Wednesday Outlook: Moral Hazard Be Damned 10 comments
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There will be no John Galt-like solutions from this gang of bureaucrats and
politicians.
The government [taxpayers] is taking over the management
of markets (Moral Hazard be damned) as noted in this release per
Bloomberg:
The sentence in bold indicates that collateral may include “…non-agency AAA/Aaa rated private-label residential MBS [Mortgage-backed Securities].” This “may” account for those securities still maintaining high ratings even though they’re junk [see other Bloomberg story here]. Does that smack of government pressure and collusion with rating agencies to maintain high ratings so the Fed could take-in these securities as collateral when in fact these companies needed bailouts?
Circumstantial evidence argues strongly that it does. In fact, the bottom line of what happened Tuesday is the Fed swapped Treasury Bonds for junk mortgage bonds. It will help Wall Street banks and their balance sheets but not necessarily solve the housing problems. And who will eat the difference? You!
I wrote over the weekend that rumors were swirling that a big rescue package was in the works and it has come to pass. Add to this the likelihood of interest rate cuts next week and the Fed/Treasury will have fired all oftheir your ammo.
The team of Bernanke and Paulson are clear they will do whatever it took with your money to monetize junk debt to bailout their Wall Street friends. There will be a large tab for this down the road.
Yesterday morning I looked at conditions overseas and noted Europe was up substantially with the only ascribed reason being the hackneyed hope for more interest rate cuts. But that didn’t seem credible. Since so many players in Europe and the US are involved in this bailout scheme some traders certainly knew. Also, this news was released before the opening Tuesday, which has become the Fed’s habit, to inflict as much pain to shorts as possible. No question, this is a big time short-squeeze.
It’s hard to make sense of this data from Yahoo Finance regarding volume and breadth. Let’s just say they can’t add/subtract sometimes, especially for the NYSE. Volume was heavy and breadth was very positive.
Go to page 2 - Commodities, Emerging Markets >>
The government [taxpayers] is taking over the management
of markets (Moral Hazard be damned) as noted in this release per
Bloomberg: The Fed said in a statement it is establishing a new Term Securities Lending Facility to, through weekly auctions, lend as much as $200 billion of Treasuries to primary dealers for 28 days, instead of overnight as it currently does. The loans may be secured by collateral including agency and private mortgage- backed securities, the Fed said. [emphasis added]
The sentence in bold indicates that collateral may include “…non-agency AAA/Aaa rated private-label residential MBS [Mortgage-backed Securities].” This “may” account for those securities still maintaining high ratings even though they’re junk [see other Bloomberg story here]. Does that smack of government pressure and collusion with rating agencies to maintain high ratings so the Fed could take-in these securities as collateral when in fact these companies needed bailouts?
Circumstantial evidence argues strongly that it does. In fact, the bottom line of what happened Tuesday is the Fed swapped Treasury Bonds for junk mortgage bonds. It will help Wall Street banks and their balance sheets but not necessarily solve the housing problems. And who will eat the difference? You!
I wrote over the weekend that rumors were swirling that a big rescue package was in the works and it has come to pass. Add to this the likelihood of interest rate cuts next week and the Fed/Treasury will have fired all of
The team of Bernanke and Paulson are clear they will do whatever it took with your money to monetize junk debt to bailout their Wall Street friends. There will be a large tab for this down the road.
Yesterday morning I looked at conditions overseas and noted Europe was up substantially with the only ascribed reason being the hackneyed hope for more interest rate cuts. But that didn’t seem credible. Since so many players in Europe and the US are involved in this bailout scheme some traders certainly knew. Also, this news was released before the opening Tuesday, which has become the Fed’s habit, to inflict as much pain to shorts as possible. No question, this is a big time short-squeeze.
It’s hard to make sense of this data from Yahoo Finance regarding volume and breadth. Let’s just say they can’t add/subtract sometimes, especially for the NYSE. Volume was heavy and breadth was very positive.
Go to page 2 - Commodities, Emerging Markets >>
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This article has 10 comments:
Strong talks needs a strong reply. I SAY BUNK TO YOU!
I'm glad that you will pay and I will gladly pay. Even though the game is NOT over and the Fed could even make money on this swap. But even if they don't it's better than having a meltdown.
Trying to intimidate readers that "you" will pay is a cheap shot. You assume that there will be a cost, when, as I mentioned above, that there may not be a negative cost. Finally, like myself, I will gladly pay the cost to avoid a meltdown.
You should stick to your charts where the data is absolute. When you try to discuss a fundamental point please consider all sides of the discussion. Never, ever, assume that you can point your finger at your readers and intimidate them into believing your assumption is absolute without providing or at least thinking about a counter point of view. No one likes a one sided bias argument.
Thanks for your blog. We do need to be mindful of the high cost of government and who and how much we have to pay.
The sad truth is that thanks to a similar approach by the Fed under Alan the Bubble King, we are suffering the decompression of the breaking of the biggest number and size of asset bubbles in history that no amount of government (looter) action will fix. But based on the never-ending stream of bailout plans, that is certainly not holding them back from trying.
At what point do we realize that the economic and market checks and balances in our free enterprise system are as out of whack as they have ever been and its time for a serious correction/recession to put things right again? Trying to re-inflate these bubbles will only make the ultimate pain greater and take longer to heal. Just take a look at Japan 17 years after their decompression... we are attempting to do exactly what has kept them in an almost perpetual state of deflation. When will we ever learn?
Matt Blackman
TradeSystemGuru.com
"Today's economic and financial crisis would resolve itself more quickly and efficiently if the government got out of the way. Yes, there would be pain. Some banks would fail. Others would clamp down on credit to atone for the years of lax lending standards. Homeowners-in-name-onl... would become renters. Housing prices would fall until speculators found value. That's not going to happen. The bigger the mess, the more urgent the calls for a government solution, the more willing government is to oblige. We want laissez-faire capitalism in good times and a government backstop against losses in bad times. It's a tough way to run an economy." (Bloomberg, Mar. 10th)
Never ever, underestimate America, its people, its government, its ideas and its place in the world.