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Biderman And Bianco Bury Bernanke's Bond Bull Market Backbone

Tyler Durden's picture




 

Digging into the details of the Fed's balance sheet can sometimes be a thankless task but  Charles Biderman and Jim Bianco have some fascinating insights into where the real money is being hidden. The stability of the Fed's balance sheet post-QE2, given we are borrowing-and-spending over $100bn per month is all down to Operation Twist and the Fed's creation of demand at the short-end (via telling banks that rates will be low forever and 'guaranteeing' positive carry returns on rolling overnight repo) and using this 'cash' to almost entirely fund longer-term borrowing. In a simple primer of the Fed's implicit risk-free carry trade, the two chaps note that the only downside is too much growth or inflation which would cause a massive unwind of these positions (leading only to further bailouts). Critically though, they explain the fact that Operation Twist (and its implicit off-balance-sheet funding of this risk-free carry trade) is nothing more than the Fed's version of the ECB's LTRO - as the banks are 'encouraged' to buy short-term government debt with risk-free-carry expectations - implying the Fed's balance sheet could in fact be considerably larger than it appears. Yet more ponzinomics explained in a simple way - that surely eventually will trickle down to the masses who will question the emperor's clothing.

 

 

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Mon, 05/14/2012 - 17:42 | 2425046 Rahm
Rahm's picture

Bullish!

Mon, 05/14/2012 - 17:43 | 2425049 NotApplicable
NotApplicable's picture

In other words, QE never stopped for an instance (as expected), it just doesn't show up on the books, YET.

Mon, 05/14/2012 - 18:23 | 2425128 CPL
CPL's picture

That why a pound of medium ground beef five years ago was .70 a pound and today we pay over 4.50.

 

The price of beef is an excellent indicator of inflation.  Highest turn over of product, nearly JIT supply, complex shipping and the costs associated with it.  Beef is a fantastic canary because subsidies get yanked on it fast.  In economic hot boxes because popular to contrary belief, Governments wish small and medium sized farmers would just die and go away because honest hard work is their anti-thesis.

Instead of going bust as in past price crashes, most of them were ready because of past experiences with liars in Brooks Brothers Suits.  They followed feed costs and use a formula.  In my area there are some very sharp accountants that help keep everyone above water.  If they follow the formula they get hit with a bad month instead of a bad year which makes a huge difference in how credit is managed. 

Look at co-op balance sheets versus banks.  Most are cash rich with lots of un-used credit...Really interesting stuff...well to some...agricultural and commodities accounting.

Mon, 05/14/2012 - 18:48 | 2425182 Caviar Emptor
Caviar Emptor's picture

But Ben told us there's no inflation and we're in another goldilocks!

Mon, 05/14/2012 - 18:44 | 2425169 FREEEEEEEEEDOM
FREEEEEEEEEDOM's picture

Inflate the pain away - Bernies JPM Remix

 

Sucking on my ZIRP like you wanted me

calling me, all the time like ponzi

check out the greeks are behind

its fine all of the time

like 100k gold is

what else is in the teaches of bernies? Huh? what?

 

Sucking on my ZIRP like you wanted me

calling me, all the time like ponzi

check out the greeks are behind

its fine all of the time

what else is in the teaches of bernies?

like 100k gold is Huh? what?

 

Huh? Right. What? Uhh
Huh? What? Right. Uhh

Huh? What? Right. Uhh
Huh? What? Right. Uhh

 

CDS IOU, Stay in school cause its the best

IOU CDS, Stay in school cause its the best

IOU CDS, Stay in school cause its the best

IOU CDS, Stay in school cause its the best

 

Sucking on my ZIRP like you wanted me

calling me, all the time like ponzi

check out the greeks are behind

its fine all of the time

like 100k gold is

what else is in the teaches of bernies? Huh? what?

 

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

 

Huh? What? Right. Uhh
Huh? What? Right. Uhh
What else in the teaches of bernies?
Like 100k gold is
Huh? What? Right. Uhh

 

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

Inflate the pain away, inflate the pain away

 

Mon, 05/14/2012 - 19:35 | 2425247 Silver Bug
Silver Bug's picture

More and more people are waking up everyday. Soon enough we will hit the tipping point.

 

http://ericsprott.blogspot.ca/

Mon, 05/14/2012 - 17:50 | 2425050 endicott glacier
endicott glacier's picture

OK trick question:

Why did Ben not give a gift on mother's day?

.

.

.

.

.

.

.

.

 

Mon, 05/14/2012 - 17:54 | 2425082 buzzsaw99
buzzsaw99's picture

Butthole baby?

Mon, 05/14/2012 - 18:23 | 2425133 CPL
CPL's picture

She dead.

Mon, 05/14/2012 - 18:42 | 2425158 Mark123
Mark123's picture

He married his mom, so he is confused on mothers day.

Mon, 05/14/2012 - 20:00 | 2425286 akak
akak's picture

Because Satan has no mother.

Mon, 05/14/2012 - 17:44 | 2425051 Bill D. Cat
Bill D. Cat's picture

Alliteration , a valid literary device . Much more valid than what's going on in the markets these days .

Mon, 05/14/2012 - 17:48 | 2425069 Midas
Midas's picture

Bodacious beginning byline.

Mon, 05/14/2012 - 17:45 | 2425056 fonzannoon
fonzannoon's picture

I don't understand the argument that the fed is afraid of intervening before the election. First off there is a good chance O loses the election without massive stimulus to put an artificial floor under everything until November. I also remember the last letter the Repubs sent the fed scorning their actions. It's probably framed and Ben etc. have a good laugh at it every week. Lastly Mitt is too busy apologizing for possibly bullying a kid 40 years ago to be concerned with present day events.

It seems like they have no choice but to act soon.

Mon, 05/14/2012 - 17:58 | 2425090 AbelCatalyst
AbelCatalyst's picture

They just can't do it too soon as the next $xTrillion round of QE will only last a few months...  They can't blow they're load too early and really screw up the election...  They'll wait until mid to late August for the next ramp up...  In the mean time they'll continue to buy everything they can behind the scenes to prop up the market until then...  

Of course, 2013 will be an absolute nightmare - QE will have worn off, spending will be cut, and taxes raised...  Holy cow is this going to get messy...  Oh, and there is also the chance that they can't prop up the markets, they QE in a panic, the markets sense this and run for the exits, and November /December of this year is a total train wreck...  

Mon, 05/14/2012 - 18:02 | 2425100 fonzannoon
fonzannoon's picture

I completely agree. August sounds about right. I think rumors start flying in June and Trillion dollar numbers are thrown around and that keeps the markets from cratering until they announce it in August. It's good for the country. This way the election can be focused on without having to worry about the economy. What a load of shit but I can see it.

Mon, 05/14/2012 - 18:39 | 2425152 Mark123
Mark123's picture

But if you can see it, so can the big players and he who acts first wins.  This may unravel sooner than they plan/predict.

 

I keep thinking one morning I am going to wake up and the markets will be closed pending some coordinated government action (the big reset).  I don't think it will be something that helps the average Joe!!

Mon, 05/14/2012 - 17:45 | 2425061 Sudden Debt
Sudden Debt's picture

It's almost like we're having like economic problems and all...
I'm getting that depressed feeling again, and that mostly means hopium is comming

Mon, 05/14/2012 - 18:45 | 2425167 fuu
fuu's picture

Here comes that ho-pi-um feeling again.

http://www.youtube.com/watch?v=aO1LbkuPfqo

Mon, 05/14/2012 - 17:50 | 2425073 Oxygen
Oxygen's picture

Do you think the goal of the US gouvernment is to inflate as much as possible the bond bubble before the war with Iran?! Then hyperinflation should happen and everybody would loose is shirt with this massive bubble???!

Mon, 05/14/2012 - 17:53 | 2425080 fonzannoon
fonzannoon's picture

Do you think the goal of the US gouvernment is to inflate as much as possible

Yes

Mon, 05/14/2012 - 17:49 | 2425076 mr. mirbach
mr. mirbach's picture

worst shirt yet Biderman!

Mon, 05/14/2012 - 17:49 | 2425077 SourNStout
SourNStout's picture

If the markets are down for long enough, the FED will prime the pump again. 

FREE FIAT for BANKSTERS

Mon, 05/14/2012 - 17:56 | 2425085 midgetrannyporn
midgetrannyporn's picture

I prefer to look at it like this. The bankster gangsters make the market go down to justify more thievery then they make it go up and appear to be working. Rinse. Repeat. There is no market, there is only the bernank.

Mon, 05/14/2012 - 18:02 | 2425094 SourNStout
SourNStout's picture

+1

This never gets old

The Bernak

http://www.youtube.com/watch?v=PTUY16CkS-k

Mon, 05/14/2012 - 17:57 | 2425086 Devore
Devore's picture

"that surely eventually will trickle down to the masses who will question the emperor's clothing"

Surely.

Mon, 05/14/2012 - 18:14 | 2425114 blueridgeviews
blueridgeviews's picture

What a racket!

Mon, 05/14/2012 - 18:18 | 2425118 strangeglove
strangeglove's picture

Jim, Whats a Circle Jerk?

Mon, 05/14/2012 - 18:22 | 2425131 Godisanhftbot
Godisanhftbot's picture

 Glad to see we have such clever people in charge!

 

 Hope they can keep this ball in the air until I die of natural.

Mon, 05/14/2012 - 18:34 | 2425144 Mark123
Mark123's picture

Excellent interview....thanks ZH for posting this.  It is a question that was bothering me (how did they keep selling all that govt debt?).  Simple enough when explained by these guys. 

 

The central bankers are really playing with fire though, since all that supports this is relative value of their respective fiat currency.  If an alien were to come to Earth he would wonder why anyone continues to believe in the USD, Euro, Yen etc.  All a big confidence game (hence the need to crush gold - which is the canary in the coal mine).

Mon, 05/14/2012 - 18:48 | 2425181 BalanceOrBust
BalanceOrBust's picture

So, does this mean I have to wait until the end of 2014 for gold to actually resume its climb?

Mon, 05/14/2012 - 18:50 | 2425189 Iam_Silverman
Iam_Silverman's picture

So, the cake is a lie?

Mon, 05/14/2012 - 20:07 | 2425304 PersonalRespons...
PersonalResponsibility's picture

Only if you try to get a piece.

Mon, 05/14/2012 - 19:00 | 2425197 Caviar Emptor
Caviar Emptor's picture

This time it's walls to the ball. 

By now even Ben has picked up the pattern: QE and other monetary stim merely re-flates the cost of living and doing business, not business itself. That's the trouble. The only thing trickling down to the consumer is cost. That's why 'consumer spending' figures are misleading: higher prices for essentials means more dollars spent, but not increasing demand. In fact at a certain threshold, higher prices with stagnant incomes depresses demand which sets off a nice little downward spiral 

Mon, 05/14/2012 - 19:01 | 2425199 yogibear
yogibear's picture

Sure the Fed's balance sheet is huge. It will just keep printing until the market says no-more and inflation is out of control.

Mon, 05/14/2012 - 19:24 | 2425229 DUNTHAT
DUNTHAT's picture

 

The Keynesian Failure Graphically Portrayed

"Printing all that money just to stay even"

<iframe src="https://skydrive.live.com/embed?cid=28D5B46EE3D15AE3&resid=28D5B46EE3D15..." width="98" height="120" frameborder="0" scrolling="no"></iframe>

Mon, 05/14/2012 - 19:50 | 2425265 navy62802
navy62802's picture

Biderman!! Light a blunt for mee too!! haha. :-P

Mon, 05/14/2012 - 21:14 | 2425437 FinalCollapse
FinalCollapse's picture

I am getting lost here. The Fed prints fresh money and lends them to banksters. This money must show up somewhere on the balance sheet. When Treasury gets their money it is also a loan from the Fed. Hence what is the difference between say JPM borrowing from Fed and the Treasury doing the same? All helicopter money needs to be accounted somewhere - cannot just disappear. Oh wait - this is Bernanki circus.. 

Tue, 05/15/2012 - 06:24 | 2426141 EZYJET PILOT
EZYJET PILOT's picture

Does the fed give the moeny to the banks at 0%, the banks buy treasuries then the Fed buys the bonds off the banks?

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