QE and ZIRP on the rest of the world.
http://video.cnbc.com/gallery/?video=3000168224&play=1
There is too much FED speak happening right now, they are going to taper. QE is going to end before the close of 2013 unless we have a major dowturn. I think there is maybe a 20% chance of that happening early in the Fall based on the recent trends and the shananigans in Europe. But I'm a pessimist.
Stocks slide as the dollar index(fwiw) goes down? Hmmm. What happened to the PPT?
Good thing Greenspan, Bernanke, and their member bankers never blew any bubbles that they could be held responsible for. /sarc
4T or 5T? The UST prints bonds, the FED prints "money" and they change holdings. Really, if that is all it took, why wait until until now? The various amounts are the shells, not the pea.
Kotilkoff estimates 220T in unfunded liabilities... $4T or 5T? pfffff...... Just put your money in the bank; what they don't inflate away they will confiscate b/c you have too much of it, put it in the wrong bank or "just because."
Serious question. Why is this a problem?
in 2015 they'll need to DO SOMETHING DIFFERENT for the 2016 election campaign.
remember "it's the economy, stupid!"?