The last straw.

[lb]

Hi guys, first post. I've been doing a lot of reading here lately, and I'm very impressed. Thank you all for the work you all do. I just wanted to post my theory:

The FOMC activity in the bond market is the only thing keeping US equity markets afloat. I think it's got one more day, but it could drag on for who knows how long.

Any other opinions or insight on the recent FOMC activities (I don't mean the dog and pony show you hear about in the news)?

PS - Just so there is no confusion, I'm a nobody. However, I did pay for my membership, so I'm not just some completely random asshole.

[FRED]

Re: The last straw.

Hi guys, first post. I've been doing a lot of reading here lately, and I'm very impressed. Thank you all for the work you all do. I just wanted to post my theory:

The FOMC activity in the bond market is the only thing keeping US equity markets afloat. I think it's got one more day, but it could drag on for who knows how long.

Any other opinions or insight on the recent FOMC activities (I don't mean the dog and pony show you hear about in the news)?

PS - Just so there is no confusion, I'm a nobody. However, I did pay for my membership, so I'm not just some completely random asshole.

Welcome, lb! You are most certainly not a CRA. But then, as you may have noticed, there are none here. This is not an accident. It's what you're paying for.

[idianov]

Re: The last straw.

I am also nobody, but I learned some things about credit and the Fed here. This is just my opinion about the last straw.

There were two components driving the equity markets rally: global liquidity growth and anticipation of lower interest rates.

The yields have been rising recently and the FOMC just signaled last week there is strong global growth, so it is good time to be in equity markets. Just buy the dip last week and hold (the bag ) for the long term.

They also seem to signal between the lines they are ready to pump the credit supply because the demand for money is rising (just in case there is liquidity event)

The slowing global credit growth is confirmed by slowing rate of growth in M3 :

http://www.nowandfutures.com/images/m3b.png

The subprime ABX could be on the next leg down:

http://www.markit.com/information/af...ns/abx/history

The market had a sharp sell off after the first ABX downleg in February.

So, we have slowing global liquidity growth, rising interest rates and the liquidity event in MBS. The last straw of cash seems to be in equity markets.

Igor

[bart]

Re: The last straw.

You are most certainly not a CRA. But then, as you may have noticed, there are none here. This is not an accident.

Now you're going to temp me to change my photo to this... ;)





... and it also keeps me in practice for duck & cover for ka-poom... ;-)

PS - Just so there is no confusion, I'm a nobody. However, I did pay for my membership, so I'm not just some completely random asshole.

You'll have to compete for best nobody then... I vote for Finster... ;)

The FOMC activity in the bond market is the only thing keeping US equity markets afloat. I think it's got one more day, but it could drag on for who knows how long.

Any other opinions or insight on the recent FOMC activities (I don't mean the dog and pony show you hear about in the news)?

Ok seriously now - the FOMC with their TOMO and SecLend operations certainly do have an effect on the equity and bond markets respectively, but be aware of the US Treasury and their TIO operation too.

There's some data in an iTulip thread about TOMOs & TIOs here and also my original article on TIOs on my site here.

Part of my comments on my blog today may apply too:

S&P 500 wise - on balance volume and accumulation/distribution are weak but other TA signs are showing closer to a bottom than top. It's been over a month since a POMO, SecLend was light today, TOMOs were about minus $2 billion net and no TIOs in sight. No signals.