28 replies to this topic

[Rogerdodger]

Was May's "FAT FINGER" really just another one of those FED tests to see how quickly they can drop it? Will profitable short trades and bargain buys be voided again? Will stocks be priced at .01 again? Comforting questions.

Edited by Rogerdodger, 21 January 2011 - 09:07 AM.

[entre]

Really good comments.

My only real add on is in two points:

1) This may not work or work out as expected (the latter is almost inevitable).

2) What disturbs me most is what these folks will try to do afterward if it DOES work.

Mark

Agree completely. The reverse wealth effect of a market decline will be more brutal if the Fed treats a reducton to 7-8 % unemployment as more prescriptive and self-sustaining than it really is, which I can definitely see as a possibility.

The people on the Fed board don't strike me as counterintuitive thinkers. This is one of those times they have to focus on the unobvious more, so that they can make the connections to what's really going on with the obvious and see the whole pcture.

[salsabob]

Back in the 90s, I came across a set of nested Russian dolls of key US presidents that started with Washington with the next to last doll being Clinton (maybe not on par with the other key presidents but at the time he was the guy sitting in the WH). The last doll, however, was Clinton's saxophone. With Russian humor, it was not hard to firgure out (no pun intended) that this was a phallic symbol that at least was what drove Clinton. On deeper thought, perhaps there is something that drives all our presidents and in turn, our nation. Perhaps with some nuances missing (e.g., the commodity play is more akin to holding a 15 pounder on a 7 lb line), what you have brilliantly deducted, Mark, is what is going on at the Fed (I would only question your assumption of whom-is-in-who's-pocket - Wall St. vis-a-vis the Fed). You have peeked under the skirt of outer doll and now taking a good look at the underlying babe. Most remain spellbound by that outer doll's attributes or perceived lack of. I'm amused by those who attack the Fed out of the sheer ignorance that it, or even more broadly, the government, should be run as a business. Even more amused by those that have not only lived to whine another day but have actually greatly profited by the Fed's actions since the meltdown - I guess they're upset that they never got to experience a soup line. But there are other 'attributes' of that outer doll that are evn harder to break your gaze from and question whether there is something more under it. Putting aside the class blindness of assuming 43 million people can just become skilled renovators and all problems solved, it is interesting to note how skilled trades and retail management rather than college or graduate school based jobs are now considered the ticket to the American Dream. How inspiring for our young people. And given that those that had the 'smarts' to go to college but now will seek refuge in the skilled trades and retail, just exactly what do the people who previously would have gotten those jobs, but now are bumped, to do for work? Interesting to find those so convinced, if not concerned, that the financial house is beginning to implode, but not able to lift the skirt to see that the unemployed, if not otherwise supported, do not consume, do not create demand, do not help diminish overcapacity of supply, do not help diminish the need for financial tricks from bankers to keep the perception if not the reality of demand up. Who is going to buy the junk and services? Ah, but some assume under the skirt is the cavalry of millions of Chinese (sounds like "Red Dawn") and Indians new middle class coming to the rescue on the demand side. Whoopee! But ask yourself, when a flat-screen-buying American or "Western" job is shipped overseas how many China, Indian or what-have-you jobs does that create, let alone a flat-screen-buying job? You thing its one job lost for many jobs gained? Really, what industry would that be? Do you think its at least a one-for-one trade-off? Really, what industry would that be in? Are you aware that the best indication of coming job automaton is earlier job outsourcing? In just a couple years, if not months, most people will begin to realize that unemployment/under-employment/wage stagnation in the West is here to stay. We'll get reprieves with the inevitable business cycle upturns, but generally we're not going under 7 perhaps 8% - the "new normal." The next downturn will see more unemployment than the last and its reprieve will set the "new normal" even higher. Sure, there will be those blinded by class sitting in their gated communities railing that it’s all about laziness, but they're from another age and they will die out eventually. And we'll all just "muddle through" for the next several years. But then the real problem comes - the "saxophone" is finally revealed. The cavalry of new great demand coming from the East ain't gonna be there. Instead, it will be amazing-by-today's-standards computers and robots bearing lots of junk and services - its just that very very few people will be able to afford them no matter how cheap - here or anywhere else in the world. Once the 4-minute mile was broken, humans have taken another 50 years to shave off 17 seconds. Not a bad feat. However, in the next 18 months, Moore's Law tells us computers will double their capacity. And somewhere today, a robot will get 10% more efficient, just like one did yesterday, and another will get tomorrow and tomorrow, and .... A burger flipper has a chance? A programmer has a chance? A backroom lawyer or accountant has a chance? An auto repair man has a chance? A cashier got a chance? A manager supervising cashiers got a chance? And, do the companies relying on these formerly employed have a chance? Those investing in these companies' stock have a chance? Eventually, the guys relying on interpreting squiggly lines on stock charts, do they got a chance – really - once the lines go dead? But let's not lift that skirt - way too ugly. Bashing Ben is at least an amusing sport.

[spielchekr]

Wow, this board has come a very long way. Back in the day (like up until QE2), the idea that Fed manipulation like this could exist would have been ridiculed with no mercy as Conspirathink. Not only is it now accepted as fact, everyone has moved on to worry that the conspiracy might not work.

Edited by spielchekr, 21 January 2011 - 12:45 PM.

[arbman]

Greenspan understood the value of "surprising" the market. I remember the Fed announcing surprise rate cuts on option expiration fridays. Bernanke is less creative there. The one thing you don't want to do is become predictable, and Bernanke has made the Fed very predictable.

Entre, this is easy to say, but how can you possibly inject hundreds of billions these markets need in any other way than pre-announcing it? If Fed's intention is to buy ahead of everyone, I would agree it should be the tactic, that's to buy while everyone is selling, but I think Fed is not trying to "time the market"...

In that sense, Fed's last intention is to get the best possible prices for the public dollars. They just want the private sector to feel comfortable and overpay for what they have to offer and hence bring in some sort of "recklessness" into the game, some sort of speculative frenzy, some sort of bubblish behavior.

Why would you want to do so? This is beyond me, obviously we would not be here unless this has been the practice since 1998 LTCM bail out. These bankers are always feeling like they are entitled to the public money, this has to change and I doubt it will change with Bernanke or the rest of the Fed's board members. They are just too used to looting the public dollars...

Edited by arbman, 21 January 2011 - 01:28 PM.

[entre]

I think the Fed could get more bang for the buck if they were more imaginative, like timing their injections just when shorts short on "confirmation" when a short-term support level breaks.

[arbman]

I think the Fed could get more bang for the buck if they were more imaginative, like timing their injections just when shorts short on "confirmation" when a short-term support level breaks.

Not that Fed has not done what you said since 2009, but I think the hatred against the bankers grows so much that they may also end up with another October 2008, if they don't do it just right. The memory of helplessness from the second half of 2008 and the fragility of the situation are still too fresh in Bernanke's memory, he cannot go there, the market has been calling him whenever he pretended to be tough, then every time he showed his hand that he was bluffing...

I think Fed should gradually let the banks with bad assets fail and let them sold in pieces to the public at dirt cheap prices, if the public should own them, they should own them at the right price and that they are WORTHLESS. In the mean time, all these banks can be kept operational in order not to cripple the economy as they love to threaten us about it. The next time they threaten the country about taking down with them, Fed should step in and throw out all of their executives doing so and demand back their fat bonuses (that's right all, all of their 2009 and 2010 bonuses for doing ABSOLUTELY NOTHING), replace them with the executives offered a $150-200k salary and 10% year end bonus only --there is an army of people competent enough for the job, they should be paid like the rest of the country. If you are going to make a lot of money, you might as well risk your own and partners assets, not by appropriating the public dollars among themselves.

What is so f'ed up about is that they take the govt Treasuries sell it back to the govt and make 5-6% from this everyday that Fed prints money. That's $5-6B for every $100B as if they are doing any real work and the economy has to grow by that amount only to pay their FEE, this is BEFORE EVEN ITS INTEREST! Talk about looting and easy life while many people live on food stamps in the very same country!!!

That's right, but the proper fixes will never happen until these people are taken to the streets and hung to the electric poles and they are pushing for it, they will eventually get it. I would actually put all of them involved in jail including Henry Paulson (and have him pay all back taxes due on his ill tax-free earnings when he became Treasury Secretary, make a complete fool out of that traitor) to save them from the public brutality --when the public explodes, they won't be able to run away with their billions, but I know I am going too far with my imagination. If these people had not known that their Ponzi scheme in the credit mania would not collapse by any stretch and it had been surely coming while they were trying to cash out as much as possible, I would cut my penis. Sorry for the extremes, but this is the HARD reality.

Edited by arbman, 21 January 2011 - 03:30 PM.

[salsabob]

I think the Fed could get more bang for the buck if they were more imaginative, like timing their injections just when shorts short on "confirmation" when a short-term support level breaks.

Not that Fed has not done what you said since 2009, but I think the hatred against the bankers grows so much that they may also end up with another October 2008, if they don't do it just right. The memory of helplessness from the second half of 2008 and the fragility of the situation are still too fresh in Bernanke's memory, he cannot go there, the market has been calling him whenever he pretended to be tough, then every time he showed his hand that he was bluffing...

I think Fed should gradually let the banks with bad assets fail and let them sold in pieces to the public at dirt cheap prices, if the public should own them, they should own them at the right price and that they are WORTHLESS. In the mean time, all these banks can be kept operational in order not to cripple the economy as they love to threaten us about it. The next time they threaten the country about taking down with them, Fed should step in and throw out all of their executives doing so and demand back their fat bonuses (that's right all, all of their 2009 and 2010 bonuses for doing ABSOLUTELY NOTHING), replace them with the executives offered a $150-200k salary and 10% year end bonus only --there is an army of people competent enough for the job, they should be paid like the rest of the country. If you are going to make a lot of money, you might as well risk your own and partners assets, not by appropriating the public dollars among themselves.

What is so f'ed up about is that they take the govt Treasuries sell it back to the govt and make 5-6% from this everyday that Fed prints money. That's $5-6B for every $100B as if they are doing any real work and the economy has to grow by that amount only to pay their FEE, this is BEFORE EVEN ITS INTEREST! Talk about looting and easy life while many people live on food stamps in the very same country!!!

That's right, but the proper fixes will never happen until these people are taken to the streets and hung to the electric poles and they are pushing for it, they will eventually get it. I would actually put all of them involved in jail including Henry Paulson (and have him pay all back taxes due on his ill tax-free earnings when he became Treasury Secretary, make a complete fool out of that traitor) to save them from the public brutality --when the public explodes, they won't be able to run away with their billions, but I know I am going too far with my imagination. If these people had not known that their Ponzi scheme in the credit mania would not collapse by any stretch and it had been surely coming while they were trying to cash out as much as possible, I would cut my penis. Sorry for the extremes, but this is the HARD reality.

It's likely that the outer doll of Ben and bankers is going to have to be shattered in some way as you indicated. But that only allows us to see more clearly the next doll underneath, and perhaps even get a glimpse of the 'saxophone' underneath it all. In the not so distant future, there will be little gainful employment for enough humans to support a wage-based global mass market economy. The gyrations in economies and markets as we move to that point are considerable enough but layering on long-cherished value systems, politics and just hyper- dishonesty and greed makes it absolutely impossible for most to see let alone grasp the inevitable trend let alone begin to think about how to deal with it.

It's only for my amusment that I think perhaps some base level of dividend-paying stocks, with some sort of incentives (replacing wages) to get more than baseline (because unequal income is not an evil, it is an absolute must in a functioning market economy) might do the trick. But i think we are much more likely to return to a feudal society arrangement. If that's the case, keep guessing right on the markets - its better to at least be a lord or even the grounds keeper than the serf. All the king spots have already been spoken for.

Edited by salsabob, 21 January 2011 - 05:01 PM.

[Rogerdodger]

Wow, this board has come a very long way. Back in the day (like up until QE2), the idea that Fed manipulation like this could exist would have been ridiculed with no mercy as Conspirathink. Not only is it now accepted as fact, everyone has moved on to worry that the conspiracy might not work.