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The Panic Behind The Propaganda: Why The Fed Wants You To Sell Your Bonds
As Barclays' Joe Abate warns, delivery fails in the Treasury market have surged recently. While not at the scale of the 2008 crisis yet, we suspect the spike is what is panicking the Fed to say "the market is wrong", talk up short-end rates, and implore the public to sell-sell-sell their bonds. The Fed's market domination has meant massive collateral shortages (as we have detailed previously) and now more even that during last year's taper-tantrum, the repo market is trouble.
The fails are greater than during last year's taper tantrum.
But well below the 2008 crisis levels (for now)
Which is why The Fed is in panic mode to get everyone selling bonds.
As Abate write in his note,
Delivery fails in the Treasury market have surged recently. On Monday, the DTCC reported that incomplete deliveries reached a 52-week high at $120bn (Figure 1). And a week earlier, Treasury fails – as measured by the Federal Reserve – exceeded 6% of daily dealer Treasury transactions volumes. By contrast, usage of the Fed’s securities lending program has been relatively constant at around $15bn/day. Recall that each day the Fed auctions securities from its securities portfolio (at a 5bp fee) for dealers to borrow overnight to cover their shorts. In effect, the securities lending program is a backstop source of specific issue supply that dealers can access temporarily to prevent market disruptions caused by fails or incomplete deliveries.
But what if the Fed does not own any of the issues that dealers need? Indeed, this appears to be driving the surge in recent fails, which have been concentrated in the OTR 5s and 10s. Operation Twist and the sale of all the Fed’s <3y paper has meant that the Fed does not own any securities that mature until early 2016. Without maturing paper, the Fed is unable to buy OTR issues at Treasury auctions. The fact that the OTR issues are trading special in the repo market also means that the Fed avoids buying these securities in its (diminishing) QE purchases.
In the absence of Fed supply, dealers face a choice: fail and pay a 300bp fee for not completing the promised delivery or offer a sufficiently low financing rate to coax supply of the issue back into the market. In effect, the 300bp fails charge becomes the threshold determining how rich an issue will trade in the repo market or whether it will fail.4 Regularly scheduled re-openings and supply lured in from customer holdings in lendable accounts will eventually cheapen these issues. But in the meantime, the issues are likely to trade deeply special.
A quick reminder of what the repo market is... (via IMF)
Think of the bilateral repo market via the analogy for old clothing trade: Typically, merchants in developed countries shrink wrap old clothes in shipping container sized bundles (under pressure) and send the plastic wrapped block to poor countries. There, a clothing broker buys it, and resells it by weight to jobbers. So if the block weighs 500 pounds and they sell it in 10 pound lots, all 50 people gather around. But some people pay slightly more to be at the front of the crowd, and some pay slightly less to be at back. Then the jobber pops the bundle open with a big knife and the shrink wraps literally explodes; everyone gathered around jumps for the best pieces.
Collateral desks are a bit like those jobbers. Big lots come in from hedge funds and security lenders, and the large bank’s collateral desk paws through it, searching for gems. Those gems go out bilateral to customers who'll pay a premium. The remainders go to the guys in the back of the line (for example, triparty repo)
* * *
But why do I care about some archaic money-market malarkey? Simple, Without collateral to fund repo, there is no repo; without repo, there is no leveraged positioning in financial markets; without leverage and the constant hypothecation there is nothing to maintain the stock market's exuberance (as we are already seeing in JPY and bonds).
Crucially, it should be inherently obvious to everyone that the moves we see in the stock market is not about mom and pop choosing to invest in the stock market (or not) as the 'cash on the slidelines' fallacy is "completely idiotic' but about the marginal leveraged machine (or human) quickly jumping oin momentum.
The spike in "fails to deliver" highlights a major growing problem in the repo markets that provide that leverage... and thus the glue that holds stock markets together.
Wondering why JPY and bond yields have diverged so notably from stocks in recent days... repo effects (it's just a matter of time before it hits stocks)...
So that explains why the Fed is so desperate to talk you into selling your bonds - most notably the short-end by demanding you listen to what Yellen said about raising rates.. as that reduces the shortfall of collateral that repo needs and restocks the banks with repo-able funds.
* * *
Is that why a noted dove like Jim Bullard was so visibly hawkish yesterday?
The irony of course of the Fed explaining how rates will rise faster is that it spooks stock investors who have grown used to exuberant liquidity supply and roitates them to bonds... which merely exacerbates the problem the Fed has
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I though I saw Bill Gross planning an addition to his house in Corona Del Mar...
Starve the Beast.
BTW: Watch for a sharp break below 16700 or so in the DJIA soon.
and buy it
who the f*** still believes that Treasuries are quality collateral?
"what if the Fed does not own any of the issues that dealers need?"
glad you asked!
in order to bring stability to this important sector, we are pleased to announce the roll-out of our new Specific Treasury Issuance program.
through this program, we will provide exactly those Treasury issues that are so desperately needed around the world in order to provide liquidity that markets require for their smooth function
hugs,
misteryellens
That sir, is the kind of thinking that will save the FED. The FED's strong suit is creating stuff out of thin air! They just need you to have faith that more credit exists.
That is where the Chinese went wrong, they hypothicated hard assets that actually exist. Go America, go liquidity, go financial innovation!
"Blessed are those who sell their Bonds, for they will be called Children of the Yellen."
I think that's one of those beatitudes, right?....[just updated a tad]
Posted 6/23/2014
I'm no expert, but the GC repo rates on the 10yr last week were 'trading' at nearly fail rates (-3.00) for several days. The 5 yr had the same experience. Just for context, shorting the 10yr overnight normally runs about $75/mm and the 5 yr about $45/mm. The last week has seen rates of $145/mm on the 10 yr, and $110/mm on the 5 yr.
If I recall reading that the FED is considering turning more attention towards the overnight repo markets.
I'm not sure how this filters down to 'Joe the Plumber', but even Joe would know something is wrong with the plumbing in the UST market.
Hmmmm?
Hey Tyler!? I want a free tshirt :)Why is it not that the Fed cannot figure that it is entirely possible for them to engage in securities lending?
I mean Jesus H Fucking Christ.
Does everything really have to be so incredibly anally retentively complex?
I might be over-simplifying things here, but ...
... dutch boy ...
... two fingers ...
... three leaks ...
Kind of like that.
Me? I am going upstream, higher ground and all. Hey, look, there is gold all over up here ... why is everyone down there ....
WHHHOOOOOOSSSSSHHHH
Sucks to be them.
Regards,
Cooter
EDIT: I am going to re-read this in the early AM with some coffee (before I go fishing) and see if I can pick it apart better. Sometimes I just wish there was a "noob button" on these more technical articles that broke out the logical flow so the less educated (such as myself) could follow. I do OK, if I work at it, but it is easy to make a logical mis-conclusion and go off the ranch.
Hey Coots, to break it down so that even peons like me might not mis-understand.
"It only gets bitter from here".
If the Jewish Soviet Central Planners want "citizens" to sell bonds, they should allow interest rates to rise. That would do the trick in a New York minute, but how could the tyrant class take credit for that?
The Tylers should totally give out "I tipped ZH" T-Shirts with a serial number on them which links back to the actual article/post/etc in some verifiable way for posterity (i.e. we issued 1 shirt for this post with the serial # NESS_1). I doubt screening tech for shirts is good enough to be phone scannable after a few washes, so the short sequence of memorable characters or ZH handle seems sensible.
Would be easy to spot fakes, if folks checked sources!
Regards,
Cooter
4904729 thought criminal. Do you prefer barcode or QR code tracking? RFID is still working with the washer and dryer manufacturer to clean the t shirt under climate disruption.
Cooter,
You understand my sarcasm and duly playing the Central Planning card at your expense. No hard feelings, I hope. We're truly working in the favor of people like yourself. I hope we can restore the confidence of our alliances. This is like steering a boat headed for a iceberg. Not a easy task. Hope to accomplish this before my dirtbed nap. Our country has taken a nasty detour to become something it was never founded on.
Exactly, the Fed and its "members" are masters at 2 things:
1) Printing the shit out of money
2) jawboning on what they are going to do...sometime....in the future...maybe.......
Just like Bulltard this week yapping about raising rates. Bullfuckingshit. They ain't raising no rates. And they're not going to stop printing money either directly or circlejerking thru Belgium or whomever is the next Fed whore.
THE FED IS DEAD
we are pleased to announce the roll-out of our new Specific Treasury Issuance Funds Facility (STIFF) program
Get STIFFed today and float your worries away!
Remember, there is always greater fool... until is not.
"I'll give up my Treasury bonds when they pry them from my cold, dead hands!"
The right to bear bonds shall not be infringed.
I thought that was the right to arm bears.
I'm so confused.
Focus on your money market account and the Spanish banking tax. You'll figure it out.
myIRA program saves the day.....
Frickin A.
Federal Reserve Notes are garbage too. Backed by nothing except Yellen and the stooges at the Fed.
Rename the Federal Reserve as the House of Ponzi Schemes.
SWR...a debt owed, by a bankrupt government, is not "quality collateral"...who knew?...lol.
Fuckin suck on it Keynesians, you ignorant, parasitic assholes.
"it should be inherently obvious to everyone that the moves we see in the stock market is not about mom and pop choosing to invest in the stock market (or not) as the 'cash on the slidelines' fallacy is "completely idiotic' but about the marginal leveraged machine (or human) quickly jumping oin momentum."
The Tylers must be watching some other stock market on the other side of the world. The one I see on my trading screen every day is dead, dead, dead. I might have to start shooting meth just to stay awake. What momentum? All the marginal leveraged machines are playing each other to a draw.
You can't have your fraudulent cake and eat it too!
There is saying in Russia, maker of sausage is not enjoy to eat sausage. Strangely Bankster class is daily manufacture excrement of goat and is consume when make by other bankster as if safe. This is "Bank-o-sphere™" and one day soon, excrement is reach planar air pressure gradient generator.
Boris, I have no idea what you just said but fuck me it is funny.
I think the closest translation is " the shit hits the fan"
Bankster class know "excrement is reach planar air pressure gradient generator" quickly, so no worry that Bankster eat excrement. Make hay before the hay is no more.
$BOND through 109
Zero Hedge vineyardsaker and difficult to read.
Prefer fuck_ss_insider.
Ass
Sheep.
hehe.
Now why would anybody think a whole lotta pension funds are about to be appropriated?
I got 99 problems but a bawnd ain't one.
In other words, the Ponzi continues until it doesn't.
Same as it ever was.
Same as it ever was.
You guys stole that
99.......................
Letting the days go by, water flowing underground...
Once in a life time...
Our settlements guys are losing their shit with this increase the trades failing to go STP fucks them up.
Settlements ? What difference does it make ?
About 5 lifetimes ago, when I was working at one of the larger trust departments, we tended to custody accounts for a number of large public funds... their daily money balances, short term investments, etc. Operating funds in these cases. All deposits therein had to be collateralized 100% with treasury bills. Meaning for these accounts, you just bought the shortest bill possible.
So one day a big super-abnormal deposit comes in and I had to go get some bills. I called several of the Big Boys and asked for "cash" offerings, that it was for XYZ state account which they knew meant No Fail, Must Make Delivery, Same Day Settlement..
Salomon (that dates me, no?) got the biz, had the best offer.
Comes time for the Fed Wire to close and no bills.
Solly says no gots, tough noogies.
I said that weren't the deal. You said good cash delivery (same day) settlement was done.
I had to have the bills to comply with State Law!
They said f-off.
So I bought them in from another dealer, and to get cash delivery had to pay a premium. Solly was bought in and had to fetch up the difference.
That bill trader never did biz with us again. Imagine him trying to explain to his boss how that fucker (me) made him pay a premium for a treasury bill.
Shortage of collateral?
Engage in a securities lending program, FED.
Dimwits, deluxe
the law of unintended consequences. when everything is manipulated this law reigns supreme.
Thank you for the honesty. They will have trouble explaining under a AK 47 confession.
The best AK47 confession with a Bankster is the one that occurs after the shooting:
"gurgle, gurgle....."
So, to follow Yellens' lead, sell your money market and short term paper and park it where...in cash? Trade a dismal return for a negative one? Wait in the hope of higher long term interest rates? This is something investors would never do, and Yellen knows it. I think the thesis in this article is incorrect, maybe even the opposite of reality.
"Trade a dismal return for a negative one?"
It doesn't matter if you are getting a .05% mm return, you're still getting a negative return. You are correct though, if the fed really wanted you to sell bonds they would raise rate tomorrow.
This worked well last year. I guess at 3% they started to blow some fuses.
"If the Fed's hope is to drive investors into equities, propping up the bond market is counter-productive. While there are many parts of the cycle where higher bond prices fuel higher stock prices, at this point in the cycle the relationship has reversed. In recent months, stocks and bonds have developed a strong negative correlation -- what is bad for bonds, is good for stocks. The Fed does not understand investor psychology: If you want to get people to sell bonds and buy stocks, the best way to do that is to show them that bond prices can, and do, fall."
- Einhorn
"If you want to get people to sell bonds and buy stocks, the best way to do that is to show them that bond prices can, and do, fall." - Well almost. In order for this statement to be true, the government behind those bonds must be able to still service existing debt and fund future liabilitis when yields go up.
If said government can't do that, then you only have the following options;
1) hard default - (Soviet Union)
2) jubilee
3) War - (and this is simply the oligarchs covering up their theft/cronyism/destruction of the rule of law)
Despite what the modern MBA is taught, "moral hazard" is more than a quaint term from the past ECON books. A "barbarious relic" if you will...
Hedge accordingly.
Very well stated.
Yep. However..."the Fed is doing what the Fed is doing." QE is now kaput..and Yellen whatever you think of her personally has made her point crystal clear: "Taper."
The whole blow up last year was over "insta Taper!" Bernanke got fired and obviously the political classes wanted QEternity...but that has now clearly failed.
The reason to be in bonds (treasuries actually. I'd be terrified of any other debt instrument after Detroit) is quite simple: we're in a recession and have been for over a year now.
It was only December when Suicidal Wall Street was cheering on the ten year breaking 3 percent. They have more than enough carry as is so I really fail to see why they're complaining...other than obviously all the "socialized losses/private gains" plan has been a totally unsurprising failure.
Again...now is the time to be sniffing around for some bargains (for those that have any money left.) I would not at all be surprised by another negative GDP print this quarter...but at the same time I think the failure of the IS(ra)IL Spring Offensive has really blown the door wide open to a major regional war of the likes we haven't seen since World War II.
That might have been the purpose...who knows.
Anyone get the impression that the goldilocks zone the fed is playing in that is keeping this shit afloat is getting smaller and smaller? At some point very soon Yellen is going to sneeze and accidentally pee a little and then the flood gates will open and you better fucking pray you're not standing under them.
Monty, Let's Make A Deal. I pick Door #3. What do I win?
Agreed. If you cannot service the current debt, why invest in bonds.
UST is an absolute 7 year joke.
Well spoken. The Transvestite in chief will ask if he can seek one trillion, rather than 500 billion to arm Iraq.
bond prices CAN'T FALL. even einhorn doesn't get that. amazing.
10+. He's a shill.
Sure they can. All it requires is for the Federal Government to take back it's power to print money in unlimited quantities, then bond prices can fall as much as anyone requires or needs.
Um, don't be too cavalier throwing down advice from Einhorn. Remember who he is, where he came from; and what he does to make his ( very good ) living.
I've personally met him. He seems easy going, gregarious and pleasant; -but, the fact is: he almost never talks without having well considered how he can make coin off a listener's reaction to what he might say.
You are correct Fonz, the 10 year above 3% is Godzilla on crack vs. the IR swaps market. It would blow up a couple of TBTF Euro banks in a hurry.
"Dual mandate." Yellen had no trouble bitchin about job creation. Spot on...good to go.
The "markets" got their bailout...if they want their banks they'll have to find a recovery now too.
Interesting point about the Bernank starting tapering just to say "it was improving when I handed it off".
That ego insecurity has locked the Yellen into a larger failure than would have happened before.
It is funny how the largest catastrophes come from the same human frailties.
getting up from the couch to put some more popcorn in the microwave. And grab the bottle of tequilla.
everything the fed sez is a lie. remember that.
Reminds me of Joe Pescis line to the prosecutors opening statement in My Cousin Vinny, 'Everything that guy just said is BULLSHIT!'
PS-Go fuck yourself FED!
Its real easy
1-Sell your bonds
2-buy the dips in the e-minis
3-????
4-profit
3 = Steal underpants
steel? (for the sake of preserving a virgin ass)
Come on, all it takes is a couple of big hedge funds and institutional funds going massively long in treasuries to put players on the other side in serious trouble. What are they waiting for?
Show me who the players are and how much of the bond "market" they own and I might be able to answer such a "simple" question.
Probably much easier to answer the question; "What is the price of something no one wants to buy?" or "What is the price of something everyone wants to buy, but that is currently unavailable?"
What is the price of something that only one person wants to buy if that person can print unlimited amounts of fiat to buy it?
What is the price of something that only one person wants to sell if that person can influence interest rates and associated derivatives complexes at will?
What is the value of something if the person that wants YOU to buy it from them OR sell it to them can BOTH print unlimited amounts of fiat and influence interest rates and associated derivatives complexes at will?
IF a person who *ACTUALLY* CAN/DOES BOTH print unlimited amounts of fiat and influence interest rates and associated derivatives complexes at will -*WHY* the fuck would they EVER NEED any further influence over or have any interest in influencing purchasings or sellings of anything at all beyond their present powers?
Extra credit:
1. WHY would anyone sell Treasuries and then NOT deliver them knowing that there is a 300bp fine for it?
2. HOW LONG between seling a Treasury and NOT delivering it is the trade considered broken/unwound and the fine charged to the seller that did not deliver.
3. WHO pays the 300bp fine if the seller is insolvent?
4. WHO gets awarded the 300bp fine?
...discussion?...
I think you missed the point.
Create all the imaginary credits you want, if there isn't any of the asset or commodity available, you won't be able to buy shit.
There never has been, nor will there ever be a monetary or political solution to scarcity.
The "value" of a paper fucking promise becomes pretty fucking irrelevant when 99% of the population has no food or clean water.
Moreover, trade is all that matters. In order to facilitate trade, we need a monetary system (money). If your money keeps screwing me over every time we trade, trade will stop (at least between you and I).
Full FAITH and credit...
Bonds, in manys ways, are a measure of the faith in the governments underlying currency (when the "market" is not manipulated).
when the market is manipulated, all bets are off.
I'm not missing the point.
"Create all the imaginary credits you want, if there isn't any of the asset or commodity available, you won't be able to buy shit.
There never has been, nor will there ever be a monetary or political solution to scarcity."
I fully agree.
( BTW, that is precisely my argument dismissing the the MMT/Chartalist quacks: that creating new credit/money does not create new resources. Printing is counterfeiting/theft. )
and still no revolution. Truly amazing.
Hedge accordingly.
Couldn't the Fed issue long bonds, sell them to the IMF to shrink wrap them and sell them on the street of the 3rd World Island of MisPrint TShirts?
I'm mean shit, they had the answer in the analogy.
Maybe skinnys that bought at premium on the Island can make quaint hats out of the paper...
The others can wipe with it.
Or maybe I don't get this. And maybe they don't either.
I am sure the myRA will come in with new buyers
http://www.marketskeptics.com/2010/05/federal-reserve-has-been-abusing.html
http://www.federalreserve.gov/monetarypolicy/files/FOMC20030625meeting.pdf
"Minutes of the Federal Open Market Committee Meeting on June 24-25, 2003
…
CHAIRMAN GREENSPAN. … Would somebody like to move approval of the minutes of the May 6 meeting?
MR. GUYNN. So move.
CHAIRMAN GREENSPAN. Without objection they are approved. We turn now to Mr. Reinhart and Mr. Kos.
MR. REINHART. Thank you, Mr. Chairman. I' ll be referring to the material called “Conducting Monetary Policy at Very Low Short-term Interest Rates” which was on the table when you came in. It' s the same as the material I sent to you electronically last week. …
…
Although I have spoken about these policies in relatively abstract terms, they are part of our history, as shown in exhibit 7. The Federal Reserve has always appreciated the importance of correctly aligning market expectations about the economy. In that regard, and as shown in the top left, one of the more sizable reactions in financial markets in the past few years to an FOMC decision followed the decision on May 6 not to change the overnight rate. The System has also been willing to put its balance sheet at risk to encourage appropriate expectations about interest rates or to calm fears about funds availability. As plotted at the top right, the Desk sold options on RPs for the weeks around the century date changethat totaled nearly $0.5 trillion of notional value. Given that the Desk already operates in all segments of the Treasury market, we wouldn' t have to move up a learning curve if instructed to increase purchases of longer-dated issues. …
…
The alternative approaches that would involve changes to how the Desk operates are summarized in exhibit 4. The alternatives that could be adopted while changing only the composition of the balance sheet are listed in the top panel. These include (1) extending the average maturity of the outright holdings in the SOMA, (2) setting explicit ceilings on longer-term Treasury yields, and (3) using derivative instruments. Because only the composition of the balance sheet changes, excess reserves can be kept at low levels and under the Desk' s control, allowing the Desk to continue targeting a positive funds rate. …"
Blah, blah, blah...
and when the Pound sterling lost it's reserve status folks holding Pounds or any asset priced in Pounds lost 60% of their wealth and purchasing power overnight.
Full faith and credit.
Same as it ever was.
http://www.federalreserve.gov/monetarypolicy/files/FOMC20030625meeting.p...
"the Federal Reserve could coordinate its policy with the Administration and the Congress to encourage, say, tax cuts that would be directly financed by money creation. You can see why I put this list last. These options would change how we are viewed in financial markets, involve credit judgments of a form we are not used to, perhaps smack of desperation, and pull us into a tighter relationship with other parts of the government. But they are available if you felt the other, more traditional forms of monetary stimulus would be inadequate to the situation
…
The Committee could sanction the use of various derivative instruments on conventional Desk operations as a way to influence longer-term yields,which is outlined in exhibit 8. Options of some form are a possibility, as are forward operations. For example, we could sell a sequence of options on term RPs, covering interlocking time segments that collectively extend as far into the future as desired.In this way, longer-term yields could be influenced and a visible signal of the Fed' s desired path of interest rates could be demonstrated. Forward operations in term RPs could be structured in a similar fashion. Alternatively, we could sell put options on longer-term Treasury securities at strike prices associated with desired longer-term yields. Of course, the operating objectives set for the sale of derivative instruments would determine their proper structure and should be carefully formulated first."
What I'm trying to point out is that Bernanke and FOMC have alrady had to commit to issuing IR protection to their own member banks because faith in the FED itself is dwindling.
IMHO, QE proves that the US Government already cannot pay off or pay the vig or even roll over the existing debt.
They are running out of time...
The FED -the authority that supposedly controls interest rates- has already had to issue IR protection.
This would also create a two-tiered market where one rate is paid on Treasury Debt issued sans the IR and a different effective rate is paid on Treasury Debt with an IR 'side-letter'.
The difference between selective interest rates and selective defaults or selective restructuring is????
Ah yes, I see, there is no difference because when fraud is the status quo, possession is the law.
Of course, Japan has been "running out of time" for 30+ years. technically, so has the Fed since 1971, and yet here we are.
LOP, normally I don't discuss my trades. When you mentioned "pound sterling"I got excited.
Word to the wise... You've all heard: "Possession is nine tenths of the Law". Well, that only applies when you have a genuine Rule of Law.
But, "When you have no real Rule of Law, but have Law of Rule, possession is ten tenths of the Law".
Plan and invest accordingly.
Footnotes are where the game is won or lost....
Answer: On day one drop $1 billion on the streets of NYC, on day 2 drop $10 billion, on day 3 drop $1 trillion, on day 4 drop $100 trillion; when will the people of NYC stop caring or even get angry that someone is droping money all over their streets? Or do you think someone will still be waiting on day 5 for a money drop so they can make bank.
Infinite is a dream and a strawman. No one will or can print anyware near what they think they can, before loseing everything they think they have. Its a trick to get people to buy or sell something you want them to buy or sell.
Japan's Abe is finding that out we type.
1 Sweet answer. No one will or can print anyware near what they think they can, before loseing everything they think they have There are limits to a limitless endeavor.
Insurance companies. "Required by law to hold them as the collateral." The only exception being the you know who of course.
They are VERY aggressive buyers of debt it they feel properly incentivized. Annuities are a very valuable asset...paying out six percent in this yield environment? ROCK STARS!
No one here has even mentioned the product. If I were to see another swoon in the economy though I'd definitely start doing some research on Prudential.
Convert your pensions into gold and silver coins/bars before it's too late.
Diamonds are forever, and a girl's best friend.
Yellen prefers to invest in cubic zarconia and USD$.
Diamonds are worthless. Try selling one.
Where are you trying to sell it?
Walmart?
Diamonds are actually plentiful; the entire mythology of their "value" was created by DeBeers, who worked closely with Madison Ave and Hollywood in the mid 1900s.
Delve into the history of how the "tradition" of a surprise wedding proposal, capped off by the presentation of a diamond engagement ring, and you will see how it was manufactured entirely by DeBeers, literally out of thin air (the analogy to fiat money is ironic). How the slogan "How can 3 months salary last forever" was a product of marketing men in New York. How the idea that the proposal should be a surprise made by the groom-to-be, because vast tomes of marketing research indicated that the man was far more likely to overspend than the woman. The techniques used are Bernaysian, elevated to a high art.
Other precious gemstones, like rubies, are actually rare, and you could argue the merits of their "worth" or "value." Diamonds, on the other hand, are in abundant supply; their price is a function of the DeBeers cartel controlling the global market with an iron hand (though their influence has gradually been reduced in recent years), coupled with the marketing techniques above that have ingrained themselves into the social consciousness, convincing zombie sheeple men and women alike that diamonds are rare and expensive.
Meanwhile, the industrial processes for making synthetic diamonds improves every year.
+1 for knowing Edward Bernays and the monster he unleashed.
Psychoanalytic Theory was huge and Bernays was just one of hundreds of thinkers that manifested out of that particular movement that Breuer and Freud engineered. The grandfather of Psychoanalytic Theory is Joseph Breuer but everyone attributes the genesis to Freud. Read Studies in Hysteria by Breuer and Freud.
Bernays was by no means responsible for any monsters being released. All monsters are in your unconscious mind if one follows the psychoanalytic orthodoxy that was promulgated by Freud. Bernays was just applying the principles he had learned from Freud. Guaranteed, he made more money than Freud.
https://archive.org/details/LiberNovus-TheRedBookjung
Expand your perspective. Read and enjoy The Red Book.
They aren't worthless, they are just worth about 30% of what you paid for them.
Great for "cross border operations." Just "where" them...
'Just "where" them'
It's easier to just wear them...useless though they may be.
You can only buy/sell, if you do the proper 'conversion': Need to convert to being a Tribesman.
A bit sarcastic, but true. I have this as inside info from a friendly Tribesman in Manhattan's Diamond District.
p.s. For Insiders, these 'structured carbon units' act as a kind of hard (pun intended) crypto-currency. A kind of a Hawala for Insiders. Very useful for global travel & transactions, in lieu of cash or PM. Outsiders still use them for global activities, but take a huge hit on the margins (since they don't control the world market for this asset class).
I thought just a few months ago it was all about getting people into bawnds, now it's not workin out so good? So they want everyone to pile into all-time high (totally non-bubbly tho) stawks I guess? Fuck all this shit.
Stocks are a NO-RECOURSE investment.
Did I say investment?
Shit, I'm sorry, I meant to say POS.
what they want is odd/even buying/selling. sell all your bonds and buy stocks on odd days, reverse that on even days. repeat until bankrupt.
hope you all just caught that rocket launch of the equity markets on no fucking news....
and the last minute slam of Silver on the close of the fucking Crimex...
all perfectly above board...
http://www.kitco.com/charts/livesilver.html
Could the writing of this be any more convoluted? Can I suggest we have a campaign to fund an editor. I think this would have support.
Anything that pricks the bubble and destroys the Fed, I'm all for it. Hope it happens sooner rather than later.
FUCK THE FED, both of them.
Colonel - if you frequent Berlin, perhaps its better to use public transportation?
Anti-Fed, pro-peace activist's car fire bombed in Berlin.
http://m.youtube.com/watch?v=DucAAAA9yUw
Thanks I'll take my chances, I'm not scurred.
Collateral shortage? Is there any other reason for this than mulitple hypothecation?
Well, if you say it that way it sounds so...umm...judgemental.
Sometimes I look at this convoluted, complex financial system and think "What if all of that money and energy had been put into industries that actually built shit". This is all about churning numbers to make bigger numbers, and does nothing to benefit the human condition.
Fuck this, I'm going to try to have a decent weekend with actual people, doing actual stuff.
Not sure I understand this completely, but I should. Is the idea that the Fed does Naked Selling during Repos?
It could come up short, as too many people try to redeem, at higher prices?
Same basic problem that got the rest of us banned from Naked Selling, except that they have to deliver bonds they don't have. I would think they could just "print" the money, as long as somebody is willing to sell.
I guess, if nobody wants to sell, regardless of the prices, it would be a problem. Still confused.
There is no confusion. All that matters is LIQUIDITY.
If you're North Dakota, Wall Street...even Washington...they're swimming in liquidity. Lehman failed but they they thought they had a financial instrument that meant "liquidity" (a CDS or CDO or Dark Pool of Zorgon or something.). But actual liquidity is in FACT liquid too...oil, natural gas, a pipeline, something that throws off cash...anything the opposite of debt.
This is not complicated. Gold is great if you think we're looking at a bad response to massive default risk...but gold has failed (somewhat) because QE...while throwing all of us here under the bus...did solve the liquidity problem (Jewish Confetti, soak up all the bad paper...and lest we forget TARP, TALF, BARF, RALPH...you name it, we had it all back in the day. Unfortunately for Europe "they Trichet"...the Central Bank equivalent of Baghdad Bob.) not saying I agree with any of this...just saying if you want to understand the problem just look at US oil and natural gas production numbers. Government spending (inflation) also generates "liquidity" in the sense that Banks will borrow short to lend long. (Carry.)
There is a point where this will show up in a savings account. Interestingly "return on savings is a headwind to growth"...which is why treasuries are so valuable here. If Americans just start saving (we know they're not spending!) then those yields can come down without any help from the Fed whatsoever.
It is only natural if you're generating inflation that people will "want" (be forced?) to save.
Gold failed because it is being manipulated, quite independently from QE. Check out the Wikileaks Beijing cable confirming the fact.
I am confused. I think ZH has lost its mind. I have been reading here about the government creating potential tax for withdrawing funds from the bond market to stem a "run for the door" situation and today I read we are being manipulated by the government to sell our bonds. WTF!!! Which is it??
You missed the followup article on that. (I'm not being sarcastic about this)
http://www.zerohedge.com/news/2014-06-19/fed-trying-create-bond-run-pani...
But there was a paper by a fed member saying that imposing a fee would be a way to induce some selling, sort of selling before the fee is imposed.
This allows a few more bonds to enter the market so that those who need them can buy them, without the fed having to raise rates and risk breaking other big expensive shit.
at least that's my take on it.
Ah! Thanks that makes more since. Still a clusterfuck
A bit added clarification for normal folk:
They were just jawboning. The act of talking about gating, rather than actually doing it, was expected to create a panic run.
There is no A(wanting to keep people in) and B(wanting more people to sell) and wanting two different things, it's using 'talk of A' to hopeful create 'act of B'.
Only B was wanted, A was gimmick talk(false alarm if you will) to get people to do B.
A high school teacher used to make us write JMJ at the top of every page in our work books.
JMJ = Jesus Mary Joseph
Now I know she was teaching me to curse politely, 'cause every day I read ZH and mentally shout "Jesus Mary Joseph!! How much longer can this ponzi scheme, that I do not fully grasp, grow?"
Why? Because its a huge, massive, Global, Compartmetalized Ponzi Centrailized Banking Scheme. That's why.
Geez, man, you make it sounds like it's a bad thing! </sarc>
Two articles posted here tells me this "Free Market" is rigged beyond anyone's imagination.
1. http://www.zerohedge.com/news/2014-01-12/great-buyback-surge-over-corpor...
2. http://www.zerohedge.com/news/2014-06-15/cluster-central-banks-have-secr...
N'fuff said.
" delivery fails in the Treasury market have surged recently "
They should have contracted with Fed EX and UPS instead of the U.S. postal service.
What can Brown do for you?
"which merely exacerbates the problem the Fed has"
Funny how that works.
And, this is why ZeroHedge is the Bestest!
now, not only does the FRB's come to ZH, but the MSM, and Wall Streets' Guru's, sniffing out everything with their moneyhound trained hook'd noses, while combing the archives fevorishly... looking for Tyler's truths , gems, and wisdomism
Excellent
Bravo Tyler
Can't they womp up some derivative that converts a long bond into a short bond repo?
But I agree it's an inventory shortage and squeeze that has been going on for some weeks now, but Cthulhu only knows what it "means".
The Fed says "The market is wrong."
No shit Sherlock! What was your first clue?
In related news, the Fed says it is starting to notice a connection between the ongoing cycles of light and darkness to that big yellow ball-thingy in the sky. A spokesman for the Fed acknowledged that "Its too early to be certain, but there DOES seem to be a pattern forming here that bears watching."
The Dow staged a late-day rally on the announcement, as investors piled into equities, driving the index into record territory.
After what we have seen the last 6 years who actually believes the Fed is in a panic? If there were such a problem, there really isn't, they would just change the rules, or backstop other collateral or allow their Treausury holdings to be pledged by others, or on and on. They would never let a "shortage" of debt crater this thing - that's laughable. If all else fails, Uncle Sam can just spend some more. The system fails when they can't hide systematic inflation and there is rioting in the streets or the dollar loses its status as the reserve currency - not before because until that happens there is no limit to how many dollars they can pump or how high they can push it
Yes there is a limit. Like a sharp turn on a country road, go to fast and you fined out where the ditch is and whats in it.
The problem is slowly bleeding them to death... The USD is losing its wordly powers (every week other countries are making deals to side-step the USD); without such powers they are, well, powerless...
Yes, its a beautiful thing.
well if I was a fed chairman being a give a fuck kinda person I would let slip that the taper is possibly going to double next month that should get some animal spirits going. course I'd be loaded up on vix futures somewhere first
+1 for "being a give a fuck kinda person" he he heeeeee
Wouldn't that just drive more investors out of long-term bonds into short-term paper?
Rising rates are bullshit just like the media propoganda about economic recovery as GDP drops.There is no economic recovery and there never will be.All you have to do is add in City,Municipal,County,State and Federal Debts and you have your answer.Any rise in interest rates will kill everything in sight that's left.There's no tax money to support Rome's budget,it's that simple.If you add another trillion onto the Federal debt for every percentage point higher,it's only part of the picture because right now it's high taxes that's still driving Corporations offshore.Don't forget that in the U.S. they put you in prison for not paying taxes.In Canada,Corporations that pay tax in another jurisdication can bring that money back into the country without paying again.The U.S. taxes twice so all the trillions are sitting offshore along with most of the other U.S. currency.It's not being reinvested in America but everywhere else.In Canada you can include your owed taxes in personal bankruptcy and it's all written off when you go under.
They need to keep those trillions offshore or someplace other than the US.
50% inflation would make the game harder to play.
Somebody might start thinking something is fishy in Fedland.
There is no double taxation of repatriated profits. Any foreign taxes on profits are an allowable expense on US tax returns. Retention of foreign profits tax free by US corporations is a simple tax postponement scheme. Unless, or course, some corporate-dominated congress allows tax-free repatriation of profits as an incentive. There is no guarantee, of course, that such re-patriated profits will be used for capital investment in the US, instead of stock buybacks.
This statement: The irony of course of the Fed explaining how rates will rise faster is that it spooks stock investors who have grown used to exuberant liquidity supply and roitates them to bonds... which merely exacerbates the problem the Fed has.....cements in my mind a sort of tipping point - the kind of tipping point black swans are made of. I am of the much simpler mindset of - how can something that didn't start well, ever actually end well? Fuck, all collateral has been diluted. This collateral problem in the repo market is like an engineering problem comprised of a bunch of asshats trying to play by the rules while not actually playing by the rules. The entire debacle started with theft and corruption and I have no reason to think or believe it will end any different. But hey! Its Friday! Happy Friday ZH'ers!!
lulz
When churn gets displaced by apathy they will say anything to
bring back churn. Repo Zillionaires, that's the ticket.
p.s. use pitchforks and tell em' you learned it on ZeroHedge
And that's what it's all about. Just keep things moving. Transaction volume is in decline. The slower the shell is moved about the weaker becomes their hand/deceptions.
It's about accumulating enough votes to over whelm your opponent.
When I walk gently to the beach this morning, I'll give thanks to GOD, and my wonderful Mother.
Who am I, without my DNA?
before 2008 the REPO market was the big thing, like the Plunge Protection Team, but after 2008 these toys were put away. POMO was rare, and hardly spoken of. the mogambo guru would rail on about the expansion of these temporary payday loans for the gamblers to go play the stock market casino. but it was all a matter of scale. 2008 blew the doors off all these minor tools in the feds handbag. and sure enough the fed will try to transition back to some of them but is pot going to satisfy a market hooked on heroin? even if it does work. is there a crisis in (the quality of) collateral? duhhhh! if the fed needs paper in the middle of the curve they can print money and buy that paper. the only thing that will stop them is a fiscal spending showdown. (and obama wants to spend 500M to fight ISIS, or ASTC (american sponsored terror contractors). well at least it gives the fed some breathing room to expand the monetary base. they could deliver the dollars directly to the Sunni rebels, but without congressional approval the transaction would not be complete. sorta like spending with an expired credit card.
The more you listen to these fools the more you realise they are just a bunch of silver haired old fucks with dementia. The illusion/delusion they live with is, is nothing short of astonishing.
Do not sell short date bonds. They are about to go tratospheric as every billionaire scrambles to park short term as he exits the SPT as the last ones stading gets closer and the musical chairs are crumbling to dust.
The SPY cannot still reach record highs with only IBM and APL stock buying, even at thier criminally insane levels.
The first big hitter that liquidates everything in stocks will pile into long and short and the curve will turn completely upside down.
Then its just a matter of time as everyone else follows and the fuckweitted yellen bitch hopefully leaps from the eccles bldg
The S&P 500 are being bloated not only by IBM and APL. Utilities especially are being snatched up in the search for yield.
Overwhelmed at times by the jargon on Zerohedge. Ok though, gives me a chance to learn.
Here is an aritcle about settlement fails Click here to go to the NY FED's article on Settlement Fails.
Here is an article about the US Repurchase Argreement Market Click here to go to NY FED's article.
Here is the wiki on Hypothecation Click here to go to Wiki.
Show me a chart Bitch! I say usd starts to strengthen next week.
http://i.imgur.com/RfSOFmq.png
Thanks very much, CO, for the links, which explain how the Wall Street conglamorates have effectively nullified the Fed´s control over the money supply.
Why don't they print the fucking bonds. They can print anything they fucking want any time they want.