8 replies to this topic

[arbman]

There was a coupon pass yesterday for $1.1B with the 2011-2015 expirations. This is on top of the $30B temporary repos. Is this the same Fed telling us there is inflation? Yes, it is absurd and yes, the currency is now responding immediately and yes, you wonder what the real motivation behind weakening the USD right here, unless there will be some sort of elevated deflation expectations later... - kisa

[arbman]

I guess this was kind of a sell signal, I mean the money pumped by the Fed failed to push the prices higher or trigger a rally. If you look historically, whenever this happened, a sell off followed. Actually the best sell offs followed when the money supply was increased and yet failed to create the price inflation... - kisa

[peregrine]

The recent additions to the money supply over the past few months may have been to keep the narrow Monetary Base, for some time increments, from slipping into negative numbers. (see table beneath chart)

http://research.stlo.../usfd/page3.pdf

But....I'll have to say that the upward angle of the much broader M2 chart suggests your hypothesis of expansion has some merit. (see chart and table)

http://research.stlo.../usfd/page6.pdf

Edited by peregrine, 10 April 2007 - 10:36 AM.

[Mr Doji]

There was a coupon pass yesterday for $1.1B with the 2011-2015 expirations. This is on top of the $30B temporary repos. Is this the same Fed telling us there is inflation? Yes, it is absurd and yes, the currency is now responding immediately and yes, you wonder what the real motivation behind weakening the USD right here, unless there will be some sort of elevated deflation expectations later...

- kisa

Another one today:
POMO

Edited by Mr Doji, 10 April 2007 - 10:48 AM.

[arbman]

I have some theories, I don't know they will make sense to everyone. Yes the money growth rate is still negative on a 9-month basis. However, the money injected into the markets was huge last year, so naturally both the failure in actual real growth and sustainability are here now. The money supply is not quite growing at the moment, but the inflation is still high especially compared to the growth, this is why the money went into the utilities and energy. Otherwise, the correction could be much deeper. The Fed knows that the trend is unsustainable and the inflation will erode the bottom line of the companies, if they attempt to sustain it, imho. I think the Fed injected the dollars they did to cap the housing speculation and keep the rates high, instead of draining the liquidity since they would have to eventually lower the rates and it would fuel an even bigger housing speculation. But, they don't have any other option, but to drain right now, beside I think the mission is achieved in terms of cooling down the housing. However, now they have a bigger deflation problem with the devalued currency problem on top. They are probably thinking the cooling in the housing will eventually support the USD, we'll see... - kisa

[newportsurf]

Kisa... Your posts are always on point and a pleasure to read. You are one of the top posters if you ask me... What is your take on the long bond. How does the coupon pass effect 30 year bonds? Thanks, NB

[thespookyone]

I guess this was kind of a sell signal, I mean the money pumped by the Fed failed to push the prices higher or trigger a rally. If you look historically, whenever this happened, a sell off followed. Actually the best sell offs followed when the money supply was increased and yet failed to create the price inflation...

- kisa

Was thinking roughly the same thing when I looked at that this morning. I also agree that when the marginal utility of the pump money declines-the spigot will soon be turned to off-and a fairly sharp market decline should follow.

[arbman]

Thanks, but kisacik failed again to remember that the Fed woud step in here, I was expecting a decline, this happened more than once to me. The Fed always injects when they see the small speculators are going short, they went short in the futures, although the speculation in the puts eased. If the mission accomplished in terms of a sustained bearish small spec speculation for a while, then a measurable decline might not come here. I think they will turn bullish ahead of the 10 wk low later this month, if a decline doesn't happen. I might look for a few more longs depending on the rest of the week. I see only 120 break outs now, sharply down from the peak 210 reading on Friday. We will see how it will affect the indices later this week... - kisa

[arbman]

What is your take on the long bond. How does the coupon pass effect 30 year bonds?

Sorry, I missed your question. I think the bonds are going lower until the USD bottoms and it should also effect the growth in the stocks negatively...

- kisa