How The Fed "Engineered A Massive Squeeze In The Markets"? With The Help Of 683x Leverage

Tyler Durden's picture

Citi's Matt King once again hits it out of the ballpark.

After laying out the fundamental problems caused by central planning, namely a historic plunge in yields, and a collapse in global growth...


... a decline in consumer spending and a collapse in investment, offset by a surge in buybacks and new debt issuance.


Matt King presents the only response the central banks have: leave investors with nothing to buy.


Which he summarizes in 6 short words.

But how does buying a couple billion in sovereign bonds every month whether in the US, or Japan or Europe translate into record stock prices even as the global economy has not been this bad since the first Great Depression?After all, there are tens of trillions in securities across the globe (not counting the hundreds of trillions in derivatives).

Simple: when you manage a 693x leverage between a sovereign bond entry and a CCC bond exit, it is perhaps far more surprising that the S&P isn't artificial orders of magnitude higher.

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TeamDepends's picture

Inside job. "WELL DUH".

weburke's picture

Pity really, how many billions of us are there?   And such a lovely retail world to walk around in. 

Thanks ZH for the fucking wild ride. 



Automatic Choke's picture

nothing to buy except a new "iWatch", of course....

indygo55's picture

"nothing to buy except a new "iWatch", of course...."

Yeah! And well,,,,,STOCKS!! 

blindfaith's picture



then buy nothing...what is so hard about sitting on the sideline?  Burning a hole in your pocket is just another slogan that was feed to us to laugh at while we spent.

DavidC's picture

The Fed doesn't operate in a total vacuum and it WILL fail at some point. Who knows when? I don't, but it WILL fail.


Xibalba's picture

already happened....just a slow motion fail

RexZeedog's picture

It's been failing for some time now. People are learning to think for themselves and abandoning any sense of fealty to "the system". These days, the better plan is to learn to be a leader for yourself and to stop depending on external forces to make things work for you. Read this training guide:

Goat Roper's picture
Goat Roper (not verified) Apr 26, 2015 7:06 PM

Zero Hedge, I'm scared! ...tell me a bedtime story Uncle Tyler...

*sits in corner rocking back and forth while sucking thumb*

sodbuster's picture

Here's your bedtime story- it's a lot like life, in general.

 This kid just got of school and he got into the car with his mom. 
The mom asks, "What did you do at school today?" 
The kid replies, "I had sex with the teacher." 
The mom was furious so when they got home, she told him to go to his room and wait for his father to come home. 
Well the father came home from work a couple hours later and the mother told him what their son said. 
The dad walks up to his sons room and says, "Son, I'm proud of you. I'm going to buy you a new bike." 
Later that day they got the bike and the father asks, "Would you like to try it out?" The son replies, "Not now. My butt still hurts.

Racer's picture

The last throws of a dying corpse struggling to keep up the pretense the FED is still in charge

adr's picture

Thanks to the Fed and the Wall Street shysters the world economy is far out of balance. Commodities have been overvalued to the point that true commerce is impossible and the people responsible for real economic growth can no longer afford to consume.

It is true that many commodities have dropped in price, however many have dropped only a small fraction of the insane valuations caused by the Fed. If the price declines do not result in increased demand, then the price must fall further. If that means blowing up the idiotic firms that bet on higher prices, then so be it. That is how the economy recovers, burning the brush.

The speculators represent the undergrowth choking the forest to death. The Fed is the government thinking they need to put out every fire, because some millionaire's mansion might be lost.

Fuck'em, I'll light the fire. 

Goat Roper's picture
Goat Roper (not verified) Apr 26, 2015 7:13 PM

...because 683x leverage is like over 2 seconds of sleep everytime I blink! :o

Oldwood's picture

The public's fear of another economic collapse, especially one significantly worse than the last, will be all they need to justify digital currency and ultimately a new world currency, one they can print with impunity, one that will never see the pressure of currency exchange "markets" ever again.

They will be forced to steal our money to save it.

Tasty Sandwich's picture

If we have supply chain failures (empty Wal-Mart shelves), whatever monetary scheme they come up with won't really matter.

Oldwood's picture

The only thing that gets people out of bed and off to work everyday is the belief that they will be paid with real money, something they can pay their bills with and buy food. Our government has a stranglehold on this perception. It is a closed currency market. The vast majority of people are 100% dependent on the full faith and credit of their government...there is no alternative. The supply chain will slow but not stop. We will see a real increase in costs of those things we need to live, and a much harder time of earning.

Our government has proven over the last decade that they can and will maintain the illusion, no matter the cost.

Tasty Sandwich's picture

The just-in-time supply chain is quite fragile.

Stores rely on several deliveries by trucks every week.

A major disruption of the oil supply is all it would take for that system to collapse.

They have kept the illusion going, but that doesn't mean they will keep it going forever.

Eliminating paper currency and/or instituting a new world currency would completely undermine the confidence upon which that illusion rests.

will ling's picture
will ling (not verified) Apr 26, 2015 7:18 PM

" once upon a time there were 10's of millions of  banksters, politicians, bureaucrats, etc. who thought they were gonna get away with their egregious, rapacious, and on and on behavior. then........   , and now they are headless, and all of the billions of humankind have learned an important lesson. "

MonetaryApostate's picture

There are people there who are smart enough to organize a serious armed assault on the elite, if their children don't eat them first... (More than likely)

ISEEIT's picture

Communism doesn't work?

Whoud'a thunked it?

Slaughter comes next.

MonetaryApostate's picture

Then God steps in.... (GAME OVER)

Chuck Knoblauch's picture

Plenty of bait on the line for shorts this week.

Who's diving in first?

A seal versus a shark, who wins?

Hint - the seal never wins.

Oldwood's picture

All that they need to maintain the illusion is players.

Chuck Knoblauch's picture

18 year old seals with student loan debt to gamble among sharks.

They'd have better luck making the swim between Africa and Australia without geting eaten alive.

q99x2's picture

Arrest them. They control the money. They are responsible for the deaths of 2 million mid easterners and the militarization of the US police. With out their control the move towards WWIII would not be possible. WWIII is the war of the banksters against the world. We will come rejoicing bringing in the thieves.

Seek_Truth's picture

"Arrest them"

Is this an invocation to the arresting sprits or something?

Who, exactly, is going to "arrest them"?

No one, that's who.

SillySalesmanQuestion's picture

Wow, only 683x...I actually thought it would be much more than that.

max2205's picture

0's and ones 

yogibear's picture

Buy-backs and massive IPOs to flood the market with garbage shares.

A rinse and repeat of the last bubble. Just larger.

cwsuisse's picture

Help! I would be grateful for an explanation how sovereign bond purchases translate into higher stock prices by a 693x leverage between sovereign bond entry and CCC bond exit?

falga's picture

finally someone starting to understand the helicopter effect of monetization as EU monetizes at the rate of 50 Billiion Euro per month forcing negative interest in EU land bonds. This forces investors to either hold cash on deposit - oh no negative too... or in cash, oh no that is not allowed!  So next stop is equities until we move the market to levles that are truly overbought and then we shall move to commodities...

Dr.Engineer's picture

So this is revalational.  I knew there was leverage in the system but this exceeds my wildest speculations.  Wow. This means the system is inherently unstable, with ALL changes being multiplied orders of magnitude.  The future swings will be awesome.

Rehypothecation would add to this as another dimension because this is ONLY ONE DIMENSIONAL. 

Wouldn't surprise me now if it were 10,000 paper oz of gold to a physical oz.

This system is gonna burn from the inside out and not from the outside in.


moratar's picture
moratar (not verified) Dr.Engineer Apr 27, 2015 7:50 AM

So theoreticaly 1 (physical) oz  of gold is worth atm hmm 12,000,000 usd :) funny, even funnier that it might be true.

moratar's picture
moratar (not verified) Apr 27, 2015 7:47 AM

Maybe FED is not squeezing anything, but:

Buying real production companies with fake money. Reversal of privatization.