Pimco's Gross on Fed MBS Purchases
Submitted by
CalculatedRisk on Tue, 01/05/2010 - 4:01pm (251 comments)
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 34 members and 183 guests online.
Currently online
- 12th Percentile
- Eric
- ResistanceIsFeudal
- Lobbyist Ben Dover
- burnside
- Rickkk
- Outsider
- Firemane
- RockyR
- shill
- traderwalt
- BelieverJeff
- Black Star Ranch
- Nanoo-Nanoo
- sscripko
- black dog
- Bruce in Tennessee
- Windward.Broach
- nova
- Cobradriver
- Mike in Long Island
- bearly
- Cat Daddy
- Blue Guy Red State
- Lurking Lawyer
- Haralambos
- silvertoes two
- gruntled
- gabyjan
- Comrade Kristina
- JP
- kratovil1
- dr munch
- Mert717
Recent Recommendations
!! They will miss the money. . .
Wish I had it to miss.
darnit, I have nothing to disagree with
I'll take 137 basis points for the win alex.
Maybe they will, maybe they won't. Got it.
and the cow jumped over the moon....
I think we really should be at about 7 1/2% mtg rates.
I tell people that plan to lend that they should have at least
one adjustment period about 5 years out, so they don't get
killed.
disagree with "we just don't know"
Sounds like a secret mission for Neel 'Cash N Carry' Kashkari who did such a great job running TARP
PIMCO Hires Neel Kashkari
You mean there were some that weren't? - RD
I was surprised he could pull anything in that-- I'd have thought it was a girl repellent. It sure smelled repellent. OTOH, it used to bounce up and down off the highway like a.... never mind.
Hubster has arrived--
I expect that the Fed may choose to "refresh" its MBS. That is, sell older seasoned securities and use the money to buy newly issued MBS. The underwriting risk in any pool should be apparent in the first year. This also keeps the principal received from the MBS to a smaller amount.
For about 10 minutes.
Bill Gross was quoted as saying:
Translation: "I know quite well what it means, if it plays out the way they say they are going to play it, and I've repositioned to make sure my funds do well. The market is going to be surprised how much it will miss that money, but at least I've got mine."
Funny thing... the dividend yield on the S&P 500 is higher than the current "all-in" GAAP earnings yield, which itself has been gerrymandered. Your average company cannot even make dividend payments out of its actual earnings, and their bankers know it. They're really going to miss that Fed pump when they can no longer siphon cash out of secondary equity issues...
If the fliipers don't exit their positions by march 30th...goodnight now.
in theory.
but let's discuss and examine what "try" means.this may be the best since the "is" definition.
Your average company cannot even make dividend payments out of its actual earnings, and their bankers know it. They're really going to miss that ----
OMG. Death spiral.
Your average company cannot even make dividend payments out of its actual earnings, and their bankers know it.
of course they know it...
that's what this Gem
is for
I've never seen such an ill executed full court press. Sad that when we so need an Aragon we get a Steward of Gondor.
The Fed has been very consistant about ending the MBS purchases. So I do think they will stop buying.
No clue if they wil try and sell some of what they have. First there has to be a market for the new MBS. And those interest rates will be higher to attract any buyers. I'm thinking mortgages at 6.5%, with points at just under 2.
House price death spiral too.
Should leave and go watch Mark Harmon. He always gets
the Bad Guys in the end.
"Bill Gross sees 2010 as a year of wreckoning..."
There, IFIFY
Ok you 387 guests, I double dare you to post something.
Circling the Drain wrote:
"Bill Gross sees 2010 as a decade of wreckoning..."
There, IFIFY
lawyerliz wrote:
Mortgage rates can't really rise above 6%. The banks have money to lend and they won't be able to find enough borrowers at higher rates. What is more likely if things go bad is that rates rise and the volume of lending (and home sales) falls dramatically.
Remember that most current sales are for either new home buyers, second houses or investors. People are still unable to sell their existing home and use the equity as down payment on their next home. Until home assets are more liquid, home sales will be dependent on liquidity in the remainder of the economy. We will probably be in this state for several years.
Intrade
US.NEW.STIMULUS.MAR10
Congress to pass a new economic stimulus plan before midnight ET on 31 Mar 2010
that's pretty much a bet on continued MBS purchases, No?
Click on financial-US stim plan
Nitey nite.
lawyerliz wrote:
Or ham.
Wouldn't a lit :Bic Lighter: be a cool icon, hint, hint.
Starting in Q4 I decided for myself that not only will the FED be unable to sell any of their junk out of inventory, but they'll have to keep buying. I would expect them to announce that soon. They can't possibly think there is any sustainable recovery underway in the housing market. And, moreover, their MBS buying program functions as a liquidity and scrubbing operation. Can't see that going away either.
G
Anyone else notice lots of changes in programs, stopping programs, starting new programs all at the end of March, begining of April?
But Gross makes the main point here- money is fungible. Sure, the Fed stops buying MBS, but if they then start buying something else, or more of something else (treasuries), the effect is pretty much the same.
I would keep an eye on the total balance sheet, not the individual parts. I expect it to total 3 trillion by the end of this year.
Wisdom Speaker wrote:
Just took a fresh look at the data (warning, Excel spreadsheet link, remember they removed the handy web link so now this is the first google hit... : http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
)
As-Reported Earnings per Share:
Estimates:
12/31/2009 $8.56
09/30/2009 (87% actual) $14.91
ACTUAL
06/30/2009 $13.51
03/31/2009 $7.52
12/31/2008 -$23.25
09/30/2008 $9.73
So, on paper, when earnings season kicks in, we'll be getting full-year 2009 earnings which no longer include the horrific -$23.25 print from Q4 of 2008.
The P/E* for the S&P will drop from the 80-plus back to maybe 25. (Where E* is again the actual reported earnings, not the "operating" earnings.) This is significantly higher than what we had going into 2004, but comparable to late-2002 to mid-2003... hmmm... another indicator pointing towards another leg down.
We could miss the money
Us poor renting blue collar slobs waiting for wages to rise and house prices to come down, miss it, already. Whose 'effin bucks were they anyhow?
Comrade Rally Monkey wrote:
Except total corporate debt has flattopped. That door appears to be closed. What's behind Door #4?
Pretty much anyone who could fog the proverbial mirror is in a mortgage already other than the patient renters who will keep waiting as prices are skewed high. Investors would be paying cash, and could be wrong but I don't think the FHA is making loans for second homes.
MBS purchases for everybody! who cares the powers that be will buy all that is needed.
did you just say 'peaked'
rosethorn, I feel so left out, you forgot us that are stuck at our parents house. I dunno, are we lucky or what?
josap wrote:
because that's tomorrow, right now. In another month, tomorrow will be end of June, beginning of July.
The Sun will come out tomorrow,
so you gotta hang on till tomorrow.
josap wrote:
With 20% [plus] down of course.
Definitely by mid-year.
Government Housing Support Update
I'd say those are significant changes.
best to all
Who is setting the price for these securities? Are they being purchased at face value?
kidbuck wrote:
Hu knows.
Run, don't walk, to the nearest FHA lender and get yo' self a house man
FT Alphaville » How much trouble is Prince Alwaleed’s Kingdom Holding actually in?
Al-Waleed is a real character, despite his huge flop going long Citigroup and any hotel you've ever heard of, he vows to press ahead with the world's new tallest tower at over 1km tall / 40% taller than the Burj Dubai which is 800m
CalculatedRisk wrote:
Make for some very interesting fall campaigns.
So they really think the econocycle can roll with out the extra support? This should be fun until the road of life rears its ugly pockmarked face of doom.
Boy, not here in west LA. Most anything decent that is under ~8-900k (so as to use FHA conforming jumbo's with DP) sells, often with multiple offers. Still. Strong kool-aide here. And plenty of folks with more money than brainz.
EvilHenryPaulson wrote:
You mean the world's emptiest sky scrapper. Now named for the ruler of Abu Dhabi.
Just a reminder that the Optimistic Bear internet radio show will be airing live tonight (Tuesday the 5th) at 9:00pm Pacific Time. We will be discussing the past week in economics and finance. Feel free to call in and share your thoughts.
Pomp & Surkanstance: Introducing the Optimistic Bear Weekly Economics and Finance
nova wrote:
Anyone ever tell you you should write?
Watson wrote:
You mean, you think we should actually have some transparency, and know what is backing our currency?
TRACE enables individual investors to receive real-time information on the actual sale price of virtually all U.S. corporate bonds
Sovereign Debt, Hither and Yon – You Know, Like Japan
credit to angel9913 in comments
EVERYBODY defaults when it cannot secure enough credit for the next debt rollover. Either that, or your society of choice devolves into an inflationary mess which makes the currency irrelevant.
It's the financial equivalent of the Law of Gravity... and offers same exceptions (none). Japan proved nothing yet. It started with plenty of leeway, but its time is getting close.
In the meantime, servicing that ever increasing debt makes life miserable for a rapidly increasing number of people.
We are on a strict need to no basis.
Wisdom Speaker wrote:
I think you are confused. We have plenty of transparency. Nothing is backing our currency.
I hope that cleared it up for you.
look back: BBC NEWS | Business | Spain's empty ghost towns
dryfly wrote:
Nope, not for FHA. All people see is how much down and how much a month.
dryfly,
Only once in awhile. The rejection slips are still in the lead.
Country Club Of The South Sold At Auction - 11Alive.com | WXIA | Atlanta, GA
Country Club of the South, Atlanta's elite golf club, where many pro atheletes own houses, was foreclosed on today. "Alpharetta-based Bank of North Georgia acquired the venerable club for $11.1 million." The note that the bank held was for $9.5 million. Your TARP money at work--I guess the bank thinks there is an upside to owning the club, so they out bid other parties--but hey, they are an Alpharetta bank.
Who knew?
Bernanke knew.
That's why he re-fi'd.
50 bps - I forget. What is that? Half a point?
Rates have already gone up half a point since I refi'd last month.
I say we haven't even begun to see where rates are going yet. Time will tell.
dryfly wrote:
Would it be un-PC to want a Chinaman icon?
That title is way to funny!
I say maybe 25 in 2010. then again the commodity bubble may make some revisit their inflation forecasts - it can be caused externally despite the best efforts of the Fed. (aka Oil crisis)
km4 wrote:
Simplified that for you!
On the other hand, without that bond-fund income (which is someone else's debt servicing burden), how will your parents retire? It's not like your typical stock can sustain more than 2% in dividends anymore...
A modest proposal:
1) Incentivize corporations to return earnings to shareholders, instead of overbuilding themselves.
2) De-incentivize individuals to buy bonds.
If the bond market were smaller and people could reliably get income from stocks, then there would be less need for the elderly to hold debt, there would be less debt outstanding, and fewer people would be made miserable from servicing that debt...
josap wrote:
Isn't FHA going to be one of those 'programs' reeled in this Spring? New tougher requirements & such?
kidbuck wrote:
(sorry)
dryfly wrote:
I suspect I'm as skeptical of this as you actually are... How long do you think the pending home sales index stays in the toilet?
My December estimate of what the Fed will need to buy next year (in total, across all asset classes) is $700 billion. There's less than $200 billion left in the existing plan, through to the end of April, so that's $500 billion more that they will have to execute.
dryfly wrote:
The tougher requirements don't include having down payments above 3% of purchase price. Mostly more checks on where that 3% comes from and restrictions on how much capital the lender should have.
dryfly wrote:
Yes, less % of seller paid closing costs allowed. max 3% instead of 6%.
Yes, increase in mortgage insurance costs. About double.
Yes, higher FICO scores required.
No changes in down payment %, it will remain at 3.5%.
Someone mentioned flippers so I had to comment. If a flip isn't on the market by mid-month then it is in trouble. Flips are aimed at the FTHB crowd since they are some of the few homes clean enough to pass inspection. The problem for the flippers is they bid the property up to a certain price point assuming a 5% 30yr rate compounded with the FHA 90 day moritorim on flip purchases. I see some nail biting in the next 90 days.
GMAC expects $5B 4Q loss, selling mortgage assets - Yahoo! Finance
By the way, when I first saw
, I thought it was a fire helmet. I think we're going to be fighting plenty of fires this year.
Yes, higher FICO scores required.
Well, that oughta boost sales sky high.
/snark
"Isn't FHA going to be one of those 'programs' reeled in this Spring? New tougher requirements & such?"
dryfly I didn't realize you had such a sense of humor (:
Wisdom Speaker wrote:
No idea - but the fed/UST have to carefully pick their battles - my guess is 'housing supports' fall in priority as the wall of treasury debt roll over approaches.
josap wrote:
So no real changes that matter.
Fed can not afford to abandon MBS and the GSEs in March. If it does, it is game over for interest rates, mortgages, and the stock market. Period.
The Fed Is Preparing QE 2.0, MBS-Only Edition
The Fed is the MBS market.
patientrenter wrote:
Just wondering, what did you estimate for total net Treasury issuance, and how much for the other classes of buyers besides Fed?
Gross in an odd one - obviously enabling the destruction of the country, yet you can't call him stupid, dishonest or obviously evil like the
.
By the way, when I first saw
, I thought it was a fire helmet.
I admit I squinted at it for a really long time before I gave up and went to the cheat sheet. Looked like a hat with a feather to me. Of course, readers would help, but I find glasses annoying.
patientrenter wrote:
So why should Gross even take the time to worry about the Fed buying MBS - FHA will see to it everyone gets a loan that wants a loan and they take the hit if they don't work. Push it all through FHA. Again and again and again.
I think the logo system here is the first glimpse of a general human reversion to hieroglyphics. - ͡҉҉ ̓̔̿̿̿̕̚۩
◊H҉̵̞̟̠̖̗̘Ȅ̐̑̒̚̕ ̚ C̒̓̔̿̿̿̕̚̚̕
Uh, they might be able to to securitize auto loans at least, right? But other than that, who is going to touch the securitization of mortgages, given the utter rubbish that has been funded since the gubmint turned into the last subprime lender standing?
dryfly, I was helping someone with regulatory substitutes to deflate bubbles, and what popped up? This post I wrote in 2005:
A Regulatory Substitute to Burst Housing Bubble? | Angry Bear
The comments were incredible - including you - and Tanta in great form!
Just thought I'd share a memory.
best wishes
This country is so fucked, at least during the cold war we had a space and technology race, now all we got is a bunch of geezer retards talking about terror like any youth worth a shit gives a shit. More people die in car accidents. sigh Whatever though, I heard the rat race is picking up, don't want to fall behind folks I heard Mr. Jones has a Plasma screen T.V.
dryfly wrote:
Not all mortgage lenders are approved for FHA. As a general rule, Fannie Mae and Freddie Mac are much simpler routes for banks. If a mortgage can qualify for either, that is the bank's preferred route.
More importantly, they set the benchmark rate. If the rate for the GSEs goes up, FHA rates also go up. The more rates go up, the fewer people qualify for loans.
dryfly wrote:
FHA standards will not be tightened where it counts the most - real money downpayments. That's the most effective way to keep house prices high.
Interest rates may well go up some. I expect moderate increases. But before everyone goes crazy saying interest rates will go through the roof, remember that the Fed stands ready to pump in whatever-it-takes liquidity to avoid a large increase in rates in 2010. And I do mean whatever it takes.
Speed, that post requires
, but the referenced article is a decent summary of what we already know:
Sources: Fed Could Do More MBS Buying if Needed After March | iMarketNews.com
This isn't anything new - the Fed has been saying this for months.
best wishes
When I was a kid, tv sets were really expensive and there was only a few channels to choose from, now tv's are dirt cheap and I have hundreds of channels to choose from, but hardly anything worth watching.
kidbuck wrote:
The Chinaman is not the issue here... oh, and dude, Chinaman is not the correct nomenclature, Asian-American, please. The issue is this guy peed on your rug.
So Bill Gross is thinking we will see about a 50 bps increase in mortgage rates when the Fed stops buying MBS, but admits he really doesn't know. He also thinks the Fed will stop buying - probably on the current schedule - but he thinks they may want to re-initiate the program in the 2nd half of 2010.
Bill Gross' second statement totally refutes his first. He obviously sees a much greater increase in mortgage rates otherwise the Fed wouldn't need to re-initiate the program AND it wouldn't warrant as large a shift in PIMCO's holdings.
Speed wrote:
I agree, so I can't figure out why they are saying they are stopping cold and not ramping down is steps to see how things go.
The Plunge Protection Team story now has legs, from none other than Rex Nutting.
Time for Fed to disprove PPT conspiracy theory MarketWatch First Take - MarketWatch
TJ and The Bear wrote:
He is a little smarter than that. He works with what the markets do, and what the govt does in response. He is anticipating both simultaneously. It's like watching a chess game as a third party, and forecasting the entire game, not just one side's moves. The outcome of the game depends on what both players do.
When you are the only buyer @ full-price, and there isn't even a secondary buyer to be seen anywhere close to that, price discovery is not your friend.
In case anyone is interested, here are my takes on the economic data today
Factory Orders Rise
Pending Home Sales Tumble
and from yesterday:
ISM Manufacturing Index Rises
The Fed Is Preparing QE 2.0, MBS-Only Edition
We all knew it would happen, and now the Fed is implicitly confirming it - Quantitative Easing 2.0 is on the docket, with a sole purpose of purchasing of MBS, reports Market News. As the private MBS market is dead and buried, much more on this coming in a post later today, the Fed can not afford to abandon MBS and the GSEs in March. If it does, it is game over for interest rates, mortgages, and the stock market. Period.
p.s.: Link first posted by yagij this morning, but I felt it worth reposting.
RevolutionWillNotBeTelevised wrote:
There are at least a half billion or so Chinamen that are not Asian-American.
I really like that name. Rex Nutting. It is almost as good as the guy I once worked with who was named "Buzz Rambo."
josap wrote:
They are ramping down. When they reset the end date of the program, they spread the buying out over a longer period. They explicitly stated that they were buying less each week as a result of the extension.
I expect them to extend once again, with a small addition of the amount they will buy, but the net result will be an even slower weekly buying rate. They can always call an early stop and any meeting. Or increase the amount if the mortgage market freezes up again.
OT, but notable...
December Rolling Tax Witholdings Collapse To Multi-Year Low | zero hedge
The rolling twelve month individual tax witholdings in December dropped to a new multi-year low of $1.298 trillion (an 8.2% decline from last December). Yet this was nothing compared to the company tax witholdings. We thought November was bad at $99.2 billion. December came in at a stunning $92.8 billion, 61.5% lower then the LTM December 2008 number. Record financial profits, record bonuses, and the Treasury and US taxpayers are none the wiser.
I think the FHA MBS kitty can swell to the size of the GDP quite easily in a few years before the Krauts and You Know Hu begin to really dump the greenback in earnest. Of course, once FIRE corrodes for another few years, we should be well under ten tril in the real version of that. Sans FIRE, we may really already be there.
"Asian-American, please. The issue is this guy peed on your rug"
we use the term Oriental in Canada quite a lot but that turned out to be very un-PC in the bay area. Apparently the correct term here is Asian American. A Korean guy explained this to my Chinese wife after we both made the same mistake.
By the way, I think the factory orders data is more significant than the pending home sales data. Pendings fall is a hangover from people rushing to buy b4 the credit expired (at least they thought it would) and deals with used homes, which only have an indirect effect on the economy. The factory order data was very strong, although I was very surprised at the strength of non durables orders.
mp wrote:
It really surprised me to see that story on Marketwatch, a respectable WSJ property.
Most of my friends scoff at the notion of interference in the sacred stock market.
patientrenter wrote:
Regarding PIMCO's moves, definitely. I still say his statements are cleverly contradictory, though (covered by his "we really don't know). He does know, he just doesn't want to scare the sheep before they're sheared.
"Asian" is so broad a term as to be ridiculous. When we're talking about nations whose reserves and trade give them an influential position in the American economy, we're not talking about Cambodia.
Given how important a rising stock market is to the Fed's gameplan (get HH wealth to rebound, bring down saving rate, etc) , how could you think that they would POSSIBLY resist doing what they are oh so capable of doing?
Ultimate Fraud Championships
Mixed Martial Law Arts, live from the Octogone
the Fed vs. Wall*Street
$4.495 Trillion pay-per-view
Yeah, well, he's the senior guy at MarketWatch.
If that story turns out to be true, there's going to be Hell to pay.
(And please note the "Big H" in Hell)
There are at least a half billion or so Chinamen that are not Asian-American.
Why not include Chinawomen and Chinachildren?
It's archaic diction that has a 19th century flavor. Forsooth.
Cinco-X wrote:
Obviously, you're not a golfer...
Well, I scoffed at it as well, until I read the TrimTabs piece.
It all makes sense.
Legally, they have the power to do it.
TSN - Canada's Sports Leader
USA vs Canada, World Juniors Hockey (Under 20), right now
And those familiar with nineteenth century history have a reason to dislike it, especially in the American West.
I prefer to use: Youth in Asia
When I was a kid, tv sets were really expensive and there was only a few channels to choose from, now tv's are dirt cheap and I have hundreds of channels to choose from, but hardly anything worth watching.
Ah, JD discovers the secret of life. There are no bargains.
Yeah, well, he's the senior guy at MarketWatch.
Thats good. Buzz Rambo was just a clerk who died of AIDS. He was cranky a lot too.
It will never be disclosed, even if there's an audit. I have no faith in the system.
Thankfully Gold Oil and Drugs are for the most part sold in the world's reserve currency. Cash dollars are soaked up(drugs) and digital ones as well (oil) preventing inflation. Imagine that the war on drugs and the war on terror preventing the worlds inflation problems as well.
RevolutionWillNotBeTelevised wrote:
By choice; I don't like hanging around with the corporate brownnosers-
,rad pavel,
There are plenty of bargains to be had in life, and not one of them costs a cent, or has any monetary value.
CalculatedRisk wrote:
Wow - I remember that night [sort of]. It wasn't long after that my father passed away. Angry Bear was how I discovered your blog - followed your link over back when you were a guest-poster. That was awhile ago.
BTW - I'll be seeing that sister in a couple days. Can't wait to get her take on what is happening.
Just notice TBT and SPX had a similar 2009. Who says leveraged ETFs are dumb?
I've now come to the conclusion that, yes, they're playing with index futures.
As to whether it will be revealed in an audit, who knows?
It would sure as hell be a good reason to resist a thorough-going audit.
There are plenty of bargains to be had in life, and not one of them costs a cent, or has any monetary value.
Yes, they can't be gotten for money. The entrance fee is having been born. But then you can't have a bargain if there is no price other than that one.
Just as you can't tell a lie if you don't know the truth.
I mean, after all, they're manipulating the debt markets, why not the equity markets as well?
"Just notice TBT and SPX had a similar 2009. Who says leveraged ETFs are dumb?"
[rubs butt and raises hand meekly]
Cinco-X wrote:
Obviously, you're not a golfer...
By choice; I don't like hanging around with the corporate brownnosers-
O.K.
Im getting the feeling you have never watched the movie "The Big Lebowski". If not, from your honest answers to the misunderstanding of my postings, I think you would like the themes it deals with. Especially how it relates to expecting to leave the underclass to foot the bill for the mistakes of the wealthy
I mean, after all, they're manipulating the debt markets, why not the equity markets as well?
Then it ceases to be a market. It's something unnatural, a freak of commerce, a travesty, a parody market, perhaps even an obscenity.
RevolutionWillNotBeTelevised wrote:
I'll have to check it out; thanks for the tip....
I live in 2 worlds, one world is full of people that know the price of everything, but they don't know value, while the other world knows the value of everything, but there are no prices on anything.
It's a juggling act.
The dude abides!
mp wrote:
I vaguely remember Greenspan saying something about how Korea intervened in their equity market and how in retrospect, it might have been a good thing.
*I live in 2 worlds, one world is full of people that know the price of everything, but they don't know value, while the other world knows the value of everything, but there are no prices on anything.
It's a juggling act. "
Yeah, I think I know what you mean.
pavel.chichikov wrote:
If the Federal Government buys cars (and they do), does it cease to be a market? It is just another buyer, adding to demand. It may be a different market but that is a philosophical argument that I really don't want to discuss.
energyecon wrote:
I'm sure he does-
I was talking to some guys today who are experts in African investment markets. They shedlight on topics that have been discussed here.
First, is there always a lower cost wage market on the horizon? Yes. They talked about opportunities in Mauritius. There is a whole emerging economy there based on outsourcing, call centers, etc. Basically, they are undercutting India on wages. By quite a lot.
Second, they said that the bounce-back economy of 2010 will be Zimbabwe. Why? Two reasons. First, there is a lot of strength and resiliency there by companies and people who survived nightmarish inflation. Secondly, there is zip debt in Zimbabwe. "They've wiped the debt slate clean, public, private, everything. There is no debt left in Zimbabwe."
How? Zimbabwe realized their own currency had become worthless and adopted a stronger currency, the U.S. dollar.
Now, it's a dollar economy and it's coming back. So, I asked, hyperinflation really does work? "Yes, it does," they said.
"the Federal Government buys cars (and they do), does it cease to be a market? It is just another buyer, adding to demand. It may be a different market but that is a philosophical argument that I really don't"
buying a few hundred thousand cars out of a 12m is an order of magnitude different from buying 70% of the mbs market or huge spy contracts in the middle of the night just as a trendline was about to break.
rich wrote:
So what currency will we adopt?
In his December "Investment Outlook", Bill Gross recommends that investors buy utilities.
I wonder what he is doing with his personal money?
rich wrote:
...dropping your currency for another country's currency to wipe out debt seems like a solution that doesn't address the problem, but color me skeptical.
Rajesh wrote:
The original remark was:
Buying in a market is not the same as manipulating it, though at times, the government has done so, e.g. corn, cheese, etc. However, buying fleet cars isn't necessarily manipulating the market.
If the Federal Government buys cars (and they do), does it cease to be a market?
No, but is the market in automobiles no different than the market in equities? Can you have insider trading in cars, ponzi schemes and manipulation in the same way as you can in stocks? Cars are not investments in the same way that stocks are investments. People don't trade them in blocks, short them as stocks are treaded and shorted. It's different, no?
Cinco-X wrote:
How about buying clunkers for $4500? Is that manipulating the market?
josap wrote:
Yuan. Also, how does Zimbabwe get USDs to run their economy? How do you get started on another country's currency? Take out a line with that country's CB?
They hold an unlimited budget, they are merely toying with us, Haven't figured it out yet? The rat race is rather pointless.
"People want wealth, people want the nice stuff life might offer, people in hell, want mother fucken ice water."
I dunno-- if things are bad enough that the world loses confidence in USD, somehow I don't see RMB as a flight to safety.
How about buying clunkers for $4500? Is that manipulating the market?
If done in sufficiently large numbers, you bet. Yes.
How about buying clunkers for $4500? Is that manipulating the market?
So? And?
Dead Shtick wrote:
josap asked about the US in particular, not RotW. China owns our debt and our manufacturing capacity. Since our crap comes from there, they can ask us to pay anyway they want.
biochemist wrote:
The rat race is rather pointless.
Not to the rentiers and capitalists who get richer by helping you advance in the game they invented for us.
rich wrote:
Obviously, it depends on the time scale. It will work in the short term, because the debt has been wiped out. In the longer term however, they have just rewarded the most profligate borrowers and so more resources will flow to those borrowers. Do we think that they will somehow become less profligate the second time around?
I do think they will wind down MBS purchases. They may however, offer others an incentive to buy them through
the tax code and accounting sleight of hand.
JP wrote:
they have just rewarded the most profligate borrowers and so more resources will flow to those borrowers. Do we think that they will somehow become less profligate the second time around?
Second time around? I wasn't aware that the cycle of perverse incentives for borrowing ever ended. In fact, all I've seen so far is a policy environment that encourages and enables the behavior.
Rajesh wrote:
Yup, as is buying MBS', corn, soybean, hell even oil for the strategic reserve. However, govt. buying isn't necessarily manipulation; it just sometimes is.
JP wrote:
Yeah? Who's going to lend to them now?
sporkfed wrote:
That would work. Not like they don't do similar things in other areas anyway.
Not to the rentiers and capitalists who get richer by helping you advance in the game they invented for us.
No, they are also players, though on a different level of play.
In Wagner's Das Rheingold, just before Wotan moves into Valhalla after having extorted the Rheingold and the Ring from Alberich, Alberich says bitterly to him:
“an allem, was war, ist und wird, frevelst, Ewiger du”),
Roughly: Everything, what was, what is, and what will be, you will desecrate, O immortal one
Poetry can be so powerful because the universe rhymes.
The gods in the ring cycle are as helpless before Fate, which they are born into, as the other characters, as the meanest and humblest Nibelung.
Rajesh wrote:
Certainly not a free market when a buyer with significant market power is buying with the aim of paying more than would otherwise occur at the margins...
Dead Shtick wrote:
Yeah? Who's going to lend to them now?
Do you have a mirror handy?
yagij wrote:
They have agricultural exports. If not that there is always contraband & diamonds. And an economy the size of the one [currently] in Zimbabwe won't need a lot of actual 'paper' money - their incomes & net wealth is too small. But that will constrain it in the future.
One more reason being the host of the world's reserve currency sucks.
yagij wrote:
And we can always say no; in fact, a lot of this problem was caused because they wanted our business so bad, they were willing to buy dollars just to keep their factories running at capacity. Attempting to force us to buy Yuan on the open market in order to buy their goods will be worse for them than it will be for us-
Certainly not a free market when a buyer with significant market power is buying with the aim of paying more than would otherwise occur at the margins...
Of course. And then, when such a behemoth plays, price becomes so distorted as to be freakish.
Let's be clear about something.
If the Fed is buying index futures, they're manipulating the market.
sm_landlord wrote:
Probably selling utilities.
mp wrote:
So when the SEC suddenly decides to ban short selling; that's OK.
But if the Fed is buying index futures, then that is bad.
There were rumors in '87 that the government had made desperate real time purchases, and supposedly, some figure admitted that there was something fundamentally wrong about it, but that there was thought to be no choice. And supposedly, it all turned out for the best.
for LL
the ppt stand for plunge protection team
"So when the SEC suddenly decides to ban short selling; that's OK"
no that's called manipulation as well.
pavel.chichikov wrote:
Poetry can be so powerful because the universe rhymes.
We need the financial equivalent of Christianity. The moneychangers thrown out of the temple, and man able to communicate with his God without the need of an intermediary. The temple curtain rent from bottom to top.
Promise to Trim Deficit Is Growing Harder to Keep
- NY Times
Whoops time for more
it's depends on how your positioned for it!
Btw there is no sec, treasury, fed, wallstreet and fedgov
there is the monied and the non-monied.
I never said that.
Ever.
If you're talking about naked shorts, that's another matter entirely.
mp wrote:
Of course it is. My original response to Rajesh was to point out that his remark:
"If the Federal Government buys cars (and they do), does it cease to be a market? It is just another buyer, adding to demand. It may be a different market but that is a philosophical argument that I really don't want to discuss."
was not germane to the issue of "manipulating the debt markets".
But if the Fed is buying index futures, then that is bad.
Why have a market? The SU didn't have a market. The Central Committee of the CPSU determined the price of everything. As a result, no one knew what anything cost. It doesn't work. There is no real economy in that case, only a shambles.
The government is already too big. People complain that the Squid has taken over the government. But what are we talking about here, some kind of incestuous polymorphous perverse obscenity with a head where its **** should be, and vice versa?
I hope this story is only gossip.
rich wrote:
There is always a lower cost emerging economy, which is the problem. I can't even think of a bad solution to that problem much less a good one. Maybe worldwide minimum wage, but that won't go over well.
Has there ever been historical precedence for a bounce back from hyperinflation? I don't mean in back to normal, but actual growth beyond what was there previously?
mp wrote:
If I were at Treasury or the Fed, and I wanted to raise the stock market from the ground, I would not execute any direct transactions. I would simply direct 'normal' Fed / Treasury support and protection preferentially to a few market players that made it clear they wanted to make very large bets on a rising market.
When the Fed buys fleet cars, they buy one type, make, year, model. Usually from one dealer in an area. That is manipulating a local market.
Sure I know about bidding things out, like they really do that allot.
We need the financial equivalent of Christianity. The moneychangers thrown out of the temple, and man able to communicate with his God without the need of an intermediary. The temple curtain rent from bottom to top.
Not bad RiF
ResistanceIsFeudal wrote:
Amen, brother.
Well said. To carry the analogy further...we need a kick ass Jesus fighting through the bowels of hell to free the oppressed once and for all...always thought that would be a good movie...Three Day War in Hell.
If I were at Treasury or the Fed, and I wanted to raise the stock market for the ground, I would not execute any direct transactions. I would simply direct 'normal' Fed / Treasury support and protection preferentially to a few market players that made it clear they wanted to make very large bets on a rising market.
Could be.
Dirk van Dijk wrote:
Thanks, Dirk. You know what you're doing.
nova wrote:
Not bad RiF
I guess I should have said a Reformation... Christianity began as a revolutionary anti-establishment movement by extremists, eventually became popular and gained in temporal power (which really began in a large way with Constantine and his establishment of a state religion) As a result, it became very corrupt, very rich, and very arrogant. The final straw or critical event that tipped the scales came about when they tried to impose a monopoly on sin (to become the gatekeeper to sin) with indulgences. The parallels are quite scary. Martin Luther only codified what even the common man was beginning to understand about the corrupt and almost criminal nature of what they were doing...
I'm pretty sure China went through hyper inflation in the early 1900s. Took decades and multile regime changes to recover though.
CaptainMorgan wrote:
I think Brazil did. I remember in the 80s. People worked 2 and 3 jobs to make enough money to be able to buy food. The inflation was insane.
Until 1986, inflation was fought (mostly) by following the Economics books. That year, yearly inflation was running at more than 100% for the second year in a row (1985: 225%), and the government felt the necessity to adopt more extreme measures against it.
The Real Plan - how Brazil defeated inflation
from the angry bear site
haloscan problems, sorry if this shows twice
the predicitve power of blogs! I love it
pavel.chichikov wrote:
Like... our housing market?
And on a lighter note:
Ann Davis, a spokeswoman for the TSA, said the agency "accepts full responsibility for the breach that occurred," adding that, "We regret the inconvenience this caused travelers."
*She said that security at Terminal C would now be doubled,from one agent to two, at three exits *
I feel so much safer now.
poic wrote:
Argentina, Brazil and Bolivia all went through hyperinflation in the 80's and 90's. In each case, the transition to a stable currency was quite quick. Hyperinflation is one of the few economic problems that economists have demonstrated they can solve. It does take a certain amount of political will to take the medicine.
Our economy has become one big circle jerk of trading. One day (not too far off) we'll wake up and find ourselves with a near 100% service economy that is completely owned by foreign lenders.
Later....
Vonbek777 wrote:
Well said. To carry the analogy further...we need a kick ass Jesus fighting through the bowels of hell to free the oppressed once and for all...always thought that would be a good movie...Three Day War in Hell.
Actually what we need is for people to get out of debt and stay that way. It is the only real base of their power.
ResistanceIsFeudal wrote:
Blue Ring of Freedom anyone?
China peaked as far as hyperinflation was concerned, in 1949.
Check out this photo of a gold store in China in 1949. Those that were able to trade in worthless paper money for gold, got to go to Taiwan, and missed out on the Great Leap Forward, Cultural Revolution and other niceties, those that didn't, got to play though.
http://www.iphotocentral.com/Photos/VintageWorks_Images/Full/10817_Henri_Cartier_Bresson.jpg
Brazil? But which currency would the dollar be pegged to?
Just stick with early Christianity. Luther relied on St. Paul too much for my taste, reinforced group think, which in my opinion is contrary to the anti-establishment message of early Christianity. What Constantine did was very interesting...again my opinion...but creating the Holy Roman Empire allowed for a reset of the gods...a compromise bringing in Odin, combining with Mithras and to the general public...declaring it Christianity. If you look at the history of some of the very early churches, what little we actually know...response was not all that favorable when the worship of Jesus went to the big leagues so to speak. It did stop the lion feeding though.
The Fed is 70% of the MBS TBA market, of course they are going to have to step back in later this year. Someone's estimate of $700B this year is a good guess, on the high end I expect $1T this year, depends on issuance levels.
I keep telling you, get your wealth out of USD or whatever fiat currency you use. You are going to get absolutely creamed in the next couple years.
OT:
Buffett eyes Ditech.com parent, report says - Mortgage Insider : The Orange County Register
Not from the goodness of his heart, apparently he owns a lot of the debt and may get a good price converting it to equity.
yagij wrote:
Blue Ring of Freedom anyone?
It would only work in large numbers. It wouldn't take as many or as much as you think, though. Leverage cuts both ways and we have much less to lose than they do.
ghostfaceinvestah wrote:
Equities? RE? Commodities? Strippers? Where am I suppose to put my USDs if not in other fiat?!
ResistanceIsFeudal wrote:
I think the bands said it all: "I'm saving myself for someone special"
How do you propose we do this? There has always been debt. I mean Essau sold his birthright to Jacob for god's sake...Truth is there is no debt right now, only in our minds, only what we allow ourselves to be burdened with. We only enslave ourselves with chains we forge. Human nature. Even in a perfect world, guarantee you, people will still be buying and selling without money, need, or want. They only way out of this, is hive mind...something I think we know is coming and fear...least I do.
Rajesh wrote:
oh, that's funny.
ghostfaceinvestah wrote:
I'll take credit for that $700 billion best guess, ghost. And yes, inflation, currently running at 2.5-3%, will start to trend above 3% by December 2010, and first get noticed in 2011.
Vonbek777 wrote:
How do you propose we do this?
You don't need to "propose" anything. A child can understand what it means not to take on debt and how to achieve it.
ResistanceIsFeudal wrote:
But child also knows that that A&F shirt can help him get chicks and needs
to buy that shirt. And the child also knows that cell phones are needed for that cute boy to call you without your loser parents picking up the phone and listening in and needs 
to get that phone. Or social obliteration happens... 
yagij wrote:
I think the bands said it all: "I'm saving myself for someone special"
That wouldn't work anymore - self-control and delayed gratification are not only not culturally-sanctioned but actively ridiculed in mass modern society.
USG will continue the RMBS purchases without a doubt. 'flight to quality bid' as credit mkts prefer sov debt risk over anything in the mtg or corp space. The defaults we are starting to see in jumbo mortgage land are unreal and getting worse fast:
The Great Loan Blog: Jumbo Loan Default Rate Moving on Up
Have to disagree with you here. Debt is human nature. Like I said, even without money...there would be debts incurred. Yes, by all means get rid of the money lenders, protect the herd...send the word to the four corners of the world...but I won't be counting the days to Heaven on Earth.
ResistanceIsFeudal wrote:
True, however most are already in debt, way too far in debt. We have to start from where we are, unless there is a jubilee soon, and I don't see that in our near future.
ResistanceIsFeudal wrote:
Depends on the country (and therefore the dominant culture) you live in.
ResistanceIsFeudal wrote:
SNL Skit: Don't Buy Stuff You Can't Afford - The Consumerist
ResistanceIsFeudal wrote:
And wearing a "Blue Ring of Freedom" would not be ridiculed?
.
Seriously I'm buying what you are selling, but I don't see it catching with the masses in any shape, form, or fashion. Even the people who are UE'd aren't showing the kind of changing mindset you are suggesting. The Beast is taking no prisoners is delaying its downfall, and I'm not even sure if an Argentian default would truly change it. Just make the people more criminal-esque in getting their goods.
poic wrote:
How China Was Stolen by Bill Walker
Redhat?
Pass the Buck: Don’t Blame Me for the Financial Crisis - Deal Journal - WSJ
Bernanke joins an all-star cast that have taken a turn in the “don’t blame me” game. Other players have included the following:
josap wrote:
Rewarding a behavior leads to more of it. Although a jubilee has its immediate attractions, the fact is that it is a reward for the behavior of over-borrowing. Expect more over-borrowing in future decades if you enact a jubilee. If your horizon is less than decades, then of course it doesn't matter.
Doc Holiday wrote:
But when the barbarians come beating down the gate, it will be a joyous time...if they get here before Benny escapes to a foreign country.
patientrenter wrote:
Decades? How much longer do you plan on living?
Vonbek777 wrote:
The Original Sin: Eve borrowed that apple.
sdtfs wrote:
Not true. She took the apple for a demo and was unable to return it.
I'm told with interest and an option on her soul.
Says Ms Yves: On Goldman’s (and Now Morgan Stanley’s) Deceptive Synthetic CDO Practices (aka Screwing Their Customers) « naked capitalism
"The synthetic CDO of MBS never should have existed in the first place. Nobody thinking about the problem could have believed that facilitating overwhelming and cascading shorts on the US residential mortgage market was a good thing, or that it was sensible to write insurance (without limit and favoring any gambler whether he owned mortgage securities or not) against subprime defaults under any circumstances, since housing prices could not rise to the sky and, indeed, they had pretty much outrun by 2005 the ability of US consumers suffering stagnant wages to pay for them. Not to mention the impending ARM resets, which made it clear that none of the borrowers intended to pay for the houses, only to pass them along to the next idiot."
Vonbek777 wrote:
Where does that leave Adam? Has any man done something more stupid for a nekkid gal?
yagij wrote:
Seriously I'm buying what you are selling, but I don't see it catching with the masses in any shape, form, or fashion. Even the people who are UE'd aren't showing the kind of changing mindset you are suggesting.
That's because they are UE'd, not starving in the streets. They don't have to think about it. I don't see this ever being popular unless forced by necessity. But I also don't see any other solution but to stop rewarding people for taking on debt.
Doc Holiday wrote:
Pass the Buck: Don’t Blame Me for the Financial Crisis - Deal Journal - WSJ
You still looking for that Red Hat?
yagij wrote:
Decades, yagij. And I have an interest in leaving some positive impacts on future generations, so my personal horizon actually runs for hundreds of years.
yagij wrote:
Yes.
ghostfaceinvestah wrote:
Bernanke's Big Bondfire on the Beach.
Don't worry, TIPS will save you!
ResistanceIsFeudal wrote:
Developing a love for socially masochistic tendencies may help...
patientrenter wrote:
I wasn't advocating a jubilee. Just don't see how the majority becomes debt free - ever. And you are fight, debt free would last for about 1 day, if that long.
Actually it is a lot worse if you read the Lilith folklore. First wife...fought over who was on top...left and became a demoness. First divorce I guess?
So Eve was the first Trophy wife?
Explains a lot.
JP wrote:
Better question; has any (edit: straight) man NOT done something more stupid for a nekkid gal?
>
Borrowers aren't the problem.
Lenders are.
Gross: "Now, what did we do with the money? We bought Treasuries, we bought corporate bonds, and so the bond markets in general have benefited, as have stocks because this available money effectively flows through the capital markets. ."
And the Chinese bought Oil, Gold, Copper, Iron Ore, etc.
This is exactly how bubbles are formed - excess liquidity. FRNs are fungible.
Anyone who read the March 18th announcement and didn't understand this needs to re-take high school reading comprehension.
Oh, I know, somehow debt will collapse and we will enter deflation, or something like that. Whatever, holding FRNs in your mattress has undoubtedly been the second worse investment since March (the worst being holding USTs).
broward wrote:
Heh. I can't respond to you without being sacrilegious, but the prayer sounds the same if you substitute (Fed/
) for God.
Vonbek777 wrote:
Nope. That wasn't a divorce. Divorces are more traumatic and involve losing more stuff. In that scenario, she actually just left without taking half of Adam's flock and making future relationships difficult.
Vonbek777 wrote:
Actually it is a lot worse if you read the Lilith folklore. First wife...fought over who was on top...left and became a demoness. First divorce I guess?
Who needs equality? A predator-prey system is way better, dude.
It is very interesting...Lilith was supposedly made from mud like Adam in God's image. Eve was made from Adam's rib though. Women's equality goes way back.
Vonbek777 wrote:
Lilith was supposedly made from mud like Adam in God's image. Eve was made from Adam's rib though. Women's equality goes way back.
Yep... You had an original equality, but it was rejected in favor of a subordinate. Interesting stuff.
ResistanceIsFeudal wrote:
Vengeance is a problem. The whole Jewish ritual to protect new born children for (is it 3 days?) after birth from Lilith is very interesting. Like Satan in the Torah, Lilith becomes part of the Heavenly Court and has a sanctioned role. Guess God deemed her as an injured party and she gets to try to steal babies souls.
sdtfs wrote:
I'm not focused anymore; what happened; I'm an old man with a red hat; speaking of hats, what happened with the roast beef hat?
broward wrote:
TIPS's inflation escalator is taxed, so it doesn't keep up with inflation, unless it's in a tax-qualified account (like an IRA). Even then, the gains intended to match inflation can be taxed away by raising income taxes at the time of distribution. A Roth IRA cannot escape either, because you can tax gains in it by introducing and increasing sales and other consumption taxes at the time of distribution.
If a country wants to remove inflation protection from its saving citizens, then it can always do so. I personally think it's wise for everyone to hedge some of their savings in good foreign currencies. Still subject to US taxes on nominal dollar gains, but you spread your risks around in one more way.
GDD9000 wrote:
Not to pop your political pointy head, but there's plenty of plain vanilla FHA stuff getting funded, unless I'm sorely mistaken. My life & prospects may be rubbish to you, but I still hold them pretty dear.
Wisdon Tree has some interesting research that the USD has lost 15% of its value (relative to a basket of currenies) over the last 11 months...now that inflationary, good for exporters mind you
and with the GSE's raising the FICO requirement and lowering the debt ratio (45%), the phones have basically stopped ringing. no amount of tax credit can over come these 2 changes.
patientrenter wrote:
Could you suggest some resources on how to do this? What criteria would you suggest for determining a good foreign currency?
josap wrote:
Euro's, Peso or Yuan...lol