Bulls, Bears & Bucks #37: Wall Street capituleert

quote:

Op donderdag 9 oktober 2008 02:36 schreef DJKoster het volgende:
http://finance.yahoo.com/intlindices?e=asia , alles weer fijn rood...

quote:

Op donderdag 9 oktober 2008 07:35 schreef DustPuppy het volgende:
Nikkei weer in de min? En het ging zo lekker.

quote:

The End of The World As We Know It - Professional Edition Fed Report

The Long March toward the destruction of the creditworthiness of the United States of America took a Great Leap Forward today, or perhaps we should say “one small step for Paulson, one flying leap for mankind.” The Treasury announced and carried out 2 same-day surprise auctions of medium term notes totaling $20 billion. They announced 2 more auctions of similar paper for another $20 billion tomorrow. The market choked on its vomit. 5 year yields rose 22 bp on the day, and at one point were up 50 bp from the low of the day, which came right after the open when the market was digesting the meaningless worldwide central bank coordinated rate cut.

The Fed action in cutting the Fed Funds target to 1.5% was merely rubberstamping the action it had already taken a couple of weeks ago when it first flooded the system with cash and drove Fed Funds rates into the ground. Today they just made it official that they intend to pursue aggressively reflationary policies of monetizing virtually anything. What next after commercial paper? Baseball cards? Monopoly money?

Ironically, today they had to pump in $20 billion via OMO as Fed Funds soared on Tuesday to nearly 3%. I suspect that they will have ongoing difficulty trying to peg actual Fed Funds trading to anywhere near the target rate.

The Treasury market’s problem is not theoretical. It’s not about the threat of investors discounting future inflation. It’s much simpler than that. It’s about simply choking on a barrage of new Treasury supply that’s running between $100 and $200 billion every week! There is no way that stocks, or corporate bonds, or GSE paper, or munis can compete with this supply. Today we saw first signs that the market can’t even absorb just the Treasury supply. As the interest rates rise on Treasuries as a result, we will be facing an unimaginable economic environment, one in which the world rightly questions the ability of the US Government to service its obligations.

The Fed is converting these Treasury funds into loans on, and purchases of, securities and loans, at least some of which are certain not to be repaid. We are now backing our money with assets that may never be able to be liquidated. A time is now virtually certain that there will be no realistic way to pay off the debts the Treasury is now incurring.

As the market begins to realize this, we may face the ultimate collapse, the collapse of US Government finance. Ultimately the world as we know it will be changed in ways that we cannot imagine. Even if the US Government were to reverse course now and say, flat out, no more bailouts, no more Treasury borrowing to finance bailouts, it’s probably already too late.

It’s one thing to allow private capital markets to fail. It’s another thing entirely to foster, foment, and cause the failure of government. A loss of confidence in financial markets is one thing. A breakdown of confidence in government would mean societal changes that we never dreamed of.

The following is repeated from reports issued over the past 4 days.

The Fed on Tuesday said that it will now buy commercial paper through a special purpose vehicle that it will set up under a new program, the Commercial Paper Funding Facility, aka the Commercial Paper Resuscitation (CPR) facility. The purpose of the CPR will be to breathe life back into the commercial paper market. Funding will be limited to the highest quality Asset Backed CP and other forms of CP as discussed in this press release from the Fed http://www.federalreserve(...)netary/20081007c.htm and an attached pdf file http://www.federalreserve(...)netary20081007c1.pdf The problem is that if you believe the Fed’s own data, the CP market was still breathing on its own.

As usual lately, the market was underwhelmed by this latest action from Toothless Ben along with the $25 billion in cash that he pumped into the market Tuesday. I suspect that rather than strengthening the private capital markets, this program like all the others will simply foster the atmosphere of dependency on the Fed and Uncle Sam, just as the drug addict becomes dependant on his dealer. The Fed is simply unwilling to allow the market to experience the necessary pain of withdrawal that is the first step to becoming sober and healthy. The Fed’s actions seem destined to foster even greater dependency on the drugs that caused all the problems in the first place. How will this help the market to get sober and healthy?

The Treasury announced that it would sell another $100 billion in CMBs this week, adding to the crush of Treasury supply pressuring the credit and equity markets. Panicked investors continued to buy only Treasuries and sell everything else. That sent rates plunging again at Monday’s Treasury auctions. This insanity will end badly too, but for now, it is what it is. Meanwhile, the Fed rolled over $25 billion in reverse repos as its open market operations become an irrelevance in the face of massive new and expanded alphabet soup programs. On Monday the Fed announced that it would pay interest on bank reserves as well as double the size of the TAF to $600 billion, and temporarily $900 billion over year end to ease year end funding pressures. Here is the Fed’s press release announcing these changes. http://www.federalreserve(...)netary/20081006a.htm

Digesting the rapid changes in the rules of the game becomes more challenging each day. The Fed is obviously now debasing the currency, but to what effect? This is a classic case of pushing on a string as lending institutions opt to hold cash rather than borrow and lend, so it is not clear when and whether these massive Fed actions will have an inflationary impact. Credit may be collapsing faster than the Fed’s efforts to replace it. As we saw in Japan, massive government money printing may have little effect against deflationary pressures when a credit bubble collapses, and the world has never seen a bubble of this magnitude collapse before.

The Fed’s H41 report last week reveals massive increases in Fed credit through the special programs created over the past two weeks, especially the Money Market Fund Assisted Living Facility (MMALF), and the expanded PDCF. The increases bring the total outstanding to $409 billion, which is shocking, and suggests that the bailout bill is just a rubber stamp for what has already been done, a fait accompli. While somewhat offset in their impact by the massive increases in Treasury supply that are funding the programs, the net effect is that the PDs have a pile of cash at their disposal, whether to plug holes in their balance sheets, or possibly go bargain hunting in the markets— a lot of cash, as expressed by a Fed Funds rate near zero at one point last week. As a result the Fed did another reverse repo Friday.

The Treasury’s auction schedule for this week dumped another humongous load of fresh supply on the market. The pressure on stocks and non government bonds is certain to continue as the Treasury crowding out continues week in and week out. The passage of the bailout bill was a disaster as predicted right here, adding even more Treasury supply to a market that can’t cope with it. This is something that policy makers either fail to understand or are ignoring. As long as they continue to pound the market with Treasury paper, there will be no market for anything else. The commercial paper market has been reeling under the competing pressure of excess Treasury supply in an environment suffused with fear. Ultimately, buyers are likely to even shy away from Treasuries. That would be the final disaster.

quote:

Op donderdag 9 oktober 2008 08:32 schreef ItaloDancer het volgende:
Nah deze ochtend moeten we wel een procentje of 2 hoger kunnen openen.

quote:

Op donderdag 9 oktober 2008 09:01 schreef PurnodePurno het volgende:
Wat verwachten jullie dat de rente gaat doen? Ik sta namelijk op het punt een hypotheek af te sluiten.

quote:

Op donderdag 9 oktober 2008 09:11 schreef Dr.Daggla het volgende:
Ik meld mij vandaag ook weer in amusementspark beursplein 5.

quote:

Op donderdag 9 oktober 2008 09:12 schreef Dr.Daggla het volgende:

[..]

Slim .

quote:

Op donderdag 9 oktober 2008 09:14 schreef PietjePuk007 het volgende:
Fortis stond in de NRC Next bij de top3 stijgers .

quote:

Op donderdag 9 oktober 2008 09:02 schreef MrFl0ppY het volgende:
Is Fortis nog steeds uitgesloten? Hier op nu.nl staat hij nog steeds op 0%. Beste aandeel de afgelopen 2 dagen gok ik zo.

quote:

Op donderdag 9 oktober 2008 09:11 schreef Dr.Daggla het volgende:
Ik meld mij vandaag ook weer in amusementspark beursplein 5.

quote:

Op donderdag 9 oktober 2008 09:11 schreef Dr.Daggla het volgende:
Ik meld mij vandaag ook weer in amusementspark beursplein 5.