Wednesday, June 24, 2009

Fed Cover Up?/Bond Market Surprise

All I can say about today is wow.

There was some major pain doled in the credit markets today as the Fed surprised almost everyone by actually announcing no new buyback programs.

Many bond traders tried to front run the Fed by piling long into treasuries before the Fed's announcement thinking that we would see another round of Ponzi spending via QE.

That was a BIG mistake. Take a look at the 30 year before and after the Fed's statement:

My Take:

Ouch! I tried to warn everyone yesterday that the Fed loves to inflict max pain anytime you try and front run them. I am happy that I nervously held onto my TBT yesterday even though I was fairly confident the Fed would announce more spending. The only reason that I stayed in this trade is because I still believe the long term trend for yields is higher.

Needless to say, I am also pleased from a fiscal standpoint that the Fed did nothing today. Perhaps they are finally realizing that their QE policy was slowly turning into a highway to hell?

Lets all hope so. What we now need to ask ourselves is this: Did the Fed just pause or did they finally realize that there is not an endless supply of money on the other side of the rainbow? Its a very important question that needs to be answered. Our whole economic system depends on it.

If the Fed has finally realized that the spending must stop then a deflationary collapse similar to Japan is highly likely. Without the Fed's endless money tree, the companies that are sucking off the government tit will suddenly be exposed for what they are: FAILURES.

The Fed recently said "no" to bailouts of California and the auto part manufacturers. Are these further signs that the Fed has decided to yell "NO MAS"? If it is then the market optimism will rapidly turn into a full blown panic as we see explosion after explosion via debt defaults and bankrupties.

Remember folks: The Fed and its balance sheet is the ONLY reason we didn't see this explosion last fall. If they have now been "neutered" its over folks. I have repeatedly warned that there is only so much money to go around. The Fed cannot spend forever despite the fact that they love telling you that they can.

This game of musical chairs will end like it always does.

Bond auction:

The five year auction today was mildly successful despite CNBC's claims that the auction saw strong demand. The bid to cover was 2.57.

Quick Take:

There was a lot of talk over on the ticker forum around changes regarding indirect bidders.

Apparently the FCB's and other buyers have been shifted into the indirect bidder side. As a result, it really skews the actual demand for bonds by indirect bidders. It makes it appear like there was more demand for bonds from these bidders than there actually was.

What a shocker, the Fed changed the rules.

They better knock this stuff off because Congress is slowly catching up to their fraudulent ways:

Bottom Line:

Folks, the Bernanke story has serious legs. Somebody wants blood. IMO its totally obvious that the Fed strong armed Bank of America into picking up that toxic mortgage garbage dump that we used to call Merrill Lynch.

The reason this is serious is because the Fed committed a serious crime. Millions of BofA shareholders suffered as a result of the Fed's forced takeover. BofA's stock has been down as much as 75% since the Fed "Soprano's" forced these two into a shotgun wedding.

Gee, do you think BofA shareholders might have solid grounds for a lawsuit here against the Fed and/or Ken Lewis? I can't wait to watch Bernanke try to explain this one under oath. Its about time that the banking thieves are thrown under the microscope after bankrupting America.

The bankers(including the Fed/Treasury) that created this mess all must HANG if Washington ever wants Wall St to regain their credibility. The pigmen simply CANNOT be given a free pass after pushing this country into an economic meltdown. There is NO other answer! Period!

There will be a revolt in this country if this never happens because this "hope rally" is going to die as this country continues to suffer in a depression. Once we hit the skids again, Americans are going to want blood.

It appears like they might get a taste of it soon as Bernanke goes down for the count.


Minton Mckarkquey said...

"The reason this is serious is because the Fed committed a serious crime."
Wow, somebody finally said it. And let's not forget this isn't the first time the Fed's meddled with share/bondholders rights...

A**holes, seriously.

Anonymous said...

Treasury plan to buy bank toxic asset is coming....

jeff said...


I know....

Tomorrow should be interesting. Lets see how Bernanke tries to talk his way out of this one.

A**holes is an appropriate term!

I didn't even get to the housing numbers today which were horrible.

Builders expected a huge jump in sales as a result of the 8k buyer tax credit.

Sales came out and were worse then the previous month! Housing is toast.

The housing bubble was the scam of the century.

jeff said...


Nice catch. Missed that.

I will believe it when I see it. They have been announcing and delaying this program for months now.

They keep recycling the same crap. Its unbelieveable. Maybe thats why we saw no QE today? The Fed is probably saving their money for this public private nightmare.

Lets see if they finally roll this out!

snood said...

I believe the original TARP bailout bill gave the FED & Treasury Department ultimate authority to take any steps they wanted with no review by anyone.

(b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation
Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Jeff said...


Good point.

The problem the Fed has is this type of crap is outlawed by the constitution.

Its going to be very interesting to see how this all plays out. No one in this country should have unlimeted power without authority IMO.

It goes against everything we stand for. Let North Korea rule like a dictatorship.

When I read those TARP rules that you posted that's immediately what came to mind.

Our founding fathers would role over in their grave if they ever read laws like that in this country.

jeff said...


Big spike in the futures around midnight.

Anyone hearing anything? I haven't seen any news.

Starting to wonder if someone blew up.

Very strange price action.

Jeff said...

Post up 6:30-7