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| User Info | Fed Eunichs Reveal Themselves in Full Technicolor in forum [General] | |||
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Iliketrends Posts: 1759 Incept: 2007-11-26 
Tejas 
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Lee Adler article I follow him...does good work on Fed open market operations http://wallstreetexaminer.com/?p=2280 http://www.ny.frb.org/markets/omo/omo200.... How did they let this one out? Many observers have expressed disbelief that the Fed is actually aggressively reducing the monetary base, in particular that part of the base which directly affects the trading accounts of 20 of the world’s largest banks, the Fed’s Primary Dealers. Wall Street Examiner Professional Edition subscribers have had the benefit of seeing the data on a day to day basis as charted in the daily Fed Report. The general public however, has not had the benefit of that insight. The vast majority of market pundits, economists, and quasi-journalists for the mainstream infomercial outlets like Marketwatch, the Wall Street Journal, Bloomberg, and especially CNBC, are totally clueless. To a man and woman, they all think that the Fed has aggressively been adding liquidity to the system. The proof, they say, is in the pudding and the Fed has just served it up in multicolored, multi-layered glory. The Fed itself is confirming, in graphical form, the very facts that I have been reporting on and charting for our subscribers every day for the past half year and more. The Fed has aggressively collapsed the size of the System Open Market Account, beginning slowly last July, then moving aggressively beginning in December. The effect has been to withdraw billions of dollars of what is, in essence, margin buying power from the trading accounts of the Primary Dealers. It is no coincidence that the stock market topped out around the time the Fed began to withdraw liquidity last summer, and it is no coincidence that the market nosedived when the Fed began its massive moves to shift reserves out of the hands of the primary dealers and into other, mostly smaller, banks when it created the Term Auction Facility. The Fed aggressively cut the size of its permanent holdings of Treasuries, and also substantially cut its holdings of repurchase agreements, resulting in the collapse of the System Open Market Account (SOMA). It replaced only part of that with the Term Auction Facility. The Currency Swap facility with foreign central banks has no direct day to day impact on the US market. When the Fed turned out the lights at the SOMA office in July, that was the end of the bull market. When the Fed began moving the furniture out to the hinterlands, again the US stock market took the brunt of the hit. The Fed published this report without fanfare within the past few days. The report, somewhat dryly titled “Domestic Open Market Operations During 2007“, contains lots of interesting facts and figures. It also includes some discussion of the difficulties the Fed’s trading desk faced, particularly in the second half of 2007, when the financial crisis crept out from under the covers and on to the front pages. Yet, in spite of the inclusion of this chart in all its brilliant color, the report had virtually nothing to say about it. There was one paragraph which got to the point in a roundabout way suggesting that the writer had been taking lessons from Alan Greenspan. In late-August, developments influencing reserve supply grew more uncertain, including the possibility of heavy use of the discount window under its altered terms. In response, the Desk adjusted the composition of its portfolio to include a somewhat higher level of RPs and lower level of outright holdings, by arranging two redemptions of bill holdings at weekly auctions. In December, further redemptions were made and adjustments to outstanding RPs made as needed, to accommodate the impact of TAF loans and swap drawings on reserve supplies. These adjustments were designed to maintain an overall level of reserves consistent with achieving the operating objective for the overnight federal funds rate while still meeting the objectives of the TAF and swap programs. Here’s what they meant: We thought in August that there would be a run on the discount window, so we began to cut the size of the permanent SOMA to allow more reserves to go out the Window. Oops nobody showed up. So we started the TAF, and cut the size of the SOMA even more. But the effective Fed Funds rate in the market kept dropping faster than we could lower the official rate. So we had to cut the size of the SOMA even faster so that the effective Fed Funds rate wouldn’t collapse too far below our targets and reveal us to be the powerless Eunuchs that we are. We didn’t think about the fact that removing reserves from the Primary Dealer accounts would trigger a mass liquidation in stocks. Next time we’ll know better. Lee, Where can I find this report/website for the Fed’s chart? Posted on 11-Feb-08 at 5:22 pm | Permalink Lee Adler wrote: You can download it here: http://www.ny.frb.org/markets/omo/omo200.... Posted on 11-Feb-08 at 5:32 pm | Permalink ---------- **** CNBS, CONgress, Obama, the Democrats, the Republicans, the ratings agencies, the Banksters, the Fed, the FASB, all the government regulatory agencies, the Trilateral Commission, the Council of Foreign Relations, the G whatever, the UN, and any other bastard or big corporate interest that has a fingerprint on this 2008-02-11 19:26:37
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Nothing Posts: 4382 Incept: 2007-09-13
Russian River Appellation Banned
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Heh Thanks, Ilt I hate to say ITYS,,,but, ITYS  ---------- One creates from nothing. If you try to create from something, you're just changing something. So in order to create something, you first have to be able to create nothing. Last modified:
2008-02-11 19:52:14 by nothing
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Exodus Posts: 2081 Incept: 2007-08-29
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*blink blink* So then I guess we know which side of the black hole we're approaching from. Dinner tonight will taste particularly good. 2008-02-11 19:52:46
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Snooze Posts: 1560 Incept: 2007-07-09 
florida
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NO Need for ITYS....I took heed back in SEPT and OCT.....Am now debt free and awaiting the RECKONING via shorts and puts....Thanks Nothing...
---------- The past is the prologue of the future. BOHICA 2008-02-11 19:58:37
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Sushihorn Posts: 5632 Incept: 2007-10-22 
Arlington, TX
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Nothing Enjoy. Revel. Hell, you deserve to GLOAT! Then put up a few charts from the FED for you clients. ---------- http://jengafinance.blogspot.com/ You can't fix stupid ... but you can kill it. 2008-02-11 19:59:55
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Nothing Posts: 4382 Incept: 2007-09-13
Russian River Appellation Banned
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---------- One creates from nothing. If you try to create from something, you're just changing something. So in order to create something, you first have to be able to create nothing. 2008-02-11 20:00:59
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Bw8472 Posts: 6446 Incept: 2007-06-28
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I understand all he said and just wanted to be sure on something. Is he suggesting that they're going to continue to cut the broker dealers margin liquidity or is that the implication? I sure hope so since being short if they reverse course would be bad. Looking at what he said it seems like that would continue to be the trend but I wanted to make sure I wasn't misreading it. ---------- At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide. ~Abraham Lincoln 2008-02-11 20:01:30
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Bw8472 Posts: 6446 Incept: 2007-06-28
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Nothing's doing her IFTYS table dance right now.... :) You deserve to after the countless explanations to boneheads like me... :) ---------- At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide. ~Abraham Lincoln 2008-02-11 20:03:55
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Nothing Posts: 4382 Incept: 2007-09-13
Russian River Appellation Banned
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Bw  They might as well keep draining the B/Ds...it was just piling up there anyway, most banks didn't need it, because reserve requirements were dropping, and the ones who did need it to cure insolvency, had **** collateral that only the FED could love. ---------- One creates from nothing. If you try to create from something, you're just changing something. So in order to create something, you first have to be able to create nothing. Last modified:
2008-02-11 20:14:19 by nothing
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Sushihorn Posts: 5632 Incept: 2007-10-22
Arlington, TX
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Bw Primary dealers were hoarding the cash from TOMOs and/or putting it into the stock market when the Fed wanted the repo proceeds to be lent out downstream. That is the only way the credit reaches into the real economy. When the primaries failed to do this, the Fed came up with the TAF as a work-around to get the repo money directly to the smaller front-line lending institutions and bypass the primaries. This effectively shifted some of the credit out of stock margin and into consumer and business lending. ---------- http://jengafinance.blogspot.com/ You can't fix stupid ... but you can kill it. 2008-02-11 20:09:39
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Exodus Posts: 2081 Incept: 2007-08-29
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Seems like a case of "I really hate to be right" here too. The consequences...
2008-02-11 20:09:56
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Bw8472 Posts: 6446 Incept: 2007-06-28
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Well so now it's down to wounded quants vs more wounded quants or hedgies.... How long until they figure out everyone else left and they're just trading against each other? Pretty funny, some disease could wipe us all out and if the power stayed on the market would keep trading until the circuits wore out. ---------- At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide. ~Abraham Lincoln 2008-02-11 20:15:46
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Patentleathershoes Posts: 7132 Incept: 2007-09-13
Looking forward to PB&J time!
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BW can you explain the wound quants unwinding?
2008-02-11 20:25:32
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Bw8472 Posts: 6446 Incept: 2007-06-28
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I had to check I meant wounded as in hurt. I'm a very not good speller so I had to make sure I hadn't mispelled it but that's what I was talking about. ---------- At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide. ~Abraham Lincoln Last modified:
2008-02-11 20:44:20 by bw8472
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Rtfg Posts: 1900 Incept: 2007-06-26
Bazookaville
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Bravo NoThing!!!!! 2008-02-11 21:13:39
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Etz3l Posts: 8658 Incept: 2007-06-26
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 Thanks for this post. ---------- I could slit my wrists and people would cheer - L. Blankfein.  http://www.youtube.com/watch?v=p8jm61vk2.... 2008-02-11 21:59:27
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Patentleathershoes Posts: 7132 Incept: 2007-09-13
Looking forward to PB&J time!
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But what I don't get is why wounded quants unwinding would result in an up market. I know that's not the only thing going on here but it would seem that it would have a big impact, more so than is reflected in the market in the last week. Newbie, Nova. 2008-02-11 21:59:52
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Foxymoron Posts: 9911 Incept: 2007-08-20
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Quote:But what I don't get is why wounded quants unwinding would result in an up market.If the quants are heavily short, then "unwinding" means "covering their short positions" - which probably means massive buying in the stocks and sectors that were so badly beaten down in the first place (think homebuilders and retail, for a start). ---------- If you trade based upon anything that I say, you're an even bigger fool than I am. ~ ~ ~ ~ ~ "The first rule is, you must not fool yourself. And you are the easiest person to fool." -- Richard Feynman 2008-02-11 22:08:01
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Matthew Posts: 493 Incept: 2007-07-17
Seattle, WA
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......, What do you have to say to this buddy?!?!?!?! 2008-02-11 22:10:52
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Genesis Posts: 66463 Incept: 2007-06-26 
Royal Flush!
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Uh uh uh uh uh uh uh uh uh uh uh uh uh uh uh uh uh uh uh uh uh uh..... Oh ****? ---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me 2008-02-11 22:11:33
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Buzzsaw97 Posts: 348 Incept: 2008-01-21 Banned
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So, in essence, the fed turned the printing press from blow to suck, without realizing it? I follow Russ and Lee, and it seems to me that the law of unintended consequences kicked in at some point. The fed threw a party, and nobody showed up. Now they are all crying in their beer because the whiskey ran out? : (/cliche)
---------- Play rough, but try not to lose your ass. 2008-02-11 22:17:48
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Buzzsaw97 Posts: 348 Incept: 2008-01-21 Banned
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Let me try one more time. The fed tried to jury rig some duct work so that the heat would flow to the back porch, but in the process they managed to clog up the return air so that the furnace blew up? Help me out, I'm dying here.
---------- Play rough, but try not to lose your ass. 2008-02-11 22:21:03
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Exodus Posts: 2081 Incept: 2007-08-29
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No I think the Fed realized it. And I think "oh ****" is more apropos to the general situation. Not to take anything away from Nothing's victory, mind you - I am pleased that she's been proven right. I really am! However, it feels like a deckhand on the Titanic saying "see? I TOLD you we were gonna sink!" 2008-02-11 22:23:00
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Etz3l Posts: 8658 Incept: 2007-06-26
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The Fed didn't try ****. The Fed just follows the market. ---------- I could slit my wrists and people would cheer - L. Blankfein. http://www.youtube.com/watch?v=p8jm61vk2.... 2008-02-11 22:27:18
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Adrenaline_junky Posts: 1578 Incept: 2007-09-14
Chicago
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Quote:
I'm not sure I follow this. It seems as if the article is blaming the bear market on the Fed, which is completely contrary to my understanding. To my thinking the Fed doesn't CAUSE anything, and is only responsible for the current situation in so far as they failed to regulate when they had the chance. The one part of this article that makes sense to me is the part about the Fed, having realized the situation, started destroying money in circulation so that their percentage of the money pie gets bigger and bigger. This is exactly as Nothing has been saying all along re deflation. I just don't get the implication about the Fed CAUSING the problem. Doesn't make sense to me. Am I completely missing something here? ---------- "A young healthy child well nursed, is, at a year old, a most delicious nourishing and wholesome food, whether stewed, roasted, baked, or boiled; and I make no doubt that it will equally serve in a fricassee, or a ragout." - Jonathan Swift from "A Modest Proposal" 2008-02-11 22:27:20
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