Utter nonsense from people who have no idea what they're talking about. Gross issuance is irrelevant when the Fed (not to mention the ECB and BoJ) buys or finances all of it. It means that net issuance is zero.
In fact, it was below zero. The Fed bought more than gross issuance until mid April.
Case in point. If the US Treasury issued $1.5 trillion and the Fed bought $1.5 trillion, how much did investors and foreign governments have to absorb?
If the Fed bought more than total issuance, then there was a shortage of paper and yields would plunge to near zero.
Which is exactly what happened.
This kind of garbage is exactly what Wall Street wants to dish out to keep the public befuddled.
The investing public does not matter. Only the securities dealers and their financiers the central banks, matter.
I've been thinking a lot about how much is riding on the economy at the moment. Not Wall Street, but Main Street. Yada yada no savings lots of debt no prospects nothing to lose. We armchair warriors are one thing, but we too have lots to lose from a breakdown in social order - not just people parking in front of hydrants, but a real failure of the social contract. Each of us here with our high speed internet, full slate of vaccinations, 3 squares a day and all that, are 1 percenters ourselves, even though we need to work for a living and have plenty to worry about.
I'm all for picking up bargain priced investments, but a real chew-the-tread-off-a-tire crash is not what anyone truly wants. Good luck entering an order in a true Mad Max scenario, and good luck trying to spend it. Etc. If the powers-that-be are flooding the markets, however futile it may or may not prove to be, I'm hoping for it to succeed. The alternative is unthinkable.
They've been ratcheting up fear all weekend, making the worst-case scenarios seem like the most-likely scenarios.
It's the same playbook they rant in 2009 to demand bailouts on casino capitalism's terms.
Eff 'em. I hope opponents to yet another corporate bailout hold the line.
Let their bondholders takeover Boeing and United and the rest of them.
Let there be markets.
Let there be capitalism.
Policy makers are clueless that Covid19 is not the cause of the crisis. It's just the catalyst that triggered the end of the 25 year credit bubble that was inevitable anyway. Had not the system been at the maximum fragility as a result of blowing the bubble to its actual limit, this crash would not have happened. Covid19 would have been a blip in the big scheme of things.
No. This crash is the end of bubble dynamics. It changes the way all of us think about the world.
And the first people to wake up to the change and react to it were the first leveraged long traders who started selling way back in September when repo funding rates went through the roof.
Then gradually more of the smart guys caught on. The trickle of selling became a wave, and the wave became a tsunami.
Collapsing asset values now destroy money faster than the Fed can replace it. Absolutely nobody wants credit for speculation any more. All they want to do now is liquididate and deleverage.
The Old Time religion is coming home after Greenspan and Bernanke kicked it out into the wilderness. They allowed, promoted, and enabled moral hazard to grow far beyond anything the normal human mind could imagine.
Finally in September we hit the limit. The system was no longer able to support the growth of the game. Everybody was margined to the hilt. And people started to go in reverse.
There's no turning back now. The big leveraged players who drove this have been destroyed. They are no more than smouldering piles of ash now. The smart money that got out first will now sit and wait, but there is too little to restart the game. We'll all be dead and gone for decades when the next game comes.
After this, people will be risk averse for two generations. There's a playbook for this. It's called the 1929 Crash and the Great Depression.
The tsunami will recede in a few weeks, and the destruction left behind will be generational.
Blackrock is managing the fund. The trades will be executed, as usual, with Primary Dealers. The Fed put out a list of accepted counterparties, and at a quick glance, virtually all of them were Primary Dealers.
The direct outright purchases of individual corporates is a new wrinkle. Previously the Fed was only going to buy ETFs.
The size of these transactions is less than a rounding error relative to regular OMO.
While I think that a Green New Deal is a good idea in theory, and I greatly admire AOC, that bit you wrote about AOC having a proxy from the Treasury is loony tunes gibberish.
No one in modern history has come close to the spending of the current Regime. The last two D administrations reduced the deficit. In fact, Clinton ran a surplus. After the initial post GFC surge, Obama shrank the deficit. The D's are the ones who are fiscally responsible. After the next round of pandemic relief, the deficit will shrink, but from what level. From $800 billion a month to 200-300 billion per month? We used to think a trillion a year $80B/mo. was crazy.
This won't be useful to anyone for any purpose whatsoever but: not only do I not know where the market will go nor what to do about my various positions, commitments, bets and wagers, but I also have no clue about the likely or unlikely outcomes of the pandemic, the protests, the police, the social compact, international relations, my future as either a salaried employee, a consultant or a punter, the future of my neighbourhood, or whether things are about to get cataclysmically worse or exponentially better.
In fact, I don't know whether to shit or steal third.
All I know is that I'm in a state of great angst about things large and small. Real angst. Can no longer bring myself to take a toke or a drink, because I feel like constancy of focus might be all I have left. That and my health, my marriage, and at least my absence of debt. A few friends, and still a job and some paying gigs, at least for right now.
Thank goodness for my blessings, because beyond those, shit is off the hook fucked to me.
I'm renting a car to drive down to Zadar today to look at an apartment by the sea. There are some amazing bargains. If I have to stay another month, which looks likely, I'd like to be seaside this time of year.
Little Croatia reported no new COVID19 cases yesterday and only 109 active cases nationwide. True? I don't know. But for the time being the country has removed virtually all restrictions on movement and business activity. I will continue to wear my hermetically sealed coffee filter mask with antimicrobial electrostatic cover while out and about.
So, they've apparently successfully publicly leveraged the private leverage that was previously leveraged against the massive public package of leverage from the last leveraged-leverage rescue.
I read that on "3,600 Seconds" last night, that Mr. Powell ("Do you mind if I call you 'an inter-generational bagman and an immoral piece-of-crap' as shorthand for 'Chairman'?") said we'll eventually pay the trillions in new loans that are being used to make whole the trillions in old loans, in a private-public swap that not even the devil would have entertained.
Lord knows (to borrow a phrase) what sort of "shithole country" these abhorrent scum intend to leave.
They'll all just righteously jet off to their compounds.
I still hope I can get to Poland.
I found the death record of my great grandfather in the town where I know that my grandfather was from. Also the marriage of great aunt, and birth of her first son, who was my mother's first cousin. They came to America. I remember him from childhood.
I also found records of the birth of my great grandmother and her siblings in another town. I found many family names of ancestors from 1900 going back to the 1830s, including Plomnik, Fuks, Walfisz, Finkielshteyn, and Kruk. But I'm now at a dead end. No more records on line.
I'd like to find the birth records of my grandparents. Perhaps they exist in the dusty basement of the town hall or some other repository, but many were destroyed. One of the towns was 90% destroyed as it was the site of a massive battle between the Nazis and Soviet Army, a meeting of two great evils. Were the Nazis worse? Yes. Doesn't mitigate how bad the Soviets were.
Great Grandpa Fuks came to America and was a socialist rabble rouser giving pro-union speeches in the early days of the organzed labor movement in America. The apple doesn't fall far from the tree.
The great grandmother stayed behind and remarried. Family grapevine is that she and her siblings moved to Palestine before the Nazis came. I probably have half-cousins in Israel. Found death records of some with my most direct and rare family name, who were likely children of my great grandfather's siblings in Warsaw 1939-40s. The Nazis got them. This is the first time I've found likely direct familial connections to Holocaust victims in Poland.
I was supposed to be there for the anniversary of the Warsaw Ghetto uprising. Sad I missed that. Hope to have another opportunity.
I don't know why I wrote this here.
I think about how bad we all have it with this pandemic.
Compared to what we're used to.
Then I think about what people went through in WW2, the Great Depression, the Holocaust, and the Pogroms in Russia and Poland. For many peoples in the world, peace and prosperity are relatively fleeting luxuries. It's true even for those who've enjoyed it in recent times. We only need to look back a generation or two, and it wasn't so good.
But we survive. It may take awhile, and some of us may not live to see it, but a time will come when everything will be alright again for a while. Unfortunately humans seem to lack the capacity to keep it that way.
I've been doing a genealogical search all day, since I'm still planning on going to Poland. I found the death record of my great grandfather in the town where my grandfather was known to have lived before emigrating to the US. Exciting stuff. Looks like I'll be doing some grave hunting in Poland.
If they ever open for visits. Jeez.
Then I found the marriage record of my grandfather's sister, and the birth of my first cousin once removed. Wow.
OK. Back to woik.
I'm looking forward to the day when I can use my negative interest rate credit card to buy negatively priced gasoline. I'm guessing there would be supply issues and probably other issues, like widespread cannibalism, before then.
The first statement is regarding the cytokine storm I described above. He's talking about the same experiment I was. The virus SARS infects innate immune cells like dendritic cells which in turn over express signal molecules called cytokines. In vaccinated people the secretion of cytokines is too high and it makes the immune system overreact which in turn causes acute respiratory syndrome (ARDS) and lung injury resulting in death. Lung injury itself is a complex topic as in includes the renin–angiotensin system and activity of ACE2 as well and injury by heme groups (which wasn’t fully understood until 2015-2019).
As to his second point, SARS-CoV-2 is a single stranded RNA virus. Why is that important? Because single stranded RNA viruses mutate easily. They create a mutation about once per week per lineage. And we now have many thousands of lineages out there of SARS-CoV-2 as the virus expands and each lineage mutates once per week. And it only started in Nov 2019! So a year or two from now any vaccine that can generate antibodies that recognizes todays SARS-CoV-2 may no longer recognize this new viral form. In fact it may even trigger antibody dependent enhancement (ADE) which is where antibodies against an older version of the virus actually causes your immune system to not effectively fight a newer mutated version of the virus leading to a much worse outcome on second challenge. You see ADE with Dengu for example. The reason RNA viruses mutate faster than DNA viruses is because DNA is double stranded and the second strand works as an error correction template. If a mutation occurs in DNA the second strand can be used to repair the error. You can say using RNA instead of DNA is an adaptation for viruses because it allows them to evolve faster.
Dumb luck defines so much of our era.
The entire VC industry around Sillycon Valley is up to its eyeballs and remarkably blind to survivor bias and dumb luck.
Instead, they think they're all effing geniuses.... Masters of the Future.
When, instead, one company with technology happens to make the contact with some pool of money that provides it an incremental advantage over someone else doing something similar without access to that critical pool at the critical juncture.
I pretty much hate everything at this juncture.
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This is a very helpful link - you can view all of US but the top drop down let's you look at numbers for your own state for bed, ICU and ventilator shortages. This is from WU and based on their model I would say this will start of noisy (wrong) but as time goes on will get more and more accurate. So you can get a pretty good idea if you should stay in your state if you are at risk. California is in good shape in terms of ICU/Beds but we need more than a thousand ventilators. New York needs to massively expand.
Jimi, Sandy et. al.
I'm so grateful and proud that you guys have come back and made such valued contributions to the discussion. I hope you stick around this time when the bull comes back, but if not, thank you anyway from the bottom of my heart.
Jimi- I'm really glad to hear that you and your family got that ordeal!
Now on with the show!
There's a huge difference between now and 2009. The Fed started direct QE in March 2009. It worked immediately.
It started direct QE this time in late September. It worked for a while but the bubble had become so brittle that it collapsed anyway.
That was at the end of a 30 month bear market. Psychologically the players were ready..
This on just started.
This one faces trillions in new Federal Debt. All other nations area also issuing massive amounts of debt to fund stimulus.
So there's QE, and maybe it's starting to work on a delayed basis.
Or maybe this is just another countertrend bear market rally, and this is October 30 1929, not March 1933.
Which came AFTER the bank holiday.
I don't know if this is the bottom or not, but I doubt it.
"What concerns me most right now is how fast we can increase the number of ventilators and Extracorporeal membrane oxygenation devices (ECMO) in the next couple of months. A clinician is going to be less worried if the patient is dying of X than if the patient isn't able to breath and they can't do anything about it. We need oxygen. My second concern is PPE personal protective equipment for medical workers. If we have those two things ready I care a whole lot less about testing in term of immediate impact. "
I think SIP didn‘t realize that those links which we see in his post were not copied into the Stool Board. It is 6:50 a.m. in Europe right now. Guess once he woke up and logs into the Stool he will fix that. 🙂
btw Sandy, I like your insightfull very much. Thanks a lot! 🙂✌🏻
Not only "professionals". Also all those bloggers and "financial freedom with 30"nutcases, all those "Frugalists", Hipsters and all that other crap. They are all a sign of all 10 year long relentless bull market, which only saw minor downmove which were all corrected quickly by CB intervention. They are all playing moral hazard although they say only others do so. No. Every blogger who say that you only should buy the MSCI World every month with a fixed contribution plays moral hazard. No one on earth would have come up with such an idea in 1980 or 1981.
What we would need is a 10 year long relentless bear market to cure all that crap out. So that Schumpeter comes into play.
Problem is: we won't get a 10 year long bear market.
The number of companies in danger of having their credit rating lowered is at a 10-year high, according to S&P Global Ratings. Among the companies drawing greater scrutiny are Chevron, Honda and the Walt Disney Co.
If that is true, then buy physical assets which are easy to sell like gold coins. In the end this paper money would be wipe out, even if gold would drop during begining of this crisis becasue of "sell everything". Then, all "paper ETFs" would be gone and gold or silver could rise like 10 to 100 times. Who knows.
But this is the case if you believe in total reset. I heard this story too many times to believe. I still think they will handle that, maybe from lower levels. Their ammo is unlimited. For me, Japan is the front runner. They have like 240 % debt to gdp ratio and still manage to keep their economy afloat. So what will happen to Japan will happen to eveyone in the end. US has low debt to GDP levels when compared to Japan. Actually Im more affraid about Italy and other south countries. After changes to policies ECB has room to print till 2023. There was a problem with CB capital (hit limit on germna debt), but they change the limit last month. So they could print an buy italian debt till 2023.
At the moment since 17 march I have 15% of my portfolio in stocks. Already have 40% increase. I invested in hard assets stocks like gold miners, telecoms.
Im thinking about going long with 50% of my retirement money. Its like 2009. The questions is - whether its too early since GFC lasted 1,5 year. But that was different story. FED acted after 1 year. This time they did it very quickly.
Right now people are quite calm. I think that has pretty much to do with that they think it will be like 2008: People in finance lose jobs and some others too, but not so many. Was to a good part an isolated problem for folks in finance. Now, every single part of the economy got hit hard, not only that, but also very quickly without any warning. People start to realize more and more which impact that will have.