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Fed Folds: Will Do Open-Ended MBS Buying, Extends Operation Twist

Tyler Durden's picture




 

Bernanke has acquiesced and is now the 4th branch of the status quo- and all is well in the world:

  • *FED TO KEEP POLICY STIMULATIVE FOR `CONSIDERABLE TIME'
  • *FED WILL ADD TO PURCHASES IF LABOR MARKET DOESN'T IMPROVE
  • *FED DOES NOT SAY WHEN MBS PURCHASE PROGRAM TO END
  • *FED TO BUY $40B MBS MONTHLY, CONTINUE `OPERATION TWIST'
  • *FED TO BUY MBS, EXTENDS ZERO-RATE POLICY INTO 2015

To summarize:

  • The good news: The Fed's NEWER, OPEN-ENDED and NEVERENDING QE is bigger, longer, and has a Retina display (however its battery life is far shorter).
  • The bad news: The Fed has now confirmed it is merely a sad, political, self-frontrunning caricature of what a central bank should be.

 

 

Pre-FOMC:

S&P 500 Cash    1437.9
S&P 500 Futures    1437
Dow    13345.43
10Y    1.7247
5Y    0.6522
30Y    2.8815
EUR    1.2895
MBS Spread    0.57993
Gold    1724.35
Silver    32.77
WTI Oil    97.23
USD Index    79.70237
Apple    676.91

Full statement link.

Full redline comparison to the August statement below:

 

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Thu, 09/13/2012 - 13:20 | 2790574 hedgehog9999
hedgehog9999's picture

That is because the focus of buying MBS is an admission they can't buy too much of 10 and 30 year bonds without disrupting the ,market as previously published here on ZH, therefore bonds will go down ,hence TBT up and rates will go up.

He can't suck and blow at the same time......

 

Thu, 09/13/2012 - 13:43 | 2790743 Village Smithy
Village Smithy's picture

Once people realize that Bernanke has consumed all of the bond supply they will flee this negative real rate crap and a tsunami out of Treasuries will begin.

Thu, 09/13/2012 - 13:14 | 2790530 10mm
10mm's picture

Im gonna bust out my hand held Mattel electronic football game from 1977 that still works just to really put me in a 70's mood.

Thu, 09/13/2012 - 13:20 | 2790575 odatruf
odatruf's picture

I'll look for my velor v-neck to wear over my rayon tab collar shirt....

Welcome back to the age of jive: http://www.youtube.com/watch?v=iBbo0slWMW4

 

Thu, 09/13/2012 - 13:16 | 2790547 Mattress Money
Mattress Money's picture

The Reits knew before everyone, they have been rallying all week! SMH GOT REITS and GOLD

 

Thu, 09/13/2012 - 13:20 | 2790576 samcontrol
samcontrol's picture

for a couple of years now, not all week. Justgot more agnc by the way, my third position on it.

Thu, 09/13/2012 - 13:17 | 2790553 Uncle Remus
Uncle Remus's picture

Goldmember

Thu, 09/13/2012 - 13:17 | 2790557 the not so migh...
the not so mighty maximiza's picture

Well thats all folks.

Thu, 09/13/2012 - 13:18 | 2790562 Arnold Ziffel
Arnold Ziffel's picture

GLD and SLV will double in price again. How nice of a hedge against my plunging house value.

Thu, 09/13/2012 - 13:21 | 2790586 samcontrol
samcontrol's picture

Why? Are you planning to move?

Thu, 09/13/2012 - 13:19 | 2790572 HANKREARDON
HANKREARDON's picture

I need help with my 'nothing to see here' shopping list:

H2O

Guns/Ammo

MRE's

Silver/Gold

Bible

Solar Set-up

Fruit trees/garden

canning jars

Thu, 09/13/2012 - 13:19 | 2790573 TN Jed
TN Jed's picture

Been emailing a photo of a bear shitting in the woods to all my deflationista friends. 

Thu, 09/13/2012 - 13:21 | 2790580 haskelslocal
haskelslocal's picture

TYLER! Since CNBC doesn't bother explaining why, (or is incapable of) can ZH please explain a few things? Such as:

How does the Fed's buying of MBS create jobs?

When they buy the MBS, who do they buy them from?

At what price do they pay for the MBS'?

And in essensce, I assume MBS will be bought at cost, forgiving TBTF banking entites of their obligations and put a bunch more money into the system for gambling the HFT robotic system.. So WHERE ARE THE JOBS! And why does job creation have to be based on this "hopeing banks do the right thing" technique?

 

 

Thu, 09/13/2012 - 13:24 | 2790617 Uncle Remus
Uncle Remus's picture

Careful, you're getting into Hopey Changey territory.

Thu, 09/13/2012 - 13:44 | 2790753 Spastica Rex
Spastica Rex's picture

Yeah, seriously: people need to get their priorities straight. How can we have jobs if the bankers can't be confident in their bonuses?

Thu, 09/13/2012 - 13:23 | 2790600 Bunga Bunga
Bunga Bunga's picture

DESPARATION replaces HOPE

Thu, 09/13/2012 - 13:25 | 2790627 Uncle Remus
Uncle Remus's picture

What - did you just get here?

Thu, 09/13/2012 - 13:24 | 2790624 Ned Zeppelin
Ned Zeppelin's picture

Of the two events this week, only got one right, the easy one of the German Court (although that was somewhat nuanced and might not be all that great).  I did as of last night, dismayed at reading Hilsenrath's article, adopt Door #2 of his WSJ predictions and that is what we got. So we did get 1/2 sterilzied (Operation Twist), 1/2 not - CMBSs. 

The Fed stayed away from massive buying in Treasuries for any of a number of reasons, not the least of which is they already own a big ass chunk of the world's supply, and they did open the "unlimited QE" door by applying it to assets, not government debt, under the guise of "helping housing," as to which this action will have absolutely no effect, and whihc is most certainly not the intended goal. Who benefits? Banks with shitty CMBSs on their balance sheet that are not good collateral, that the Fed buys at par? I don't know. It sure doesn't serve the twin mandate, so why?  We also know it is pure FLOW that is the goal, as ZH has said.  Now, we have unlimited QE but not yet as to US debt, and friends, it is QE4EVUH that we are looking at. Might as well go long equities.

Cracks in the foundation have a way of getting wider slowly. 

Thu, 09/13/2012 - 13:54 | 2790633 Fecklesslackey
Fecklesslackey's picture

They have to print to be able to keep a lid on gold and silver

Thu, 09/13/2012 - 13:30 | 2790662 Greater Fool
Greater Fool's picture

Sweet. The next step is the political redefinition of "qualifying loan" to include anyone with a pulse and at least three teeth (note: provision 2 only applies to the 25-or-under set), and we're off! Instant housing market recovery.

Thu, 09/13/2012 - 13:30 | 2790669 1835jackson
1835jackson's picture

1. Financial Crisis- check.

2. Print $- check.

3. Sovereign debt crisis- coming soon. (Never let a good crisis go to waste).

4. WW3- coming soon.

5. NWO- almost check mate.

 

 

Thu, 09/13/2012 - 14:47 | 2791238 toomanyfakecons...
toomanyfakeconservatives's picture

Sorry, no WWIII, the military won't play ball on that. Also, the NWO is desperate, defunded, defanged, and about to be arrested (or shot) along with Obama, Brenanke, Timmy G. and hundreds of other traitors to the Constitution.  The MASS ARRESTS are coming soon... http://tinyurl.com/cd5cyjo/

Thu, 09/13/2012 - 13:37 | 2790688 TheObsoleteMan
TheObsoleteMan's picture

Who is surprised by any of this? Once the Fed climbed on the tiger's back, there was no getting off. People used to think the saying "QE to infinity and beyond!" was just a punch line. It wasn't. It's policy. And it will continue. The Fed had a choice to make back in 2008; to save the currency or save the banking system. Only a moron could not have seen which they were going to save. In the end, all they would prove to do is buy some time. The banking system will implode eventually also once the currency hyper inflates.

Thu, 09/13/2012 - 13:58 | 2790854 silverserfer
silverserfer's picture

Uhmm, Graham Summers and any of the idiots out there who subscribe to his newsletter.

Thu, 09/13/2012 - 13:40 | 2790726 PatientZero
Thu, 09/13/2012 - 13:42 | 2790736 q99x2
q99x2's picture

Pull up your zirpper before your Bernanke falls out.

Thu, 09/13/2012 - 13:42 | 2790738 snakeboat
snakeboat's picture

<clears throat>  Fuck you, Bernanke!  

Thu, 09/13/2012 - 13:42 | 2790742 Apocalicious
Apocalicious's picture

Keep that bid under the cusips, bitch. I got whole loans to securitize. Of course, makes it too rich for me to issue new mortgages with maybe 25 bps spread net of credit losses + duration mismatch. I'm sitting in reserves for that same spread...Laters...

Thu, 09/13/2012 - 13:45 | 2790750 JohnKozac
JohnKozac's picture

CPI holds steady at 1.41 so the seniors are in good shape...don't worry about inflation...CPI shows it's under control.

 

http://www.bls.gov/news.release/cpi.nr0.htm

Thu, 09/13/2012 - 13:45 | 2790755 Mark123
Mark123's picture

No surprise...what else could they do?  US govt needs about $100 billion per month in incremental debt - and who will buy that debt?  A significant portion of the trade deficit will be reinvested into US treasuries by China etc trying to keep their currencies down against $US...bu that still leaves a big gap.

 

The Fed could not just stop - since that would require either a massive increase in interest rates, or a massive cut in federal spending.  Either option would mean a massive depression.

 

So, there is no escape, but given the choice the ruling class will choose to push the day of reckoning off a little further hoping for a miracle.  I just wonder at what point the financial system simply falls apart due to a loss of confidence.  The only thing keeping the game going is  central banks issuing massive credit to bankrupt sovereigns....period.  Gee, wonder why they are doing that!!

Thu, 09/13/2012 - 13:55 | 2790824 walküre
walküre's picture

Either option would mean a massive depression.

So they're waiting for it until the last idiot realizes that FIAT is worthless?

I don't want to get paid in FIAT anymore. Hyperinflation is here. Look at Gold/Silver moon shoot today.

No wonder the robbers in the Volvo were throwing the cash into the streets yesterday.

CASH IS WORTHLESS

Thu, 09/13/2012 - 14:55 | 2791312 toomanyfakecons...
toomanyfakeconservatives's picture

Correction... Federal Reserve Notes are worthless. After the MASS ARRESTS occur, you will see the return of legitimate Treasury Notes backed by shiny metals and/or commodities. The MASS ARRESTS are coming... http://tinyurl.com/cd5cyjo/

Thu, 09/13/2012 - 13:50 | 2790772 Bastiat
Bastiat's picture

Did you see the stop runs Blythe's monkeys make on gold and silver?  Physical--monkies won't touch it.

http://raemegoneinsane.files.wordpress.com/2012/06/blue-monkey-and-witch.jpg

Thu, 09/13/2012 - 13:50 | 2790792 Cassandra Syndrome
Cassandra Syndrome's picture

QE1 and QE2 announced the Dollar index was at 87. QE3 announced it was at 79.

 

Just saying....

Thu, 09/13/2012 - 13:51 | 2790800 QE49er
QE49er's picture

Paul:  Do you think Gold is Money?

Bernanke: No...it is a precious metal

Paul: Even if it has been money for 6,000 years, somebody eliminated that economic law?

Bernanke: Well, it's an asset, you say treasury bills are money, I don't think they are money either but they are a finiancial asset

Paul: Why do central banks hold it?

Bernanke: well, it's a form of reserves

Paul: Why don't they hold diamonds?

Bernanke: well, it's tradition...long term tradition

 

Thu, 09/13/2012 - 13:55 | 2790830 Village Smithy
Village Smithy's picture

My question is who in the WTI cabal will be first to break the obvious vow that has been taken, and start buying?

Thu, 09/13/2012 - 14:00 | 2790868 walküre
walküre's picture

It makes no sense to jack up the price of WTI in worthless USD paper.

Instead the cabal is buying gold because oil will be traded in gold going forward. No sane producer will accept worthless USD FIAT for the most important commodity of our lifetime. The one commodity that is needed to keep countries alive.

If you were a producer of oil, would you take worthless paper in exchange for the commodity? Why?

 

Thu, 09/13/2012 - 13:59 | 2790856 Big Ben
Big Ben's picture

Mitt should not have threatened to fire Bernanke. Clearly Bernanke has concluded that his only chance to remain Fed chairsatan is for Obama to win. So he is throwing out all stops in order to make that happen.

Thu, 09/13/2012 - 14:03 | 2790905 Spastica Rex
Spastica Rex's picture

Gas over $4 means BO loses. BO will try to prevent this. Bernanke calls the shots, not Mittens. or BO.

Thu, 09/13/2012 - 14:11 | 2790968 black_furry_dog
black_furry_dog's picture

I'm not a smart man, but.... if the fed is buying MBS, is it going to be handling the foreclosures? 

Thu, 09/13/2012 - 14:17 | 2791015 SmoothCoolSmoke
SmoothCoolSmoke's picture

Well, I thought theSP 500 would go up more than it has (+20). Maybe it will in to the close.  Wonder what the 1/2 life of this will be?

Thu, 09/13/2012 - 14:21 | 2791039 Atlantis Consigliore
Atlantis Consigliore's picture

Foodstamps for Margin and Tier I Capital;   100% out of US Dollar Assets. 

Thu, 09/13/2012 - 15:03 | 2791377 Bugsquasher
Bugsquasher's picture

The Race To The Bottom Is On!

Helicopter Ben is running his mouth again, channeling "Super Mario" of the ECB. "The FED will do what's needed to support the economy." Read: More QE via "unlimited" purchases of MBS (mortgage backed securities) and continued zero interest rates through 2015.

More specifically keep growing the FED balance sheet by printing more and more money so the FED's constituent banks can buy more and more stocks, and pay their board members bigger and bigger year-end bonuses. (It is September after all.) Wonderful!

Another lesson not learned apparently. Trying to extinguish old bad debt with new bad debt is a fools errand. It is precisely why Europe is on the brink of collapse. The ECB just called this week for "unlimited" bond purchases so the FED can't be left behind in the race to the bottom. Who has the fastest printing presses is now the new competition between the FED and the ECB.

What was it Henry II of England said? "Won't someone rid me of this meddlesome priest?" (banker)

Thu, 09/13/2012 - 16:16 | 2791852 redd_green
redd_green's picture

When is a recovery not a recovery?

Thu, 09/13/2012 - 17:05 | 2792074 medicalstudent
medicalstudent's picture

"new all time highs i doubt (for stocks)"

 

dr faber

 

1:1

Thu, 09/13/2012 - 20:50 | 2792927 Curt W
Curt W's picture

Please Bernank,

Explain to me how buying worthless MBS from banks is going to improve the job market?

Sounds like another bank bailout, and it will not trickle down.  Maybe a few bankers will have a trickle down their leg.  But this will not help the economy.

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