[Daniel]

“The Fed’s recent activities are blatant examples of the PPT in action.”

Absolutely. Whether we agree with those actions or not, that’s another story. But this IS it. What we just saw. Not buying stocks to support the market, this idea is plain silly.

[Daniel]

“The Fed’s recent activities are blatant examples of the PPT in action.”

Absolutely. Whether we agree with those actions or not, that’s another story. But this IS it. What we just saw. Not buying stocks to support the market, this idea is plain silly.

[Daniel]

“The Fed’s recent activities are blatant examples of the PPT in action.”

Absolutely. Whether we agree with those actions or not, that’s another story. But this IS it. What we just saw. Not buying stocks to support the market, this idea is plain silly.

[Daniel]

“The Fed’s recent activities are blatant examples of the PPT in action.”

Absolutely. Whether we agree with those actions or not, that’s another story. But this IS it. What we just saw. Not buying stocks to support the market, this idea is plain silly.

[Daniel]

The answers are 1)No, and 2)Not Applicable. There are many urban legends about the PPT, just like about 9/11, Kennedy, and moon landing conspiracy theories.

What the WGFM actually does is precisely what we witnessed this week-end: arrange an emergency buyout of BSC, to prevent it from formally declaring bankruptcy and throwing the entire financial system into counterparty chaos. Do you know what happens if you have a brokerage account at BSC and BSC goes under? Your account gets frozen until the SIPC sorts things out. Not funny. Do you know what happens, if, in addition to that, you were trading on margin? Your collateral can be seized by BSC creditors. Even less funny.

So the WGFM (which is basically another way of saying the Fed and the Treasury chiefs) arranged for JPM to take over BSC to prevent monumental chaos. That’s precisely what they were supposed to do. And, BTW, this is not really a BSC bailout, as BSC shareholders get nothing (OK, 2 bucks). What really happened last night was to arrange for an extraordinarily fast bankruptcy and liquidation of BSC, presented as a “merger”. All the government approvals were granted in just a few hours, JPM started guaranteeing BSC trades as of this morning, JPM management took on supervisory role as of this morning… That was not a bailout, that was orderly liquidation.

[Daniel]

The answers are 1)No, and 2)Not Applicable. There are many urban legends about the PPT, just like about 9/11, Kennedy, and moon landing conspiracy theories.

What the WGFM actually does is precisely what we witnessed this week-end: arrange an emergency buyout of BSC, to prevent it from formally declaring bankruptcy and throwing the entire financial system into counterparty chaos. Do you know what happens if you have a brokerage account at BSC and BSC goes under? Your account gets frozen until the SIPC sorts things out. Not funny. Do you know what happens, if, in addition to that, you were trading on margin? Your collateral can be seized by BSC creditors. Even less funny.

So the WGFM (which is basically another way of saying the Fed and the Treasury chiefs) arranged for JPM to take over BSC to prevent monumental chaos. That’s precisely what they were supposed to do. And, BTW, this is not really a BSC bailout, as BSC shareholders get nothing (OK, 2 bucks). What really happened last night was to arrange for an extraordinarily fast bankruptcy and liquidation of BSC, presented as a “merger”. All the government approvals were granted in just a few hours, JPM started guaranteeing BSC trades as of this morning, JPM management took on supervisory role as of this morning… That was not a bailout, that was orderly liquidation.

[Daniel]

The answers are 1)No, and 2)Not Applicable. There are many urban legends about the PPT, just like about 9/11, Kennedy, and moon landing conspiracy theories.

What the WGFM actually does is precisely what we witnessed this week-end: arrange an emergency buyout of BSC, to prevent it from formally declaring bankruptcy and throwing the entire financial system into counterparty chaos. Do you know what happens if you have a brokerage account at BSC and BSC goes under? Your account gets frozen until the SIPC sorts things out. Not funny. Do you know what happens, if, in addition to that, you were trading on margin? Your collateral can be seized by BSC creditors. Even less funny.

So the WGFM (which is basically another way of saying the Fed and the Treasury chiefs) arranged for JPM to take over BSC to prevent monumental chaos. That’s precisely what they were supposed to do. And, BTW, this is not really a BSC bailout, as BSC shareholders get nothing (OK, 2 bucks). What really happened last night was to arrange for an extraordinarily fast bankruptcy and liquidation of BSC, presented as a “merger”. All the government approvals were granted in just a few hours, JPM started guaranteeing BSC trades as of this morning, JPM management took on supervisory role as of this morning… That was not a bailout, that was orderly liquidation.

[Daniel]

The answers are 1)No, and 2)Not Applicable. There are many urban legends about the PPT, just like about 9/11, Kennedy, and moon landing conspiracy theories.

What the WGFM actually does is precisely what we witnessed this week-end: arrange an emergency buyout of BSC, to prevent it from formally declaring bankruptcy and throwing the entire financial system into counterparty chaos. Do you know what happens if you have a brokerage account at BSC and BSC goes under? Your account gets frozen until the SIPC sorts things out. Not funny. Do you know what happens, if, in addition to that, you were trading on margin? Your collateral can be seized by BSC creditors. Even less funny.

So the WGFM (which is basically another way of saying the Fed and the Treasury chiefs) arranged for JPM to take over BSC to prevent monumental chaos. That’s precisely what they were supposed to do. And, BTW, this is not really a BSC bailout, as BSC shareholders get nothing (OK, 2 bucks). What really happened last night was to arrange for an extraordinarily fast bankruptcy and liquidation of BSC, presented as a “merger”. All the government approvals were granted in just a few hours, JPM started guaranteeing BSC trades as of this morning, JPM management took on supervisory role as of this morning… That was not a bailout, that was orderly liquidation.

[Daniel]

The answers are 1)No, and 2)Not Applicable. There are many urban legends about the PPT, just like about 9/11, Kennedy, and moon landing conspiracy theories.

What the WGFM actually does is precisely what we witnessed this week-end: arrange an emergency buyout of BSC, to prevent it from formally declaring bankruptcy and throwing the entire financial system into counterparty chaos. Do you know what happens if you have a brokerage account at BSC and BSC goes under? Your account gets frozen until the SIPC sorts things out. Not funny. Do you know what happens, if, in addition to that, you were trading on margin? Your collateral can be seized by BSC creditors. Even less funny.

So the WGFM (which is basically another way of saying the Fed and the Treasury chiefs) arranged for JPM to take over BSC to prevent monumental chaos. That’s precisely what they were supposed to do. And, BTW, this is not really a BSC bailout, as BSC shareholders get nothing (OK, 2 bucks). What really happened last night was to arrange for an extraordinarily fast bankruptcy and liquidation of BSC, presented as a “merger”. All the government approvals were granted in just a few hours, JPM started guaranteeing BSC trades as of this morning, JPM management took on supervisory role as of this morning… That was not a bailout, that was orderly liquidation.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Pemeliza,

Your #1 argument is very good. Foreign central banks (especially the PBoC) have been very aggressive buyers of Treasuries, in order to prevent their own currencies from rising against the dollar. Interest rates would certainly be higher if not for their intervention. How much higher I don’t know, and I’m pretty sure nobody really does.

However, there is still a lot of private money pouring into long-term bonds. They may be wrong (maybe they’re just pension funds on autopilot, supposed to invest a certain percentage of assets in bonds). But they’re there, and it would be arrogant of us to dismiss them all as dumb money.

Also, let’s make one thing clear: this is not just a short-term “flight to quality” thing. First of all, long-term rates have been quite low for awhile (the Greenspan conondrum), since way before the current crisis. Second, “flight to quality” means that investors pile into cash (aka very short-term Treasuries), not long bonds. If you are hoarding cash, you buy 3 month or 6 month T-bills. Not 30 year bonds or 10 year notes.

So I think the bond market really has low inflation expectations, as strange as this may seem to some here. I happen not to share those expectations (I posted recently on another thread that I have no money invested in bonds), but I do acknowledge them.

[Daniel]

Kewp,

They certainly swing a big stick. But the ECB’s got one, too, and they don’t hit very hard with theirs, either. I don’t have a chart handy, but I think the ECB’s rate has been around the 2% – 3% range for as long as I can remember. Hardly tight monetary policy, and, still, the euro is up 50% or so against the dollar. My argument is that fundamentals matter much more than rates over the long term. And those fundamentals showed the dollar being too strong for its own good at the end of the last decade. Remember that the last coordinated central bank intervention (Fed, ECB, Bank of Japan) was in support of the euro. Nobody’s making any noise yet to support the dollar, which shows that the central banks are much more comfortable with today’s exchange rates than to those of 2000.

[Author]

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