This page has been archived and commenting is disabled.
Art Cashin's Take On The Twist
As usual getting Art Cashin's pragmatic take on something as important as the Fed's decision (which at this rate will need to be revised very soon), is quite a morning coffee, or for some, "fermentation", treat.
From UBS' Art "The Chairman Of The Fermentation Committee Ain't Not Rogue Trader" Cashin
Analysis And Reaction On The Fly - This morning we will vary the format just a bit. Yesterday’s action appears to have been egregiously misinterpreted by a broad group of TV pundits.
There was an initial selloff that was clearly related to the FOMC and new policies (Operation Twist, etc.). That reaction ended around 2:45 and stocks began to rally sharply until about 3:10. Then stocks rolled over and went into near free-fall as the Euro plunged and the dollar soared. That plunge continued into the closing bell with nary a look back.
To put things in more real time style perspective here is an email I sent to some friends (trading types and journalists).
Untwisting “the twist”. As the closing bell approached Wednesday, I was approached by two different folks about the sharpening selloff and outlook for the Thursday opening.
I told Patti Domm of CNBC that only part of the selloff was a response to the Fed’s statement. I attributed more than half the anxiety to vague rumors out of Europe that things were rapidly unraveling. The rumors seemed to suggest that things in Greece or Italy – or both – were coming apart. I pointed to a violent spike up in the dollar (DXY) in the final hour of U.S. equity trading.
The other person was a floor friend who had a client with an error who was concerned about Thursday’s opening. Based on the above analysis (rumors/dollar), I suggested the opening could look ugly to downright nasty.
If you look at the minute by minute charts, the post Fed statement selloff had exhausted by 2:45 and stocks rallied into the beginning of the final hour.
As to “Operation Twist” – two key take-aways concerned mortgages and operational problems. The Fed will now reinvest maturing MBS payouts in new MBS purchases. They had been using the MBS dough to buy treasuries. By shifting mortgage payouts back into mortgages (and also targeting the 10 year Treasury) suggests the Fed is going “all in” to cut mortgages and dislodge a frozen real estate market. It would also put the Fed in a good spot to help facilitate a major government sponsored re-financing initiative (rumored for weeks). When Republicans awaken to this, expect a good deal of pushback on the “helping the re-election” mode.
The operational problem is in implementing “Twist” itself. Part of twist requires selling – or at least not buying short term treasuries (6 month to three years). At the same time, the Fed is committed to holding rates very low in this area until 2013. Somewhat like cross purposes.
Sorry for the lengthy note – but with TV pundits so far off base on what happened, I had to get my two cents in. Pull up a minute by minute chart and it will all jump off the page for you.
The Euro went into a virtual death spiral about 20 minutes before the Fed statement hit (and before stocks had any significant reaction of any kind).
That seems logical since the foreign exchange (currency) markets would be most sensitive to rumors on banks and bailouts.
- 14509 reads
- Printer-friendly version
- Send to friend
- advertisements -


BRK a five-figure stock again.
The Careless Whisper Morning Report
Pic Of The Day; "Wall Street Occupation" Protestor
http://gothamist.com/2011/09/21/ocuppy_wall_street_day_5.php#photo-2
Guatemala Hit By 3 Earthquakes
http://latino.foxnews.com/latino/news/2011/09/20/3-killed-in-guatemala-q...
Facebook Users On "New Facebook", Tweet: OMG Make It Stop!
http://www.dailymail.co.uk/sciencetech/article-2040377/Omg-horrendous-Fa...
Florida Dept Health Promotes Intergenerational Sex Talk
http://www.miamiherald.com/2011/09/21/2418976/state-wants-young-people-t...
South Florida Household Income Drops 12%
http://www.sun-sentinel.com/business/sfl-census-income-poverty-south-flo...
Gay Blogger Teaches Rick Santorum A Lesson In Hi-Tech Campaigning
http://motherjones.com/politics/2010/08/rick-santorum-google-problem-dan...
Top Google Result For "Rick Santorum" (warning; ewwwww)
http://spreadingsantorum.com
Doctors Opt-Out Of Flu Vaccines For Masks Instead
http://www.post-gazette.com/pg/11265/1176618-114.stm
Mick Jagger In NYC: Art Galleries And Rare Books
http://www.nypost.com/p/pagesix/bookworm_mick_1FOyudeXHrKLmnYdZ9M1bI
American Airlines: $450 Fee For Overweight Bag
http://www.cbsnews.com/stories/2011/09/21/earlyshow/living/travel/main20...
A better picture of "Operation Tits"
http://gothamist.com/2011/09/21/ocuppy_wall_street_day_5.php#photo-5
Those losers have more signs than sense, and not enough people to carry them. Fucking Communist useful idiots!
Those chicks ? Moreso "Operation Muffintop."
They should switch to Diet Coke.
perhaps the real purpose of the event is to paint the anit-wall street crowd in a negative light to the average person. who knows...
Always good to read the Fermentation Committee's notes with the proper musical accompaniment.
Pull up a seat, people, and cheers...
http://youtu.be/OYo6G8RBjAE
Strong dollar will crush any recovery...index now over 79.....
This was pretty much the goal of the game. Also, Arabs need to be revolting again soon, or we won't be able to build up that Islamic Reich to run our World War.
Bernanke playing "Bad Cop" to get Perry and the Pugnuts to STFU about his mendacious monetary manipulations?
Sometime in November the "Good Cop" will come in to "keep him from beating the interviewee to death".
On the bright side, those unemployment checks will buy a lot more gas and groceries.
On the real tip, the debt behind those UE checks looms taller (and the revenues that fund them? a frightened turtle).
I like turtles.
Look! Up in the sky! Its a bird! No its a plane! No! Its Obama, and he is going to save the day!!!.....What an asshole.
Watching the market, and the words "sleigh ride to hell" keeps coming to mind.....
The whole thing is percolating before death spiral.
CNBC is a joke. Are they unaware of this? If so, it is a bigger joke.
Strong dollar is definitely crushing many things, look at Ag/Au. Roller coaster.
But boy oh boy, look out below once this dollar rally meets it's stall point.
All out of gas, FED is. All that is left is hot air and thermals for a craft with a negative glide ratio!
ORI
Troy Davis and the 33rd
This won't work. Bet against The Fed.
The real estate market will only be helped in small segments. I wouldn't expect a rush into housing, refis, sales, etc. I see the same deflationary spiral for housing continuing (gold of course will buy more house in the future.) The kicker would be if lending standards are relaxed. Look for the same problems from 2008 infecting the "new MBS".
Don´t put it past the Socialist to come out with a trillion dollar program to make the downpayment for the "Needy"...government housing is a socialists wet dream.....to be able to tell people where to live and to pay for it is a vote for life...
Sad and tragic, yet true.
That is true... I just would like to see the people win a few battles.
EUR was holding up as the Italian banks were being downgraded some minutes before Ben's announcement, then boom -200 pips, Ka-boom today -200 pips again. LOL
Lehman event coming in Europe.
I agree with Art (as I said yesterday): one of the hidden purposes is prepping for the big mortgage refi stimulus coming from DC. They want to push mortgage rates below all time records to encourage refis and make it look attractive and like they're doing something that will work.
Of course without jobs and incomes plus retirement assets dropping, refis for underwater white elephants is meaningless
If they want this to be successful, then 120% financing (which I've heard rumors of), and 500 credit scores are needed.
Sacrificing the Nation attempting to revive a dead horse and fight the market forces usually results in a poor outcome.
My question to all the smart traders here at ZH: To WHOM is the Fed going to sell the $400 Billion of whatever it's going to sell to buy the other "treasuries"?
To themselves.
You cant sell something to yourself, I dont care how bizarro the world has become, still impossible.
I know you have been here too long to know better than that, SD1. Isn't that exactly what's been going on? It works for the govt. & even works in business.
Once, I worked for company x. They owned another company y, and another still, comany z.
Company x was $billion +, and company y sold them all their everyday supplies - from soap to copy paper. Obviouly, company y could enjoy great margins as the exclusive supplier to company x.
Company z...well it was a leasing company. If I wanted anything that could be depreciated, from a calculator, to a desk, to a car....we leased it from company z.
That was over 30 years ago. Company x is chugging along and doing very well year after year. Too bad all the stock is tightly held and not traded.
Two answers (you get to decide what's 'real'):
-To their primary network of dealers
-To themselves
The primary dealers have $400 billion sitting around?
$1,568,590,000,000
They dont have to sell. They can just let the ST securities run off in short order, then use the proceeds to buy LT securities. No net change in the Fed's Balance Sheet? Good luck w/that being helpful.
They could if they start unloading their longer dated treasuries to the Fed at elevated prices although maybe they won't want to shorten the average maturity and yield of their portfolios like that.
The original plan was to lower the cost of capital for the banks so they could make loans and....function as, you kmow, banks - but they used the $$ to load up on treasuries instead and lived off that spread.
The shadow government. DUH!
Ultimately to whomever is attracted to the higher yields that additional selling pressure will produce.
There's probably even a rate of return for which you would loan money to Uncle Sam for <3yrs.
Bernanke sweating bullets this morning. And the mad Professor wants to transfer more toxic MBS from the bank's to the taxpayer's balance sheet. At par.
flag as a bingo (1)
I agree with Art's take on refi positioning. If that is not the endgame, this move makes not much sense.
Obvious point: M. Bernanke will keep short rates low. M. Bernanke will sell short term paper to buy long term paper. Spot the gap?
How will ST rates stay low when he is SELLing them? They wont; ST bond prices will fall raising ST rates. The entire Yield Curve will flatten, and thus so will bank profits (flatten, that is).
"Other than that, Mrs. Lincoln, how was the play?"
Marc Faber calls Bernanke's rate decision 'the best decision in a long while by a U.S. Central Banker'
Marc Faber: Bernanke’s Decision to Leave the Fed Rate Unchanged is the “Best Decision I have Seen for a Long Time From a U.S. Central Banker”
http://wallstreetpit.com/84153-marc-faber-bernankes-decision-to-leave-the-fed-rate-unchanged-is-the-best-decision-i-have-seen-for-a-long-time-from-a-u-s-central-banker
UPDATE: Faber claims he was misquoted; actually said that Bernanke couldn't find his own ass with a flashlight & a map.
I was surprised by the quote as well, had to rub my eyes a few times and re-read it. This coming from Faber after only a few months ago calling Benocide (rightfully), a murder of the middle-class.
It is a misquote. Faber was NOT talking about "Bernanke's Decision to Leave the Fed Rate Unchanged", he was talking about "the decision of Mr Bernanke not to expand the balance sheet". See here: http://marcfaberchannel.blogspot.com/
cool, thanks for the clarification. :-)
Here's the rub: all rates are negative, O/N out to infinity. This is irrelevant, in a world where nobody is willing to lend to anybody at -100%, 0% or 100%, except for the government. And who cares? What are you going to do with the government's money?
Although they were in a very specific money-losing business, I think Solyndra proved the only thing you can do in this economic enviironment with borrowed funds is waste them. Build a factory, produce a product, and more likely than not, all you do is build inventory and go bankrupt.
So nobody is willing to lend at any rate, and nobody can be bothered to borrow at any rate - unless it is to defraud taxpyers/bondholders/investors.
Let the banks fail, already. Liquidity will dry up, you say? Guess what? It already has.
"Let the banks fail," should have happened in '08.
U.S. Consumer Confidence Falls to Lowest Since June ’09 in Bloomberg Index
By Bob Willis
http://www.bloomberg.com/news/2011-09-22...
From the Bloomberg article:
"Consumer confidence in the U.S. dropped last week to the weakest point since the recession ended in June 2009."
. . . . and the depression began.
Nice try, Bob.
I thought gold was a safe haven. NOT!
unfortunately paper gold and silver still drive the price.
Paper is not safe no matter what it is.
Let's check out the return for gold at year end vs other assets, ok?
Lots of turbulence for sure. But, what else aside from land would you buy?
For safety buy treasuries. For investments (long term $) pick stocks; stay defensive & look for nice divi's. Same shit different day. DCA to bring down basis.
T pretty solid and has over 6% divi, w or w out tmobile.
Nothing is a safe haven when you're talking about a 2-3 day timespan. With attitudes like yours, you're better off on a roulette table. Real gold > paper/electronic stocks any day.
I just tuned in CNBS for the first time in 5 months...and they have proven themselves to be a fully predictable, fully scripted Infomercial for Financial Sector Parasites:
They said the phrase they said all through 2008 each and every day as the market kept cliff diving: "We're Down....BUT Is This The Bottom?"
LOL....All it took was 1 minute of viewing! One tune in was enough for me. I find they only detracted from my trading and internet content is now superior in terms of timely information
So it took nearly 2 years for me to be right, but I was.
So this is my great I told y'all so moment..... and I'm over it. Stop screaming manipulation, this was predictable and required. Do more homework on Treasury bonds people.... And learn about the mechanics of the Federal Reserve instead of trusting math to lawyers (aka Austrian Economics).
went long 20 /es at 1122 off the bounce at 1120.25. i think we saw the low of the day, and the calvalry comes riding in.
Wow! You've got brass ones bigger than a pawnshop sign. Good luck w/that trade.
Bloomberg Confidence gauge lowest since July 2009. Oof:
I agree this is all about attempting to do something - anything - to give the perception they can make a difference. If this latest move is about the mortgage and refi markets, its impact will be miniscule. Underwater mortgage holders won't refinance because it means coming up with a chunk-o-change to get the mortgage amt in line with market values. So who is this for? The people who are in okay shape. In this climate, even those who refi are unlikely to use their mortgage payment "savings" to consume more. * It is amazing to sit back and watch the show.
Could the decision turn out to be an effective political move, whether it was planned as one or not? Mr. Durden used to say that it would take a big stock market drop to generate the political cover for a big QE3, and that seems as obvious now as ever.
"Opereration Twist" huh?
They need to re-name it to: "Operation Testicle Torsion".
The real story is all this 'financial' stuff is only a show on the curtain, whats going on behind the curtain most people couldnt handle.
I think we'll see a series of flase flag attacks next to divert attention and then right into WW3 due to 'the unspeakable attrocities' committed against us by those evil Muslim terrorists there in Iran.
I think the main battlefield will be in the South China sea.
It will be a far easier to conduct a false flag there, even with the use of a nuclear devices, to start a world war; nuking NY, again, just won't fly with the general populace - you need them fighting the Chinese, not in FEMA camps.
Here's a great article of what is to come from the people who are running this planet:
http://www.foreignpolicy.com/articles/2011/08/15/the_south_china_sea_is_...
I read the first page before I realized there's 4 more pages. I doubt the rest is worth reading since in the first page the author said WW2 was a battle against fascism, the cold war was a battle against communism, and the modern wars are a battle against Islam. Wars of ideology? That's the biggest hoax that was ever contrived. War is about the benefit of a few at the expense of many.
out at 1132.50, it broke the downside of the 1132 penetration.
Nice 10 pt scalp.
i like playing apache ambush. lol. i'll tack that to my lodgepole
heroic trade
Holy shitshow, Ag/Au is taking a solid raping today.
Time to pull some moldy money out of the mattress and BTFD, bitches.
if it breaks the downtrend line from 1120 on the 1-minute, (hasn't yet). its setting up for a head and shoulders down to about 1114.
if that doesn't happen, i'll watch 1135. if it breaks up nada. but if it bounces down i'll short 20 more neckline violation at 1135.25
"Strong dollar will crush any recovery." that is a myth
art needs a big cup of irish coffee
I wonder what was Greenspan's contribution to yesterday's meeting? did he prevent Ben from hitting the 'shock & awe' button yesterday?
Somebody interviewed him. Saw a teaser blurb on bloomberg. "If simpson-bowles can't get votes, I truly despair for this county"
Weird .... as this guy gets older, he become more coherent. woulda been nice if he had these language skills when he and bubba were creating the housing bubble.
With all of this turmoil going on, I just have to write a sequel to "War Of The Money Worlds". The possibilities are endless. I'll get right on that. Meanwhile, here's the original.
http://georgesblogforum.wordpress.com/2011/06/18/war-of-the-money-worlds/
With all of this turmoil going on, I just have to write a sequel to "War Of The Money Worlds". The possibilities are endless. I'll get right on that. Meanwhile, here's the original.
http://georgesblogforum.wordpress.com/2011/06/18/war-of-the-money-worlds/
This is the disappointed-in-the-Fed sell-off I expected weeks ago - I know, I know, early is the same as wrong. Few people exactly expected QE or an IOER cut, but there was enough hope among bulls (and fear among bears) to keep their fingers off the SELL button, despite a lot of bad news, until yesterday.
http://how-to-trade-armageddon.com/2011/08/24/fight-the-fed/
As for this mega-refi, I just can't wait to see exactly what kind of turd they drop. By the way, refis are actually already proceeding as quickly as banks can process them. Have been ever since early August. The banks are swamped. Who else is going to process refis, Brian Sack?
CNBC Commentators, analysts and da broads, kicking and doing da
Watusi and da Twist....
Very Interesting....but Stupid
http://www.youtube.com/watch?v=QlVWArmysic&feature=player_embedded