The Sound Of Distant Helicopter Engines

[Finster]

"The Fed accepted all mortgage-backed debt as collateral for this morning's repurchase agreement..."

http://www.bloomberg.com/apps/news?p...d=a9stQCtcIbnM

[Sapiens]

Re: The Sound Of Distant Helicopter Engines

Let's see how Gold does. I think they may dump some gold reserves to keep it in check.

[Sapiens]

Re: The Sound Of Distant Helicopter Engines

http://www.federalreserve.gov/boardd...10/default.htm

Release Date: August 10, 2007



For immediate release

The Federal Reserve is providing liquidity to facilitate the orderly functioning of financial markets.

The Federal Reserve will provide reserves as necessary through open market operations to promote trading in the federal funds market at rates close to the Federal Open Market Committee's target rate of 5-1/4 percent. In current circumstances, depository institutions may experience unusual funding needs because of dislocations in money and credit markets. As always, the discount window is available as a source of funding.

They are flying!

[Tet]

Re: The Sound Of Distant Helicopter Engines

http://www.federalreserve.gov/boardd...10/default.htm


They are flying!

Fed's can only purchase stocks, bonds or land with their liquidity, looks like the answer to that question is land. The Fed is getting a lot better at stealing land since the last depression, I bet this time nobody notices. One things for certain, the Fed ain't dumb they'd rather be holding title instead of d0llars, of course d0llars are a liability for a bank so I guess they kind of have to.

[Sapiens]

Re: The Sound Of Distant Helicopter Engines

Fed's can only purchase stocks, bonds or land with their liquidity, looks like the answer to that question is land. The Fed is getting a lot better at stealing land since the last depression, I bet this time nobody notices. One things for certain, the Fed ain't dumb they'd rather be holding title instead of d0llars, of course d0llars are a liability for a bank so I guess they kind of have to.

Bingo! .

[Tet]

Re: The Sound Of Distant Helicopter Engines

Bingo! .

Create the problem and be the solution, many only thought Spyware software companies and the Mafia did this. Rob a store and charge the owner for protection is how it works. I'm not sure if banksters taught the mobsters or if the mobsters taught the banksters, both are cut from the same cloth.

Everything comes down to a land grab for these bastards it always does, they can't help themselves. This is the story of the frog and the scorpion and the scorpion convinces the frog to let him ride on the frog's back across the river. Halfway across the scorpion stings the frog and the frog asks why because they are both going to die. The scorpion replys it's in his nature. Stealing is just in the banksters nature that's for sure and they're getting pretty good at it.

Bid the prices of land up, create a problem of credit worthiness with higher rates and inflate other staples ie food/gas and bingo, you've got your problem, now print up $150 billion of bullshit paper and you've got your land which was what you were after the entire time. Good thing our education system is free or there might be somebody that would fight back.

[unlucky]

Re: The Sound Of Distant Helicopter Engines

Give the Fed some credit (pun intended), they are trying to limit their intervention by focusing on the most logjammed part of the market.

Maybe they are worried about the dollar...

[Jim Nickerson]

Re: The Sound Of Distant Helicopter Engines

Give the Fed some credit (pun intended), they are trying to limit their intervention by focusing on the most logjammed part of the market.

Maybe they are worried about the dollar...

Looking at what the dollar/bonar will buy today vs. 2-3 weeks ago, it seems to me, the worry should come if one doesn't hold them. The Bonar is strong when measured against US stock assets.

[Finster]

Re: The Sound Of Distant Helicopter Engines

Looking at what the dollar/bonar will buy today vs. 2-3 weeks ago, it seems to me, the worry should come if one doesn't hold them. The Bonar is strong when measured against US stock assets.

You can say that again, Jim. The question for investors is how long will it stay that way if the Fed is determined enough to trash the bonar. Just taking a peek at the gold price today (up smartly) suggests that we are not the only ones to hear helicopters ...

[Jim Nickerson]

Re: The Sound Of Distant Helicopter Engines

You can say that again, Jim. The question for investors is how long will it stay that way if the Fed is determined enough to trash the bonar. Just taking a peek at the gold price today (up smartly) suggests that we are not the only ones to hear helicopters ...

This is big, folks. At least a 7.8 on the Richter Scale. When the CBs start to panic, maybe the rest of us ought to consider following suit ...

So how long do you speculate it will take for this "panic" to play out?

[Finster]

Re: The Sound Of Distant Helicopter Engines

Fed's can only purchase stocks, bonds or land with their liquidity, looks like the answer to that question is land. The Fed is getting a lot better at stealing land since the last depression, I bet this time nobody notices. One things for certain, the Fed ain't dumb they'd rather be holding title instead of d0llars, of course d0llars are a liability for a bank so I guess they kind of have to.

Funny you should mention that, Tet. Because out of a dozen or so individual stocks, there are only two of mine that are up today, and they are up 3%-5% while the averages are down around 1%. And they are land stocks.

[Finster]

Re: The Sound Of Distant Helicopter Engines

So how long do you speculate it will take for this "panic" to play out?

Heck if I know, Jim. Probably we'll see actual panic come and go on a weekly, daily, even hourly, basis. A manic-depressive kind of thing. But the underlying problem is not likely to just disappear for at least several months. Emphasis on "at least". It took three or four years to inflate and lever up this mortgage bubble, and the more general credit bubble has been brewing longer than that. At least 2004-2006 vintage ARMs are going to be re-setting for a couple more years. Meanwhile, we're likely to see bailouts with public funds, either from the treasury or out of thin air, a-la helicopter drops. That could soothe the immediate crisis a bit while kicking the ball a little further down the road and fomenting another crisis yet.

No need for us to actually panic, however. That is, unless you have all your eggs in one basket, especially if that basket is high-beta stocks, MBSs, CDOs, CLOs, hedge funds, or private equity, or if you're levered up with margin. A nice cushion of UST and gold bullion ballast in your portfolio sure doesn't hurt, either. Politicians and bureaucrats may do their best to rescue the reckless at the expense of the prudent, but they can't totally ruin the latter without wrecking the whole system, and in that case, it wouldn't matter much anyway.

Not to panic completely out of stocks, either. It may be hard to feel in times like these, but equity in general may be the safest long term investment there is.

[Pervilis Spurius]

Re: The Sound Of Distant Helicopter Engines

Finster, maybe I have my limited knowledge of the FED backwards, but I'd like to raise a question(s) about the nature of these FED actions.

As I understand it, these were TOMOs with the emphasis on the T (temporary), that is, they mature on Monday. I wouldn't call this a helicopter drop (not that you necessarily did either given the thread title). It seems more of a stopgap measure to give banks some time to sort out their respective messes rather than a bailout. Neither does it look unique to me that the FED is putting out TOMOs on MBS either. Neither does the amount look extreme.

Am I missing something here?

For that matter, I guess I could have addressed this question to Tet or Sapiens as this doesn't look like a land grab by the FED (yet). If there was a POMO for this stuff, then I would freak.

I agree that the ECB intervention is massive although I don't know the nature of their action (TOMO, POMO, or maybe the euros have some other mechanism for manipulating the market).

[EJ]

Re: The Sound Of Distant Helicopter Engines

Finster, maybe I have my limited knowledge of the FED backwards, but I'd like to raise a question(s) about the nature of these FED actions.

As I understand it, these were TOMOs with the emphasis on the T (temporary), that is, they mature on Monday. I wouldn't call this a helicopter drop (not that you necessarily did either given the thread title). It seems more of a stopgap measure to give banks some time to sort out their respective messes rather than a bailout. Neither does it look unique to me that the FED is putting out TOMOs on MBS either. Neither does the amount look extreme.

Am I missing something here?

For that matter, I guess I could have addressed this question to Tet or Sapiens as this doesn't look like a land grab by the FED (yet). If there was a POMO for this stuff, then I would freak.

I agree that the ECB intervention is massive although I don't know the nature of their action (TOMO, POMO, or maybe the euros have some other mechanism for manipulating the market).

Indeed, these are short term loans. The Fed is not yet dropping cash and flying off with a barrel of live grenades. For the moment, it is extending short term loans to give banks time more time to find buyers for the barrels of live grenades before they blow up. The Fed really doesn't want them, both because they do not want to encourage further moral hazard and because they really do not want the grenades on their books. But, at the moment there is no market for these grenades, and one will probably not appear before the term of these loans expires, so new loans will need to be extended.

Speaking of grenades, today I got a call from a friend I've known about six years at one of the top three investment banks. He asked, “Hey, have you written anything about money market funds for iTulip?”

“No, why?” I ask.

“Because you and your readers might be surprised to know that a lot of MM funds have B2 and worse grade securitized debt based on things like letters of credit backing them. One in Europe is off 20% in one day. I bet most folks in MM funds don’t think $1 in their MM fund one day can turn into 80 cents the next.”

“Good idea.” I said. "We’ll get on it."

And he hung up.

We haven't done much digging yet, but I recommend readers take a look at their money market funds to make sure they are safe. If you have any doubts, you may want to call your brokerage or bank and find out what you MM fund is made out of.

[Andreuccio]

Re: The Sound Of Distant Helicopter Engines

I called the two companies I have MM funds with: Capital One and National City. I asked if there was any way the principal could go down with changing markets. They both told me it was essentially like a bank account with a fixed interest rate. The principal would not go down except for money I withdrew.

Should I feel assured, or did I ask the wrong question or talk to the wrong people?