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Art Cashin Asks (And Answers) If The Fed Has Been Engaging In Stealth Tapering

Tyler Durden's picture


Those following day to day flow (buys and sells) data of Treasurys and MBS by the Fed, are aware that in the past few months Ben Bernanke's net purchases of MBS have declined modestly. Naturally this is not due to a stated policy of tapering one or more purchasing programs (at least not yet), but due to what appears to have been a drop off in origination, as confirmed by recent plunging mortgage applications data (and which today literally crashed out of bed). So is this net change in Fed flow, in a world in which Fed flow is all that matters (sorry "Stock" purists: 2009 called, they want their discredited ideas back) an indication of stealth Fed tapering? Read on for Cashin's explanation.

From Art Cashin of UBS

Tapering vs. Supply And Demand – Last week, three members of the FOMC called on the Fed to end a portion of their Quantitative Easing (QE) program.

The portion that the three wished to end was the Fed's purchases of mortgage backed securities (MBS). The three amigos struck two chords. First, the housing market had rebounded enough that it should be taken off life support.

More importantly (to us, at least), were their indications that continued Fed purchases in the MBS area could be disruptive and counterproductive. They were already influencing (negatively) the efficiency of that market.

We have noted for weeks the risk of the Fed staying full throttle as the numbers of treasury bonds and mortgage bonds were starting to decrease. There were some estimates that the Fed was already purchasing 90% of the MBS issuance.

When I have a question on mortgages, I turn to my good friend, Barry Habib, who is the resident genius on the topic. (Actually, Barry is the resident genius on lots of things financial, but I don't want to give him a big head – well-deserved or not). Anyway, this was Barry's comment:

As you know, the Fed has been stating that they will purchase $40 billion in Mortgage Backed Securities (MBS) and $45 billion in Treasuries, for a total of $85 Billion each month. However, the Fed has actually been purchasing much more than that because of reinvestment of principal from refinance loans and principal payments. Earlier this year, they were purchasing over $80 billion per month in MBS alone. This is more than double the amount the Fed stated they would be purchasing. But over the past two months, the Fed has eased up a bit on the gas pedal, as these purchases are now closer to $65 billion per month. This is still  obviously more than the advertised $40 billion, but less than what we had seen earlier this year.


Has a little tapering already begun? The answer is no. We believe that the slowdown in Fed purchases is due to fewer loans being originated for refinancing in March, when rates had spiked.

Barry went on to note that the resultant drop-off in MBS paper may have prompted the Fed to scale back purchases (lest they disrupt the markets thoroughly).

He pointed out that there was a burst of refinancings in April (nailing down low rates before they rise?). Those loans will close in June, which could result in a new flurry of "paper" for the Fed to buy.

If the Fed does return in earnest, it could cause a mild rally in MBS paper in general. So, added supply could reignite the Fed whose activity could then raise prices. Lewis Carroll would have loved it. Thanks Barry!


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Wed, 05/29/2013 - 09:43 | 3607145 IridiumRebel
IridiumRebel's picture

Tepper. Taper. TIPS. Top?

Wed, 05/29/2013 - 10:02 | 3607200 nope-1004
nope-1004's picture

"Green shoots, Recovery, Exit Strategy, Systemic Risks, Tapering, QE, ZIRP, TALF, TARP, cash for junk, ........."

New Age Economic Terms from the PhD muff-face himself.


Wed, 05/29/2013 - 10:02 | 3607219 King_of_simpletons
King_of_simpletons's picture

"Stealth Tapering"


Why not ? Everything is a lie these days.

Wed, 05/29/2013 - 10:11 | 3607258 Jumbotron
Jumbotron's picture


....the algos are listening.......

Wed, 05/29/2013 - 11:33 | 3607555 TheCanadianAustrian
TheCanadianAustrian's picture

Wondering whether Bernanke has been stealth tapering is like wondering whether an employee has been smuggling money into the cash register.

Wed, 05/29/2013 - 10:04 | 3607227 aint no fortuna...
aint no fortunate son's picture

stocks jacking up on a whiff of hope and puppy dog dreams that the spigot opens again in June

Wed, 05/29/2013 - 11:24 | 3607524 CVfriendship
CVfriendship's picture

However, the Fed has actually been purchasing much more than that because of reinvestment of principal from refinance loans and principal payments.

Can someone please explain this. Does that just mean a new MBS is written when the flurry of refi's happen on a previous MBS the the FED already owned thus they buy that one again plus the fresh ones being written that month?

Thanks, and I hate this big steaming pile of cow dung....literally speaking.


Wed, 05/29/2013 - 11:33 | 3607556 asteroids
asteroids's picture

The FED should suggest that the "food stamp" program be expanded and the benefits increased to include mortgage payments.

Wed, 05/29/2013 - 09:43 | 3607146 Jacque Itch
Jacque Itch's picture

ZH posted a weekly letter from Ron Paul a few weeks ago that the Fed's purchases were around $100 Billion in both March and April.  BS everywhere.

Wed, 05/29/2013 - 09:56 | 3607183 eigenvalue
eigenvalue's picture

Forget about Ron Paul. He is just an insane old coot. The Fed is what makes the US a great country. Ron Paul wants to end the Fed. What a putz.

Wed, 05/29/2013 - 09:58 | 3607196 ACjourneyman
ACjourneyman's picture

What a crackhead, enjoy the feds dick in your ass when this mess crashes.


Wed, 05/29/2013 - 10:18 | 3607299 Bangin7GramRocks
Bangin7GramRocks's picture

And have fun cleaning the santorum from your sheets too!

Wed, 05/29/2013 - 09:59 | 3607197 ACjourneyman
ACjourneyman's picture

And it will!


Wed, 05/29/2013 - 10:01 | 3607212 Dr. Engali
Dr. Engali's picture

Okay..that one was pretty funny.

Wed, 05/29/2013 - 10:01 | 3607214 redd_green
redd_green's picture

The Fed, the front organization for biggest bunch of crooks in world history, makes the us "great"?  Man, you have got to put that crack pipe down.

Wed, 05/29/2013 - 10:07 | 3607242 Cult of PersonALity
Cult of PersonALity's picture

@ eigenvalue       /sarc      there, fixed it for you

Wed, 05/29/2013 - 10:41 | 3607366 angel_of_joy
angel_of_joy's picture

The eigen non-value is collecting red arrows again.

Nothing to see here people, move along...

Wed, 05/29/2013 - 12:05 | 3607680 Jake88
Jake88's picture

Thank you Mr. Bernanke

Wed, 05/29/2013 - 09:44 | 3607147 francis_sawyer
francis_sawyer's picture

The only thing 'tapering' in Art Cashin's world is the scotch in his glass...

Wed, 05/29/2013 - 09:53 | 3607172 Ghordius
Ghordius's picture

cheers, then!

btw, "the housing market had rebounded enough that it should be taken off life support" - I promised a friend to repeat here a rant of his. He is French, and full of sounds of fury about the USD's global reserve currency status

according to him, the US housing market will never be "healthy" as long as it's structurally supported for the Greater Glory of the HomeOwner's dream

his back-of-of-the-envelope calculation: 30% of the "market" price of a house in the US is supported by state fiscal/monetary policy and state-orgs (like Fannie and Freddie)... since the seventies

Wed, 05/29/2013 - 09:56 | 3607185 new game
new game's picture

so cash buyer should get substantial discount?

Wed, 05/29/2013 - 09:58 | 3607199 francis_sawyer
francis_sawyer's picture

If anybody had two wits about 'em anymore, instead of buying a house they'd buy about 3 little acres [some wooded], with a well & hopefully a creek or lake nearby... Then sink the rest into a bullzoder, a few 50' containers & go to town...

Wed, 05/29/2013 - 10:02 | 3607217 new game
new game's picture

interesting as i have 37 acres with small 3 seas cabin with well and water near by. 4-sale at 83.5k and no fukking takers.

see, i want to be free to to roam...

Wed, 05/29/2013 - 10:08 | 3607249 Aurora Ex Machina
Aurora Ex Machina's picture

Ahh, America. Try that in Europe, you'll want to move your decimal place one step to the left. (Only slight hyperbole).

Wed, 05/29/2013 - 11:46 | 3607607 francis_sawyer
francis_sawyer's picture

Any 'types' that would be interested in that kind of setup are going to pay cash & not fuck with mortgages or bankers...


I'd be willing to bet that if you could subdivide & still provide the same H2O access to each, you'd find takers...

Wed, 05/29/2013 - 09:45 | 3607149 the not so migh...
the not so mighty maximiza's picture

one big pile of poo

Wed, 05/29/2013 - 09:45 | 3607151 SheepDog-One
SheepDog-One's picture

Must....Blow....Moar Bubbles...

Wed, 05/29/2013 - 10:16 | 3607291 disabledvet
disabledvet's picture

Not gonna get in the way of the dark machinations of course but the simplest explanation is the private banks won't front run anymore. Again this is all new to me (the bond thingy)...but I'm not afraid to plunge in, lose money and insodoing learn. Never recommended anyone follow fact said the exact opposite. Classic "buy high, sell higher" trade...but I had an itch to scratch and when no less than Satan himself invites you down to his world "to see how the other 99% are doing" let's just say you don't want that guy as your enemy either. The forever rush to liquidity continues is so much easier...WAS so much easier when we could just focus on the economy. Reagan was the last in my view...Clinton was close but now we know the whole thing was a Scam. I do agree with France..."who are these excessive Americans?" of all the people to ask of course...

Wed, 05/29/2013 - 10:57 | 3607428 Herd Redirectio...
Herd Redirection Committee's picture

You are a debt slaver, disabledvet?

Wed, 05/29/2013 - 19:02 | 3608765 Possible Impact
Possible Impact's picture

Whose nickname is "Moar Bubbles"?

(It must be someone in Washington DC or New York right???)

Wed, 05/29/2013 - 09:47 | 3607155 Sutton
Sutton's picture

Weird.. It's now ALL FED, ALL of the TIME

Why did my father and uncles fight for this country?

Wed, 05/29/2013 - 10:13 | 3607269 LawsofPhysics
LawsofPhysics's picture

"Why did my father and uncles fight for this private bank?" - fixed.

Wed, 05/29/2013 - 10:14 | 3607276 DeadFred
DeadFred's picture

So Bernanke and Krugman could be fawned over? I give, what's the right answer?

Wed, 05/29/2013 - 09:49 | 3607161 PiltdownMan
PiltdownMan's picture

US rates are rising, mortgage apps are falling. Oops!

Wed, 05/29/2013 - 10:24 | 3607319 Schmuck Raker
Schmuck Raker's picture

Click bait.

Wed, 05/29/2013 - 09:50 | 3607163 e-recep
e-recep's picture

if the central banks stop printing, the governments are fucked.

if the central banks keep printing, their fiat currencies are fucked.

Wed, 05/29/2013 - 09:55 | 3607181 Ghordius
Ghordius's picture

then let's gently fuck the governments. there is a word for that: balanced budgets. just an opinion

Wed, 05/29/2013 - 10:01 | 3607207 e-recep
e-recep's picture

well, the governments hold the guns and history tells us that whoever holds the gun will have the last say. so I'd expect that the governments will force the central banks to print to infinity even if it means the death of those particular fiat currencies.

Wed, 05/29/2013 - 10:08 | 3607251 Ghordius
Ghordius's picture

might be, but we have here a different opinion: if you hold the street, you have the last say. we had, after all, more revolutions since yours, more than I can possibly elencate here. we'll see...

Wed, 05/29/2013 - 10:58 | 3607432 Winston of Oceania
Winston of Oceania's picture

How can a politician BUY VOTES unless they run a deficit to purchase the votes in the first place? It is all about staying in power whether you are a central planner for the Banksters or the Gub'ment it's all about being a floating turd and not a sinker.

Wed, 05/29/2013 - 09:59 | 3607179 new game
new game's picture

question? fed buys these mbs's; does it have any interest in the actual property? just the security?

dumb question?-be honest...

Wed, 05/29/2013 - 10:04 | 3607226 Ghordius
Ghordius's picture

central banks usually are not interested in such collateral, they prefer liquid, marketable and in particular uniform

this was one reason why securitization was so strongly encouraged, in the US, both banks and the FED liked the idea of huge areas of buildings having the same price, the same kind of owners, and so the same risk (in theory) - which gave the rise of CDOs and MBSs

Wed, 05/29/2013 - 10:05 | 3607233 new game
new game's picture


Wed, 05/29/2013 - 09:57 | 3607189 rosiescenario
rosiescenario's picture

No reason to taper....M2 velocity too low.....but one day that may change and then all the current printing will result in hyper inflation....but when???

Wed, 05/29/2013 - 09:57 | 3607192 Life of Illusion
Life of Illusion's picture


No more inventory left. Loan mods and refi are all but worked over. Inventory for cash fund buyers yeild rental return getting to low.

Larry Summers next?



Wed, 05/29/2013 - 09:59 | 3607202 Dr. Engali
Dr. Engali's picture

The mortgage market has rebounded enough? Wait until the Bernank stops buying MBSs and  rates go up to 5 or 6%. we will see just how quickly the market blows up again. Go ahead Ben I dare you.

Wed, 05/29/2013 - 10:06 | 3607240 LawsofPhysics
LawsofPhysics's picture

More propaganda.  There is no "tapering".  Let's see what treasuries do today. tick tock...

Wed, 05/29/2013 - 10:09 | 3607252 Yen Cross
Yen Cross's picture

    The Fed. isn't stealth tapering. The Fed. is scared shitless, to do anything.

Wed, 05/29/2013 - 10:12 | 3607263 LawsofPhysics
LawsofPhysics's picture

Please, so long as people accept FRNs in exchange for their labor and physical assets of real value, the Fed isn't scared of shit.

Wed, 05/29/2013 - 10:15 | 3607284 Yen Cross
Yen Cross's picture

  If anything the Fed. would be secretly buying up more bonds.

Wed, 05/29/2013 - 10:17 | 3607295 fonzannoon
fonzannoon's picture

agreed. As FRN's have sold off, someone, somewhere was buying. Because they had to.

Wed, 05/29/2013 - 10:21 | 3607306 LawsofPhysics
LawsofPhysics's picture

Yes, the question now is, who is left to bankroll these corrupt sorvereigns?

Wed, 05/29/2013 - 10:27 | 3607331 Yen Cross
Yen Cross's picture

   You and Me via 'Bail Ins'. Cyprus Style<

Wed, 05/29/2013 - 10:31 | 3607341 LawsofPhysics
LawsofPhysics's picture

Only those with significant investment in the system will be subject to the "bail-in".  Russia tried this already, the outcome in the U.S. wil be the same. Shit, 52% of Americans have nothing to "bail in".


Long black markets and sharecropping.

Wed, 05/29/2013 - 10:59 | 3607437 Yen Cross
Yen Cross's picture

     It won't stop them from trying.  +1 on Long black markets and sharecropping. (and bartering)

Wed, 05/29/2013 - 10:50 | 3607403 LawsofPhysics
LawsofPhysics's picture

yes, get busy Mr. Chairman.  When the Fed (and the PDs) are the only bidders, game fucking over.

Wed, 05/29/2013 - 10:45 | 3607382 Winston of Oceania
Winston of Oceania's picture

And that is why they will do ANYTHING they can conceive of to put off the sorrows of tomorrow. They live in fear of GREENBACK REJECTION, which is the inevitable conclusion to the manipulation or plainly stated NOMO full faith and credit in the US Gub'ment...

Wed, 05/29/2013 - 10:10 | 3607253 q99x2
q99x2's picture

Someone got some toxic shit to put on joe six packs back and you better believe FEDs going to be there. FEDs going to kill us all.

Wed, 05/29/2013 - 10:11 | 3607260 Kreditanstalt
Kreditanstalt's picture

Does the whole damn economy hinge on a few characters, probably in just three states, taking on new mortgages or "re-financing"??   What a sick economy.  And what data-obsessesion...

Wed, 05/29/2013 - 10:53 | 3607409 RockyRacoon
RockyRacoon's picture

Right.  When was the last time equities moved on the tonnage of steel produced, the wrangling of garment worker unions, exports of manufactured products, exciting real technology advances, and so on?   Not the latest tiny change in what is essentially a phone which makes the one you bought last month "obsolete", the musings of some big banker, political intransigence, or, most of all, what a Constitutionally unauthorized quasi-governmental agency run by one guy thinks interest rates ought to be.  Since about 1971 the major U. S. exports have become debt and inflation, not things that people need or want.  There is too much power in too few hands, and there is a lack of the rule of law.  Other than these small problems, we are doing great.

Wed, 05/29/2013 - 10:59 | 3607440 Herd Redirectio...
Herd Redirection Committee's picture

A complete lack of rule of law.

A two tiered system.  One for schmucks, another for people who can afford 2 or more lawyers.

Wed, 05/29/2013 - 10:12 | 3607264 buzzsaw99
buzzsaw99's picture

Now we know why the housing bubble is back. The banks are stuffing that mbs crap into the fed at twice the rate they stated. lying assholes are getting rich off the destruction of the country.

Wed, 05/29/2013 - 10:19 | 3607302 eclectic syncretist
eclectic syncretist's picture

It's just another back door bailout, taxpayer funded debt forgiveness criminal hack job, all for the benefit of the big banks at taxpayer expense.  We are paying incredible amounts of "money" for near worthless MBS so that the banks can do it to us all over again.  Where's the spirit of Andrew Jackson when this country needs it most?

Wed, 05/29/2013 - 10:34 | 3607350 LawsofPhysics
LawsofPhysics's picture

"Where's the spirit of Andrew Jackson when this country needs it most?"-  That spirit has been killed off (or sent to a FEMA/re-education camp).  He has been replaced with a "swipe yo EBT", television watching, lard ass.  

Wed, 05/29/2013 - 10:15 | 3607281 orangegeek
orangegeek's picture

No one knows what the Fed is really doing. 



The Fed plays the game to help its insiders and the non-insiders (the herd) are the bag holders.



Wed, 05/29/2013 - 10:16 | 3607287 AcidRastaHead
AcidRastaHead's picture

"2009 called, they want their discredited ideas back"


That gave me a good chuckle.

Wed, 05/29/2013 - 10:29 | 3607336 Meremortal
Meremortal's picture

The FED simply follows the bond market while pretending it leads with important decisions on interest rates.

It has no choice in the matter. 


Wed, 05/29/2013 - 10:44 | 3607343 LawsofPhysics
LawsofPhysics's picture

Correct, sorvereign debts expand or sovereigns die.

Now get to work Mr. Chairman;

Wed, 05/29/2013 - 11:01 | 3607450 Herd Redirectio...
Herd Redirection Committee's picture

What keeps the people in power, in power, is making more promises than they could possibly fulfill.

But everyone thinks the promise the politician made TO THEM will be fulfilled.  Including those in the armed forces.  Sad.

Wed, 05/29/2013 - 11:03 | 3607455 LawsofPhysics
LawsofPhysics's picture

Be optimistic.  I stay in touch with all my former brothers and sisters in arms.  There will be consequences of training efficient killers and then abandoning those promises.

Wed, 05/29/2013 - 11:36 | 3607528 akarc
akarc's picture

If it were only true. But considering the continuing intentional abuses of returning and other servicemen it is not.  How many "brothers and sisters in arms" have died of legionaires disease in VA hospitals? How many of their homes were illegally foreclosed on?  How many corproate/government theives have been jailed since 2008?  How far has the constitution, which so many are sworn to uphold, been degraded since the Patriot act?

Those who think the American people will rise up and throw off their chains are engaging in fantasy. I hear the chatter constantly. We will not stand for this. Well we have and we will.

There was a time it could have happened. But unless you have been stacking drones, that time is gone. 

Wed, 05/29/2013 - 10:41 | 3607370 Dan Conway
Dan Conway's picture

I refinanced on 2/28/13 and they said they wouldn't sell the paper.   I made my first payment on 4/1 and then got the letter that is was sold to fannie or freddie.  I knew it would be sold to the fed but it just burns me up when everyone in the chain is making money off of the loan (usaa, fannie) before it is sold to the fed.  I am certain that some of this is done just so fannie/feddie don't look like complete pieces of crap.  I wish I could go directly to the fed and save the skim from those cretins. 

Wed, 05/29/2013 - 10:45 | 3607383 LawsofPhysics
LawsofPhysics's picture

Too many useless middle-men, paper-pushing fucks, none of whom are being held accountable (applies to many industries and many sectors of the eCONomy).  This is the fundamental underlying structural problem.

Wed, 05/29/2013 - 13:58 | 3608008 ghandi
ghandi's picture

Too many leeches and not enough blood and guts.


America, land of the bled dry.

Wed, 05/29/2013 - 10:47 | 3607388 AynRandFan
AynRandFan's picture

The Fed will need to start buying Sallie Mae paper next, just to keep up its pace of monetizing all debt.

Hey, just occurred to me that when all debt is monetized, nobody ever has to pay anything back!  Cue the song: "I owe my soul to the government store".

Wed, 05/29/2013 - 10:59 | 3607441 LawsofPhysics
LawsofPhysics's picture

I'd argue that depends on what entities/families are on the other side of the debt and what resources/armies they control.  This is and has always been about power and control of resources, period.

Wed, 05/29/2013 - 11:17 | 3607506 ekm
ekm's picture

Ok, please allow me to repeat this again:


1) Government data is manipulated

2) Federal reserve data is untrue by design

3) Private people data is guess best


As far as I am concerned, Fed may have already halted QE, increased QE, or even unwinded QE.


My point is, do not trust the data, any data, from anybody. Do your own homework and come up with your................GUESS.


Then draw conclusions from your own GUESS. That's the best we can do.

Wed, 05/29/2013 - 12:42 | 3607781 rlouis
rlouis's picture

When I see how distorted markets have become, the closest analogy I see is Hunter S. Thompson in Fear and Loathing in Las Vegas ... there is no reality. 

Wed, 05/29/2013 - 12:43 | 3607782 mendigo
mendigo's picture

The more that Ben buys the market, the more the market will let him.
It is the opposite of stimulus.

Wed, 05/29/2013 - 13:53 | 3607990 CustomersMan
CustomersMan's picture

The Population Is Awakening Rapidly:

Since way, way back, the Bankers have inflated economies flooding the system with money  (cash, cash equivalents and later digital money) then contracting and withdrawing cash and credit deliberately for their own gain, like playing Chess.

So, they have had centuries of practice to fine tune this strategy. What it means to the rest of us is that they (Central Bankers and kin) know human nature and that people are inclined to spend and borrow when cash and credit are in large supply. Most people are not long-term thinkers and strategists and do not plot against their neighbors for a hostile takeover a hundred years in advance.

Under this Central Banker "Strategy" people become used to good times and encouraged to spend their money and also borrow. Once this is firmly established in the psyche and people become sufficiently leveraged, the Central Bankers, like the FED, contract the system, withdraw access to cash and credit, decimate the growth in the economy thereby shredding jobs and force people to sell the real assets they have accumulated over many years, at huge discounts. Since there is no money in the system, deflation ensues and this is the end-game in each recession-depression, except that Central Bankers can print their own money (our money which they have an exclusive franchise to print) and give it to themselves free, or give themselves huge low-interest rate credit-lines to buy-up/steal bargain-basement assets they want to own in order to repeat this strategy again and again in the future, unhindered.

After several of these inflation / calculated deflation contractions, the devious, treacherous, power-hungry Bankers (Like the Rothschild's) are able to buy up all the real assets from the populace and gradually gain control of all the key corporations, properties, media, governments, agencies, and institutions needed to take over our lives completely

Is it any coincidence that they (Central Bankers and friends) now control all the key institutions including the U.S. President , Congress, the Supreme Court, media, banking, education, foreign policy, technology, military, and the equivalents in so many other countries worldwide.

So, when do we take back what's ours?

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