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The Day The POMO Died

Tyler Durden's picture




 

For those who follow the Fed's daily intervention in the stock market, today is a historic, if bittersweet day: this is the day when the Permanent Open Market Operations (or POMO) as a result of the QE3 program launched in December 2012, finally die (at least until they are reincarnated yet again). Today, at 11:00 am, the NY Fed's market desk will conclude its 933rd POMO since August 25 of 2005, when it will inject just about a $1 billion in the stock market in the form of a $0.85-$1.05 billion buyback of long-end bonds. And with that, Simon Potter's open market operations desk located on the 9th floor of Liberty 33, will be put on temporary hiatus.

A chart showing the daily history and 30-day average of the Fed's direct intervention in capital markets and mispricing of risk is shown below.

 

And with that, QE3 will end.

Or not. Recall the most important chart for the Fed's centrally-planned regime of the past 6 years is the one "correlating" the performance of the S&P500 with the size of the Fed's balance sheet.

 

And this is what happens when the Fed threatens to pull away the punchbowl...

 

... in short relentless "Risk On" quite quickly becomes Risk Off the moment QE comes to a close. More importantly, stock market levitation most certainly is put on hold if and when the Fed isn't injecting daily liquidity (because "fundamentals.")

And with hopes of the ECB picking up the torch from the Fed and proceeding to monetize public debt rapidly fading, especially after such headlines:

  • ECB SOURCES CITE BARRIERS TO QE, NEED TO LET OLD MEASURES WORK

... one can only hope the BOJ itself doesn't taper any time soon or else all bets are off.

So while we all look forward to today's celebration when the Fed will step away from the market, we will keep it muted because we know it is only a matter of time, or a 10% or so correction, before Yellen rushes to the rescue of stocks everywhere.

After all, that's all the Fed has left...

 

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Mon, 10/27/2014 - 08:51 | 5381630 knukles
knukles's picture

So the Permanence of the Permanent was But Transitory?
almost seems Biblical as man's delusions of his control.... after all, the Bernak and such enablers seem to believe they are something extraordinarily significant but alas will likewise turn to ashes and dust.  Go Go Mario!  Assholes.

Mon, 10/27/2014 - 08:51 | 5381651 GetZeeGold
GetZeeGold's picture

 

 

Just one more hit....should do the trick.

Mon, 10/27/2014 - 08:54 | 5381657 cossack55
cossack55's picture

Alas, poor POMO, farewell.  We barely knowed ya.

Mon, 10/27/2014 - 08:57 | 5381668 Greenskeeper_Carl
Greenskeeper_Carl's picture

The POMO is dead. Long live the new POMO

Mon, 10/27/2014 - 08:58 | 5381676 Manthong
Manthong's picture

Fed BS on the chart.

How apropos.

Mon, 10/27/2014 - 09:09 | 5381725 Headbanger
Headbanger's picture

Now where is our favorite QE POMO pom pom boy Fonz ??

Where could she be??

LMFAO!

Mon, 10/27/2014 - 09:23 | 5381775 toady
toady's picture

Great, more layoffs! What kind of marketable skills does a pomo dude have?

Mon, 10/27/2014 - 10:13 | 5381954 Headbanger
Headbanger's picture

Cheerleader,  Male stripper....

Just ask Fonz..

Mon, 10/27/2014 - 11:04 | 5382181 fuu
fuu's picture

At least we still have TOMO.

Mon, 10/27/2014 - 13:34 | 5382910 SafelyGraze
SafelyGraze's picture

the end of pomo will (finally!) allow all that money on the sidelines to begin rotating into bonds without the fed elbowing it out of the way

 

Mon, 10/27/2014 - 09:26 | 5381780 Divided States ...
Divided States of America's picture

Hey Tyler, tell me about it the day when the FED has died

Mon, 10/27/2014 - 09:38 | 5381835 new game
new game's picture

how does the fed unload 4+ trillion of junk grade debt backed "assets"? just asking,ha...

Mon, 10/27/2014 - 09:57 | 5381892 Keyser
Keyser's picture

Not to worry, once POMO dries up, the PPT will take over... Watch for daily losses to turn into gains during the power hour, every stinking day... 

Mon, 10/27/2014 - 10:15 | 5381959 philipat
philipat's picture

So what will poor Kevin Hnery do now? Especially so soon after having moved to Chicago?

Mon, 10/27/2014 - 10:16 | 5381966 gatorengineer
gatorengineer's picture

That one is easy let equities drop 20-30 percent and unload your script into those seeking safe haven..........

Tue, 10/28/2014 - 14:25 | 5386792 Helix6
Helix6's picture

Ain't happening.  The bonds will be kept to maturity, then rolled over.  Th MBS will be kept to maturity, then replaced by new ones.

Mon, 10/27/2014 - 09:48 | 5381714 Cacete de Ouro
Cacete de Ouro's picture

For a plunging Potter POMO time, call 212-720-6309 and ask for Simon. Transactions are between consenting adults, (plunge) protection must be used at all times, discretion assured.

http://www.newyorkfed.org/research/economists/potter/potter_cv.pdf

Mon, 10/27/2014 - 09:50 | 5381873 N0TME
N0TME's picture

.org??? I thought FRB was .gov. Damn conspiracy theorists!!!  /sarc

Mon, 10/27/2014 - 09:39 | 5381836 LawsofPhysics
LawsofPhysics's picture

As unethical as POMO is, ZIRP is far, far more destructive to real capital and savers, great for oligarchs.

 

Mon, 10/27/2014 - 09:48 | 5381870 magnetosphere
magnetosphere's picture

huh?  in a steady state economy there is no such thing as everyone earning a return on capital.  interest rates must be zero forever.

Mon, 10/27/2014 - 10:00 | 5381893 LawsofPhysics
LawsofPhysics's picture

No one is in a "steady state"...  ...sorry the laws of physics and Nature don't work like that.

Every year we see huge returns from our crops.

I guess it depends on how you define "captial" doesn't it motherfucker?

There is always a cost for capital, period.  Interest rates must reflect that or we unleash massive moral hazard.

If you are going to do ZIRP, then give everyone access to the same low interest rate motherfucker.

See the problem yet?

Mon, 10/27/2014 - 10:19 | 5381973 gatorengineer
gatorengineer's picture

Not sure where you are living the cost for capital, has been NEGATIVE for years now.

And if you are a farmer, what about the moral hazard of your taxpayer back "Crop Insurance"

Mon, 10/27/2014 - 10:28 | 5381996 LawsofPhysics
LawsofPhysics's picture

We have been profittable for years asshole.  Talk to the stupid fucks who go crying to the government, it isn't us.

Let me guess, you don't have insurance on your home or business.  Tell me another one motherfucker, the government forces everyone to have it.  Go talk to your local "representation" about this bullshit if you don't like it.

Some will work, eat and live, others will not.

Same as it ever was.

Mon, 10/27/2014 - 10:32 | 5382011 magnetosphere
magnetosphere's picture

steady state:  you produce the same amount of crops this year as last year.  exceptional circumstances excluded, all natural systems are in steady state.  you've been drinking too much banker koolaid propaganda, anything other than zero interest rates is an infinitely compounding exponential ponzi scheme.

Mon, 10/27/2014 - 09:37 | 5381832 Sam Clemons
Sam Clemons's picture

Lots of 9s and 33s in this article.

Mon, 10/27/2014 - 08:55 | 5381660 BringOnTheAsteroid
BringOnTheAsteroid's picture

You can see it Bernanke's eyes, he knows he's fucked up big time

Mon, 10/27/2014 - 09:06 | 5381711 Unknown Poster
Unknown Poster's picture

At 250k a blather, maybe not.

Mon, 10/27/2014 - 09:58 | 5381896 Keyser
Keyser's picture

The Bernank got his and like any good Jew, the rest of you can go fuck yourself... 

Mon, 10/27/2014 - 09:23 | 5381767 ZH Snob
ZH Snob's picture

bullard showed up today at the POMO office with his staff.

not so fast.  this shit's mine, he was quoted, freakin' pussies have no idea how to print, but I'll show 'em.  it's nothing to be ashamed of, he continued, everyone loves more money, right?

Mon, 10/27/2014 - 08:46 | 5381631 spastic_colon
spastic_colon's picture

it actually ends on wednesday after the verbal POMO

Mon, 10/27/2014 - 08:48 | 5381643 Keltner Channel Surf
Keltner Channel Surf's picture

As the tears begin their flow at the death of QE, going forward will Bernanke rhyme with ‘hanky’ or ‘wonky’ ?

Mon, 10/27/2014 - 09:49 | 5381867 Winston Churchill
Winston Churchill's picture

Spank me.

Mon, 10/27/2014 - 08:50 | 5381645 Philo Beddoe
Philo Beddoe's picture

Just to be sure, I am going to take my Chevy to the levy and check the water level. 

Mon, 10/27/2014 - 10:14 | 5381951 HardlyZero
HardlyZero's picture

Dead Pomo and Bears coming out will make Wallstreet Wolves HOWL !!

The Wolves will be out this afternoon and tonight.

Roll up your windows and low ride around town using back streets....not front street.

Mon, 10/27/2014 - 08:49 | 5381646 LULZBank
LULZBank's picture

Last day to cash out?

Tue, 10/28/2014 - 14:27 | 5386804 Helix6
Helix6's picture

Mmmmmm...  Could be....

Mon, 10/27/2014 - 09:05 | 5381650 Global Hunter
Global Hunter's picture

(edit) The Day the Dollar Die by Peter Tosh (1979)

http://www.youtube.com/watch?v=EtwmjcsQi1E

Stepping Razor.

Mon, 10/27/2014 - 08:52 | 5381654 Notsobadwlad
Notsobadwlad's picture

Now, if only the US spy agencies would stop supporting GOOG, FB, AAPL, MSFT and others with investment and business.

Mon, 10/27/2014 - 09:44 | 5381845 new game
new game's picture

no worry hitlary will keep the "assets" market share growing facsistly to the goal. 1984 +32=2016, new prez and sprint to the demiss of your last freedom-disco chit chat...

Mon, 10/27/2014 - 10:00 | 5381904 LawsofPhysics
LawsofPhysics's picture

or stop supporting the MIC.  experience tells me that is were the real money is.

Mon, 10/27/2014 - 08:55 | 5381665 SickDollar
SickDollar's picture

this is  a Temp short live celebration

I wonder if they are going to print money behind closed doors

 

Mon, 10/27/2014 - 09:21 | 5381770 PartysOver
PartysOver's picture

Belgum, Belgum, Belgum.  Long live Belgum!

Mon, 10/27/2014 - 09:53 | 5381880 new game
new game's picture

somebody has to "buy the shit".seems like all of us, got dolla?

Mon, 10/27/2014 - 08:56 | 5381666 wmbz
wmbz's picture

Over? It's not over, was it over when the Germans bombed Pearl Harbor?

Hell no!

Mon, 10/27/2014 - 08:56 | 5381669 SickDollar
SickDollar's picture

 you mean  Japan not Germany

Mon, 10/27/2014 - 09:00 | 5381682 NoVa
NoVa's picture

Animal House - 

Mon, 10/27/2014 - 09:14 | 5381737 GetZeeGold
GetZeeGold's picture

 

 

Damn Luftwaffe......we will never forget!

Mon, 10/27/2014 - 09:14 | 5381744 LULZBank
LULZBank's picture

Animal House - is not a country.

Mon, 10/27/2014 - 09:21 | 5381773 TheReplacement
TheReplacement's picture

No but it is a reference that you apparently missed.

Mon, 10/27/2014 - 09:32 | 5381815 LULZBank
LULZBank's picture

Sorry, nobody gave me any reference here.

Mon, 10/27/2014 - 09:43 | 5381840 Terminus C
Terminus C's picture

Animal House is a movie about college students.  The quote above is from one such "student".  IMHO an appropriate analogy of our modern predicament.

Mon, 10/27/2014 - 10:02 | 5381905 GetZeeGold
GetZeeGold's picture

 

 

 

Forget it......he's rolling.

 

http://www.youtube.com/watch?v=59HD8UPl_3Q

Mon, 10/27/2014 - 10:19 | 5381967 HardlyZero
HardlyZero's picture

Bluto helped Flounder while crying about the situation, Flounder who is the new Czar.

Mon, 10/27/2014 - 10:21 | 5381981 GetZeeGold
GetZeeGold's picture

 

 

 

No worries......he's on double secret probation.

Mon, 10/27/2014 - 11:00 | 5382153 PT
PT's picture

LULZBank:  Lemme put you out of your misery:

http://www.youtube.com/watch?v=V8lT1o0sDwI

Or otherwise, just watch the whole movie.  You may as well get up to speed.  That ref gets used a lot around here.

Mon, 10/27/2014 - 09:07 | 5381719 GoldenTool
GoldenTool's picture

That never gets old and there is always some tool that has to correct it.

Mon, 10/27/2014 - 08:58 | 5381670 Rainman
Rainman's picture

The ' methadone solution ' is for corporations to buy back even moar of their stawks at record setting highs... !! hahahaha

Mon, 10/27/2014 - 09:30 | 5381794 Tall Tom
Tall Tom's picture

You forgot the punch line...

 

And go into debt while buying back those outstanding shares.

 

At least there will be a little less suffering to some muppets who may have owned those shares after the company declares itself insolvent after the crash.

Mon, 10/27/2014 - 08:59 | 5381677 goldenbuddha454
goldenbuddha454's picture

We need more stimulus stimulating the stimuli with stimulingus.

Mon, 10/27/2014 - 08:58 | 5381681 NoVa
NoVa's picture

brings Don McLean's "The Day the Music Died" to memory - 

so, bye bye Miss American Pie - 

 

NoVa

Mon, 10/27/2014 - 09:01 | 5381683 eddiebe
eddiebe's picture

Whatever they tell us. POMO will never end.

Mon, 10/27/2014 - 09:01 | 5381685 ThisIsBob
ThisIsBob's picture

Why is the Fed thought to be more competent than the Pentagon, State,  WH, et al?  Is it because they are economists?  Lordy!

Mon, 10/27/2014 - 09:24 | 5381777 NoDebt
NoDebt's picture

Oh, absolutely.  They're much smarter than all of us, Bob.

We laugh at ancient civilizations with high priests who searched the sky and the entrails of goats, demanding human sacrifice to appease angry gods.  But they had the last laugh.  They all became economists and now run the banking system.

 

Mon, 10/27/2014 - 09:01 | 5381687 Pig Circus
Pig Circus's picture

I can't believe the market won't sell off this week as a kind of pre taper tantrum. Predicting this phoney market seems foolish but I see a shot across the bow by the addicts before Thursday's statement.

Maybe they can hold it up and even rally it after the statement so the bozo's on CNBC can tell the few fools that watch them that "see the market likes it" but that's not what I think happens.

Sell it hard this week and call yellens bluff and should she state Thursday that she is done conterfiting they really pound it. By Monday they will be announcing QE5.

Mon, 10/27/2014 - 09:01 | 5381688 techstrategy
techstrategy's picture

If the Fed had the gold,  it could put a bid under gold and range it up to reliquify the entire system.   It is the only semi stable path and will put the flows of not only the domestic but global economy back into balance 

Mon, 10/27/2014 - 09:01 | 5381689 cherry picker
cherry picker's picture

Best thing that could have happened.  Maybe these economists will quit and find other lines of work, they have had too much money to play with and too much influence.

In Bloomberg this morning there was an article about deflation and good deflation USA and bad deflation Europe.

I go to a store and the prices of some food items is ridiculous, especially meat and cheese.  I knew a few cattle farmers who had to sell their heards a few years ago as there was no money in it.

Wall Street is looking to become ground zero if this continues, especially if the people there have no clue whether inflation or deflation is good for the economy.  Maybe they should let the economy figure that out.

Mon, 10/27/2014 - 09:03 | 5381694 Jason T
Jason T's picture

It'll so be back once aggregate credit growth goes negative again and we see massive deflation..again.

Mon, 10/27/2014 - 09:03 | 5381696 whopper
whopper's picture

those scumbags will find some way to get their cyber money in there.

Mon, 10/27/2014 - 09:04 | 5381701 q99x2
q99x2's picture

Aye Jim. I'll be running this ship on fumes if you can't keep the trannies away from the selenium crystals.

Mon, 10/27/2014 - 09:08 | 5381716 Keltner Channel Surf
Keltner Channel Surf's picture

Don McLean begins to sing:

And the two folks I admired the most
Cramer and that Squawk Box host
Knew their careers were simply toast
The day the POMO died

They were singin’:
Bye-bye to Fed-induced highs
Bought some stocks at 10:15
But they fell from the sky
Them good ol’ boys got puts in GOOG and SPY
Sayin:  “this’ll be the day that it dies”

Mon, 10/27/2014 - 09:06 | 5381717 NYPoke
NYPoke's picture

The Fed has left The Building.

Mon, 10/27/2014 - 09:07 | 5381722 kowalli
kowalli's picture

Another BIG FAT LIE

Mon, 10/27/2014 - 10:24 | 5381995 GetZeeGold
GetZeeGold's picture

 

 

Do you suppose they sense we're on to them?

Mon, 10/27/2014 - 09:08 | 5381724 syntaxterror
syntaxterror's picture

Everyone relax. They're just "reworking the lease" or "closed for remodeling." QE will be back. New and improved.

Mon, 10/27/2014 - 09:24 | 5381782 TheReplacement
TheReplacement's picture

Word is they are fitting the print engine for either a turbo or a supercharger...

Mon, 10/27/2014 - 09:49 | 5381871 new game
new game's picture

yes sir or mam, they will be creating digital fiat some way some form, ask abe or da drag...

Mon, 10/27/2014 - 09:09 | 5381726 craus
craus's picture

Don't forget they can start a new QE without announcing it for a few months.

Like they did before.

Mon, 10/27/2014 - 09:11 | 5381728 g'kar
g'kar's picture

POMO may be gone, but Obola's BROMO will take it's place

Mon, 10/27/2014 - 09:11 | 5381729 mademesmile
mademesmile's picture

The key words are "temporary hiatus"

Mon, 10/27/2014 - 09:12 | 5381730 forwardho
forwardho's picture

Just as planned, The program bought time to finish the preps for a compleat overturn of the societal contract.

Ponder all that has been accomplished.

Without spending a dime of actual money.

Brilliant.

Mon, 10/27/2014 - 09:15 | 5381747 Oh regional Indian
Oh regional Indian's picture

Buy Buy  Ms. American Pie...

Mon, 10/27/2014 - 09:19 | 5381762 toros
toros's picture

Going short the SPY today, just for old-tyme sake.

Mon, 10/27/2014 - 09:22 | 5381772 buzzsaw99
buzzsaw99's picture

i could tell you how it would play out if we had a real market. i can also tell you how it will play out since we don't but most here already know that scenario so what's the point?

Mon, 10/27/2014 - 09:25 | 5381786 TheReplacement
TheReplacement's picture

Just BTFD already.

Mon, 10/27/2014 - 09:30 | 5381804 Johnny Dangereaux
Johnny Dangereaux's picture

Over/Under in days til the next QE...it is to Infinity, right?

Mon, 10/27/2014 - 09:52 | 5381869 JenkinsLane
JenkinsLane's picture

Paging Mr Miyagi, that's Mr Miyagi, please come to reception.....

 

[Wax on, wax off glasshopper.]

Mon, 10/27/2014 - 09:57 | 5381884 Goldbugger
Goldbugger's picture

The night they drove OLD POMO down. And all the market were singing....

http://www.youtube.com/watch?v=nnS9M03F-fA

 

Mon, 10/27/2014 - 10:01 | 5381911 Billy Sol Estes
Billy Sol Estes's picture

Buy the dip when the QE drip is temporarily paused.

Mon, 10/27/2014 - 10:22 | 5381984 alangreedspank
alangreedspank's picture

The Fed can always buy bonds from the secondary market without naming it or even announcing it. Half and half if they'd actually do it in a significant way IMO. Yeah, they'd might want to hide their uncertainity about the economy (doing it surreptitiously) OR they want the "soothing" effect of doing it, yet again, very publicly.

Who knows.

Mon, 10/27/2014 - 10:24 | 5381986 gatorengineer
gatorengineer's picture

All this means is that they think they can keep it up with HFT alone.....  The training wheels are comming off the Bots.....  This is the day that Skynet actually become sentient....

Mon, 10/27/2014 - 10:34 | 5382012 KingIdiot
KingIdiot's picture

First time poster!!!  What is QE3?  My instincts tell me the devil's dead.

 

Long Beach, Compton, Inglewooooooood!!!!

Mon, 10/27/2014 - 10:48 | 5382067 Sorry_about_Dresden
Sorry_about_Dresden's picture

.

Mon, 10/27/2014 - 10:47 | 5382083 Sorry_about_Dresden
Sorry_about_Dresden's picture

QE=Quantitative Easing....the Federal Reserve buys Treasury debt, mortgage backed securities and futures contracts in the market. 12 trillion dollars since 2008.

Mon, 10/27/2014 - 15:00 | 5383290 El Hosel
El Hosel's picture

QE = When Quince Edward is let out of the can to buy stocks with debt.

Mon, 10/27/2014 - 10:46 | 5382079 RabbitOne
RabbitOne's picture

Not to worry. The fed $perm Bank is prepared for a new QE artificial in-dollar-a-nation any time we need it… 

Tue, 10/28/2014 - 14:36 | 5386832 Helix6
Helix6's picture

OK, let's see if I've got this right.  The Fed stops buying treasuries from the banks, leaving them hanging out to dry.  The banks, knowing how this story goes, demand higher interest rates to cover their added risk, so ZIRP goes away with POMO.  The servicing cost of the Federal debt inexhorably escalates through the stratosphere...

Sounds like the proverbial rock-and-hard-place to me.  Unless Brussels steps in, I give it twelve months on the outside before POMO kicks in again.

And then, the abyss.

Tue, 10/28/2014 - 14:39 | 5386845 Helix6
Helix6's picture

By the way, how's your bond fund doing?

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