8 replies to this topic

[OEXCHAOS]

What if the Fed is planning on using the stock market to sop up a bunch of the excess liquidity? Ben may be dumb, but he's not stupid. He knows he's going to have to fight inflation at some point. But if he raises rates, there's a good chance that he'll kill whatever little recovery we have going, killing tax revenues, hurting the deficit even more... But if he doesn't, the vigilantes will do it for him... So, what to do? Take the market up. It's not like the don't have the capacity or will to do it. Get everyone Bulled up. Get massive amounts of money into the stock market. There aren't many other liquid choices anyway. Create a perception of safety. Get companies doing secondaries. Get new issues coming to market. Whatever. Basically sop up every buck that isn't going for the production of more goods (supply) and get it out of the commodity and hard assets demand equation. Then, after as much as can be sucked in gets sucked in, maybe foreign money too (which would make the $ stronger and allow you to export some inflation along the way)... let it fall. Send those dollars to money heaven. Send other dollars to treasuries. Let them drive yields down. Maybe you sell some of those bonds you purchased at those lower yields. Whatever. The point is, you don't want stagflation. This would be a pretty flexible approach, too. Anyway, that's one plausible scenario. It makes me much more open to the up side for the next several months.

[Gary Smith]

What if the Fed is planning on using the stock market to sop up a bunch of the excess liquidity? Ben may be dumb, but he's not stupid. He knows he's going to have to fight inflation at some point.

But if he raises rates, there's a good chance that he'll kill whatever little recovery we have going, killing tax revenues, hurting the deficit even more...

But if he doesn't, the vigilantes will do it for him...

So, what to do?

Take the market up. It's not like the don't have the capacity or will to do it. Get everyone Bulled up. Get massive amounts of money into the stock market. There aren't many other liquid choices anyway. Create a perception of safety. Get companies doing secondaries. Get new issues coming to market. Whatever. Basically sop up every buck that isn't going for the production of more goods (supply) and get it out of the commodity and hard assets demand equation.

Then, after as much as can be sucked in gets sucked in, maybe foreign money too (which would make the $ stronger and allow you to export some inflation along the way)... let it fall. Send those dollars to money heaven. Send other dollars to treasuries. Let them drive yields down. Maybe you sell some of those bonds you purchased at those lower yields. Whatever. The point is, you don't want stagflation.

This would be a pretty flexible approach, too.

Anyway, that's one plausible scenario. It makes me much more open to the up side for the next several months.

The market has been saying this for a couple months now and Bernanke in a Washington Post OP Ed pretty much said the Fed was targeting equity prices. I realize those who have missed this thing since December 16, 2008 when the Fed first brought up the possibility of buying Treasuries (to get traders back into riskier assets) like to badmouth the guy, but for selfish reasons he will always be my hero. He put it out there on a silver platter for all to partake. I will say though that it does seem a bit unfair that while Main Street has suffered, traders have prospered.

[Cirrus]

What if the Fed is planning on using the stock market to sop up a bunch of the excess liquidity? Ben may be dumb, but he's not stupid. He knows he's going to have to fight inflation at some point.

But if he raises rates, there's a good chance that he'll kill whatever little recovery we have going, killing tax revenues, hurting the deficit even more...

But if he doesn't, the vigilantes will do it for him...

So, what to do?

Take the market up. It's not like the don't have the capacity or will to do it. Get everyone Bulled up. Get massive amounts of money into the stock market. There aren't many other liquid choices anyway. Create a perception of safety. Get companies doing secondaries. Get new issues coming to market. Whatever. Basically sop up every buck that isn't going for the production of more goods (supply) and get it out of the commodity and hard assets demand equation.

Then, after as much as can be sucked in gets sucked in, maybe foreign money too (which would make the $ stronger and allow you to export some inflation along the way)... let it fall. Send those dollars to money heaven. Send other dollars to treasuries. Let them drive yields down. Maybe you sell some of those bonds you purchased at those lower yields. Whatever. The point is, you don't want stagflation.

This would be a pretty flexible approach, too.

Anyway, that's one plausible scenario. It makes me much more open to the up side for the next several months.

Can't stand the guy but have you read Soros' theory of "Reflexivity"? My guess is the Fed's agents are and have been pushing liquidity into stocks for a while.....

[nimblebear]

Its a garbage market anyway. So Why not ? Who says Ben hasn't been doing that now, hand over fist since 3/09 ?

[arbman]

Look Guys! I don't mean to be intrusive or assertive, but Fed is a PONZI SCHEME! The only way they can legitimize their money printing scheme is if they can somehow at least have their fake money flow through the economy whether by forcing through the stock market via the speculators or legitimate investors and turn into the govt taxes, hence this will show as if some sort of income or labor. There is absolutely no intention to pay any of this debt back, as long as they can inflate enough such that the interest can be recycled out of the tax revenue, it is all they need to keep the game going. Maybe one day the economy will really grow and pay them forward, but this is absolutely not required at the moment...

[SemiBizz]

What if?

Then, after as much as can be sucked in gets sucked in, maybe foreign money too... let it fall

With or without the BurningMan in this picture...

Sounds to me an awful lot like..

BIZNESS AS USUAL ON WALL STREET...

[NAV]

What if the Fed is planning on using the stock market to sop up a bunch of the excess liquidity? Ben may be dumb, but he's not stupid. He knows he's going to have to fight inflation at some point.

Mark,

I just don't get it. Where is the Fed sopping up liquidity or showing the intentions of doing it ? Quite the opposite - they are printing gigantic amounts of money under the Euphemism of QE, which is nothing but the fed monetizing the U.S deficits - plain and simple !

Take the market up. It's not like the don't have the capacity or will to do it. Get everyone Bulled up. Get massive amounts of money into the stock market. There aren't many other liquid choices anyway. Create a perception of safety. Get companies doing secondaries. Get new issues coming to market. Whatever. Basically sop up every buck that isn't going for the production of more goods (supply) and get it out of the commodity and hard assets demand equation.

What do you mean when you say they are sopping up every buck ? What monetary tools are they using to sop up the liquidity ? Every tool they are using and operations they are conducting is injecting liquidity into the system.

Are you saying that the Fed is directly intervening in the stock market and taking stocks on their balance sheet? If it is, then it should be some sort of covert operation, which is not reflected on the balance sheet they publish on their website. So is the Fed cooking up the books and lying to us then ? If not, please explain what you mean when you say Fed is taking the market up ?


Bernanke is neither dumb nor stupid IMO. But he is dangerous. He is doing what any other bureaucrat would have done in his place - i.e. respond to the gigantic debt mess by creating more debt, which he knows in his heart will blow up some day. He is not that stupid to see that play out during his tenure. Greenspan passed the buck to Bernanke. Bernanke will pass it to his successor. The game of musical chairs will continue....

As for the stocks and hard assets going up, it's a secondary effect of the massive money injections into the system. It's a inflation/reflation trade by the smart money. Why make it more complicated and conspiratorial ?

Edited by NAV, 16 December 2010 - 10:33 PM.

[bullshort]

"Ben may be dumb, but he's not stupid."

My, my, do we have short memories. The same principle applies to Greenspan as well, but since we're on the subject of Ben, let's let the facts (i.e., the moron's own words) speak for themselves:



Tell me again how smart this clown is . . .

[entre]

By "sopping up liquidity", he means the Fed is gonna keep jamming stock prices until stock prices are the most attractive game in town and sop up liquidity from the treasury and commodities markets because of it. In other words, the Fed will keep pumping to get the institutional community to chase stocks at the expense of bond and commodities markets. They want a mania where the institutional community chases stocks to make it easier for companies to do secondaries. Basically the Fed wants institutional hot money to share the load to propping up stock prices for economic recovery. Without the institutions chasing a rising stock market, the Fed is doing all the heavy lifting.