wndysrf Posted January 12, 2004 Report Share Posted January 12, 2004 Al Green has pulled it off. Stephen Roach at Morgan Stanley talks about the Fed Celebration of its Wildcat Central Banking Policy aka The John Law Prosperity Trade. http://www.morganstanley.com/GEFdata/diges...est-digest.html Roach: ?Whether it was the stock market crash of 1987, the seizing up of capital markets in the aftermath of the failure of Long-Term Capital Management in 1998, or especially the burst equity bubble in 2000, the Fed has had little choice other than to take asset markets into explicit consideration in framing its policies.? Mark?s Translation: After the stunning collapse of the financial markets in October 1998, when ?When Genius Failed? LTCM was imploding in a Derivative Gravestone Spiral, Al Green had no choice but to throw a ?Hail Mary? pass. Massive reliquifaction jumpstarted by a surprise rate cut announcement a half hour before the stock market closed on a Friday during options expiration week. The result was nothing short of spectacular. The S & P futures exploded 5% in 5 minutes, and would end up about 17% in the next two trading days. Instantly, Al Green had obtained Rock Star Status. So confident he was in his abilities, he would begin the process of building the ?Al Green HedgeFund?, the sole purpose of which was to jam futures, pump up the dollar, and start the world?s largest Repo Pool. Never again would the U.S. Economy have to deal with a liquidity crisis. The Al Green HedgeFund will show up as The Buyer of Last Resort, and the Provider of Liquidity for all failed speculations. Roach: ?The main issue of today?s macro debate is the emergence of asset markets as a key driver of real economic activity. The newly ascendant prominence of asset markets changes the rules of the macro game ? to say nothing of altering the role of central banks.? Mark?s Translation: The main issue of today?s macro debate is the emergence of the Al Green HedgeFund as the largest Derivative Gambling House in world financial history, where Repos, Treasury Bonds, Interest Rate Futures, Currency Contracts, and Gold Shortselling have become the primary instruments used to ?manage? the Speculative Sphere. A HedgeFund so large, that all other hedge funds, mutual funds, and daytraders simply game their trades in the same direction as the Al Green HedgeFund. So in effect, the Fed has become an accelerant for speculation as opposed to its traditional role as a firewall against MTV Spring Break excess. Roach: ?Asset-driven economies are biased toward increased debt and reduced income-based saving; lacking in domestic saving, the US has no choice other than to import surplus saving from abroad and run massive external deficits to attract that capital. The ascendancy of asset markets has resulted in a significant shift in the mix of America?s internally generated economic fuel ? away from earned income toward the wealth effects derived from investments in stocks, bonds, and property. Moreover, by keeping short-term interest rates low and signaling that it is inclined to do so for some time to come, the Fed?s post-equity-bubble damage control tactics have led to a series of additional asset bubbles ? property, refis, bonds, and credit instruments.? Mark?s Translation: The U.S. had no real savings, so the only way to feed the gargantuan funding needs of the ballooning balance sheet of the Al Green HedgeFund was to recruit Fannie Mae and Freddie Mac to lever its own balance sheets off the ?As Good As It Gets 1% Fed Funds Rate? to create a mortgage debt explosion. A Perpetual Motion Machine that roundtrips debt into money, eagerly lapped up by our Asian trading partners financing our bingeing, consumer spending, and property flipping. A manufacturing economy transformed into Paper Speculating and Real Estate Pyramiding enterprise. Roach: ?The cost of the recovery is manifested in the form of serious and ever-mounting structural imbalances ? namely, a rock-bottom national saving rate, record levels of personal indebtedness, a massive budget deficit, and record current-account and trade gaps. These imbalances are being finessed ? in large part through massive direct purchases of Treasuries by Asian authorities. The implicit contract: You (America) buy our goods and we (Asia) will buy your bonds ? an arrangement that keeps US interest rates low and limits the appreciation of Asian currencies. And so the music plays on ? at least for the time being. The question we must ask is whether this arrangement is sustainable indefinitely.? Mark?s Translation: The Al Green HedgeFund has been criticized for being too reckless and taking on huge risks, making gigantic bets with the $1 trillion ?custody account? pool, LTCM ? style. Last year, economists wondered if gaming such a large position could really turn the tide of the real manufacturing economy by using the John Law Prosperity Trade: Dropping money out of helicopters into the hands of the Wall Struck Speculators and financing an unlimited credit pool of Countrywide Refinancing and Capitol One Mermaid credit cards for the U.S. consumer. Hustling up the Bank of Japan to take up the slack of increasingly weary foreign speculators reluctant to add more funds to the Al Green HedgeFund. The question we must as is whether there is anybody other than the ECB large enough to sustain this trade after the BOJ?s resources are exhausted. ??????????.. Now that the Banana Republic Semiconductor Index is up 75%, GDP is at an 8.2% annualized run rate, economic stats are validating an economic resurgence, Al Green is now gloating and chortling at his success as the Chief Matrix Architect of the Al Green HedgeFund, which has pulled off the biggest, riskiest, most spectacular trade ever: The John Law Prosperity Trade. Roach: ?In all my years as a Fed watcher, I have never seen US central bankers take to the bully pulpit as they have in recent days. In the first seven days of the New Year, six speeches were given by members of the Federal Reserve Board. A carefully orchestrated campaign of economic cheerleading to convince businesspeople, consumers, and financial market participants that this recovery is finally for real ? and without serious risk.? Mark?s Translation: The amount of Fed Governor Bullhorning the last 3 months has been unprecedented. Virtually every day, one of the ?Dollar Ben? Bernanke lieutenants jawbones some announcement about the strong economy, precisely at price points where the Dow Jones is in danger of losing more than 2% on the session. Coincidently, sudden S & P Futures Jamming appear at key technical levels, while Matrix Chart Technicians spot key stocks on the verge of a breakdown, flooding the CBOE with ?at market? stock futures orders from unknown Bermuda buyers. Roach: ?In true military fashion, the Chairman has led the charge. In a look back on his 16-year stewardship of the Fed, Alan Greenspan lays bare his philosophy and guiding principles as a central banker. It is a veritable tour de force covering his views on the quest for price stability, crisis and shock management, and the role of asset markets in shaping monetary policy.? Mark?s Translation: Al Green is celebrating his Victory Lap by conducting a Power Jam in all major stock indexes, carpet bombing the short sellers via Daisy Cutter Futures Explosions. A veritable Tour De Force instructing all market participants that he is the boss, and that the Al Green HedgeFund has been the most successful ?wealth creator? of all time. Roach: ?The FOMC rewrote the book on the conduct of monetary policy, and Alan Greenspan is now celebrating of the apparent success of this strategy. Victory laps are dangerous sport in financial markets. Yet that danger has all but been dismissed in the giddiness over economic recovery.? Mark?s Translation: The FOMC rewrote the book on the John Law Prosperity Trade, and Al Green is now relishing in his success. While his runs his Victory Lap by goading the Bank of Japan to inject unheard amounts of paper confetti into the Speculation Arena to finance the Stock Market Parabola, the real scoreboard of this Economic Frankenstein Experiment is flashing warning signs. The U.S. dollar is in a Barrel Ride headed for the Niagara Falls, and Gold and Silver prices are coiling up for a spectacular moonshot launch. All those danger signs are being dismissed in midst of the 24/7 Fed Bullhorning and CNBS Cheerleading. One day, somebody holding a substantial position in the Al Green HedgeFund is going to cash in his chips, buy gold and silver futures on the COMEX, request delivery, and quietly exit to Tahiti. And be smart enough to announce his delivery request on a Friday afternoon during options expiration week. That?s likely to cause a 5% move in about 5 minutes on the Gold Spot price, with a 17% move within the next 2 trading days. Everyone knows what happened to the Nasdaq when it launched off its lows around 1400 in October 1998. Gold and Silver will be making an equally spectacular move. At that point, we are likely to see the Sudden Demise of The Al Green HedgeFund. And nobody big enough will be around to save it. A Classic From Charles Mackay: ?It was remarked at this time that Paris had never before been so full of objects of elegance and luxury. Statues, pictures, and tapestries were imported in great quantities from foreign countries, found in abundance in the houses of the middle class in general. An illusory prosperity shone over the land, and so dazzled the eyes of the whole nation. John Law, the magician whose wand had wrought so surprising a change, was by far the most influential person of the state. He had so much confidence in his sagacity and the success of his plans, that he always consulted him upon every matter of moment.? ?The first slight alarm that was occasioned was early in 1720, when The Prince de Conti, offended that Law should have denied him fresh shares of India stock, at his own price, sent to his bank to demand payment in specie of so enormous a quantity of notes, that three wagons were required for its transport. Others were soon found who imitated from motives of distrust. The more acute stockjobbers imagined justly that prices could not continue to rise forever. Vermalet, a jobber, who sniffed the coming storm, procured gold and silver coin to the amount of nearly a million of livres, which he packed in a farmer?s cart, and drove his precious load in safety into Belgium.? History Repeats??. Machinehead gets the credit for today's inspiration. Thanks to Grot for the photo of Al Green in The Matrix Control Room desperately putting bids under the U.S. Dollar to keep the Al Green HedgeFund solvent. Link to comment Share on other sites More sharing options...
tpark Posted January 12, 2004 Report Share Posted January 12, 2004 Post bubble opinion. Anyway, we're at the "bread and circuses" stage, not yet at the "cornered wild animal" stage Link to comment Share on other sites More sharing options...
DrStool Posted January 12, 2004 Report Share Posted January 12, 2004 Another Day Another Stampede Your Closing Anals Intraday are now posted. Take a subscribatory, open it and download it RIGHT NOW, along with everything else in your Anals!? 15 Day Intro Subscribatory. Just $2.99! Get In RIGHT NOW! Link to comment Share on other sites More sharing options...
purdymouth Posted January 12, 2004 Report Share Posted January 12, 2004 U.S. jet accidentally bombs Yorkshire Link to comment Share on other sites More sharing options...
DrStool Posted January 12, 2004 Report Share Posted January 12, 2004 Buck Bounces Stops Smoking Bong Uncle Buck and the Long Bong Hit, including short and long term updated charts and price targets, is now loaded. Take a subscribatory and get the latest whiff of Uncle Buck and the Long Bong Hit. 15 Day Intro Subscribatory. Just $2.99! Get In RIGHT NOW! Link to comment Share on other sites More sharing options...
Howl Posted January 12, 2004 Report Share Posted January 12, 2004 We are going to the red planet. As if this planet is not already colored too red by deficits and debts. Link to comment Share on other sites More sharing options...
DrStool Posted January 12, 2004 Report Share Posted January 12, 2004 Massive Feeding Stops Stocks From Swooning Helps Pay For New Bongs Today's Fed Feed Report is now updated. How can you expect to know how things will come out if you don't know your Feed? It's in your Anals daily. Take a subscribatory and download your Feed report and analysis RIGHT NOW! 15 Day Intro Subscribatory. Just $2.99! Get In RIGHT NOW! Link to comment Share on other sites More sharing options...
Madame Wrecked Him Posted January 12, 2004 Report Share Posted January 12, 2004 We are going to the red planet. As if this planet is not already colored too red by deficits and debts. Aren't you looking at this rather pessimistically? Think of the job creation possibilities! I wonder how many jobs could be exported to Mars? Link to comment Share on other sites More sharing options...
Hypertiger Posted January 12, 2004 Report Share Posted January 12, 2004 This is the best most optimistic scenario I can come up with... Link to comment Share on other sites More sharing options...
Calculus Posted January 12, 2004 Report Share Posted January 12, 2004 Slightly off topic but still on hail mary passes. I'm not an expert but what the hell was Kansas doing on the final play of the game yesterday? Surely a hail mary was the ONLY play option open in that situation. 4-5 receivers, throw it up and see what happens? Link to comment Share on other sites More sharing options...
soup Posted January 12, 2004 Report Share Posted January 12, 2004 How was it allowed to get so out of hand? Why no outrage? Why is greenspew not been given the death penalty? There is no economic recovery, no uptick in jobs. Every natural adjustment process was fought to death by the statists. There is no pent up demand, no build up in savings; Nope, the only thing we got from the statists multiple bubbles was more debt and more malinvestment. Once again, I ask, where is the OUTRAGE? Link to comment Share on other sites More sharing options...
BigWave Posted January 12, 2004 Report Share Posted January 12, 2004 Purdy, Practice run Link to comment Share on other sites More sharing options...
wndysrf Posted January 12, 2004 Author Report Share Posted January 12, 2004 Another "Fed Hubris" article. An excellent read. Much more vicious than Roach's. Henry C K Liu - Asia Times Link to comment Share on other sites More sharing options...
soup Posted January 12, 2004 Report Share Posted January 12, 2004 When, if ever, has debt financed consuption led to sustainable economic growth? WTF am I missing? Link to comment Share on other sites More sharing options...
Guest Posted January 12, 2004 Report Share Posted January 12, 2004 Mark: Awesome opening today!!! As for the accidental bombing of Yorkshire...soon you'll be reading about the accidental bombing of O'Neill's house. It seems as though the Treasury Department would like to have a word with said former Secretary regarding how it came to pass that some secret government documents would up in the hands of a writer. This poor bastard is going to get hung...big time. While I was glad he exposed the truth, I couldn't believe he did so with a box full of government documents. That's just asking for it. Can you say Treason? Link to comment Share on other sites More sharing options...
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