Its all there...plain as day....in the chart of the FED balance sheet.
When did it all start........
Most say in the bail outs of late 2008.......
But perhaps we should look nearer.....in early 2018 when the FED tried to do a bit of QT
So softly softly so the market wouldnt notice........
They propbably thought is was going real swell.
But the hedge funds leveraged into treasuries certainly didnt think so.......
The QT pushed the REPO rate they had to pay on their money up and up and up.
The hedge funds could see their profits disappearing before there very eyes.
Something had to be done about this obviously unacceptable situation.
And so on 17 September 2019....a day that will live forever in financial infamy....
The REPO market printed 10%.
And just like magic a $500 Billion REPO facility was created out of thin air to pour the healing balm on troubled waters.
Was'nt that nice of the FED.....
Even better the virus came along shortly afterwards.... crushed treasury rates and provided the perfect opportunity in April 2020 for the hedge funds to get out of thier leveraged bond positions and into stocks.
Shortly afterwards the FED increased the money supply by 40%.....
And its been up up up and away for the FED balance sheet ever since.
Of course this created a lot of inflation and a lot of very over valued stocks.
So the FED had to throw a few bones to the shorts after February 2021 with all its QT talk.......
Though I find the FED's tough QT talk unconvincing.
And its transitory inflation meme was just so ridiculous......
Then the FED created that nice Reverse Repo Program so all the hedge funds could hide in a house made out of bricks while the inflationary Wolf huffed and puffed and blew all the bonds and stocks down.
All that FED QT tough talk really helped a lot.....
Well beside the oil price there is a very high J number on this stock
The J number (which I invented) quantifies in a mathematical way the wealth transfer from lenders to borrowers (i.e the common shareholders) due to inflation.
The FED is a monetary umpire. Unfortunately for Team Lender the FED is an umpire who now days only awards penalties to Team Borrower.
Thus making it very hard for team lender to ever win a game (note I think they won a few games back in the early 1930's but thats about it).
Anyway the J number is 30B debt plus 8B in preference shares multiplied by CPI.
Or about $4 Billion a year that is being transfered to the borrowers (the common shareholders) from the lenders.
So to get his $800 million back per annum (his preference share dividend which has been swallowed by inflation), Uncle Warren has to buy about 20% of Oxy.
Should be fairly easy now he can exercise the warrants.
I think thats his plan.
Also you should note that inflation is driving Uncle Warren to use his cash pile.
Inflation is a tax on cash and its become too expensive to hang on to.
The temperature in the hot house is going down as the bond rate goes up.
This is not good for the all the strange and artificial flowers in the hothouse that the master printer of the Eccles Temple had carefully cultivated.
So many venus fly traps were cultivated to suck the "investors" ( a word that must always be put in commas and used very advisedly with a host of caveats).
We should have a competition to decide what was the strangest flower....was it Virgin Galactic? was it AMC? was it one of the chinese fraudcaps? was it the Austrian 100 year bond?)
They are wilting in the harsh sun of financial reality.
So Uncle Warren realises that the FED pulled a fast one on him re his Oxy deal.
They changed the FRAME with their 40% M2 Print.
Whats 8% interest on your prefs when inflation is 10%.....well its called going backwards.
But sueing the FED wont work.
So what can he do......he can buy cheap equity insurance.....by buying the common ....lots of common.
He can have a frame congruent investment and have the frame forces work for him and not against him.
If the value of his preference shares is to be transferred to the common shareholders due to the actions of the sacred printing machine contained in the Eccles monetary temple.........then he is going to make sure he is the common shareholder who benefits from that wealth transfer.
Remember Oxy also has a lot of debt as well that is beng transfered...in real terms...to the common shareholders at a rate of CPI per annum.
I would also like to make a point about Chapter 2 of the Intelligent Investor. I think the Chapter on inflation is rather cursory. Nowhere does it address the issue of inflationary transfer......a rather big ommission.
Price equals the function of information divided by time.
Stock prices and any other asset prices are "particles" brought into being by the interaction of the information field with the time field.
The information field acts on the time field to constanty alter the value of the price particle.
However the information in the information field (both past information which is known and future information which is not curently known but is estimated) is viewed through the markets collective bias lense to determine the price value.
This market bias lense unreasonably discounts the probabilities of certain events:
It tends to ignore the probability of wars.
It tends to ignore most fat tail events (see the writings of Nassim Taleb).
It tends to ignore the lack of property rights and legal protections of those rights in certain countries.
It tends to ignore acounting frauds/irregularities.
It tends to ignore value metrics.
It tends to ignore the fact that bubles and fads eventually end.
The markets bias lense ignores a lot of things.
It is constantly under weighting some types of information and over weighting others.
Understand what the markets bias lense unfairly ignores and unreasonably discounts and you have an inbuilt advantage over the market.
Your own individual investor lense needs to be clearer, less distorted and see farther than the markets lense.
How does the Efficient Markets Hypothesis explain that away.
Clearly the market was betting on peace....and got it wrong. There was clearly no discounting by the bond market of the clear and present danger of a war.
THE EMH should be replaced by the DMH.
In deficient markets asset prices cannot and do not discount the future or current infornation accurately.
1/ Future information is inherently unknowable and thus cannot be discounted to determine current asset prices.
2/ Even where information is known i.e. current information.... it is "Interpreted" by current actors to determine current asset prices. The "Interpretation" can be very very faulty. The interpretation depends on existing investor biases.
Thats why there is so much financial propaganda...to effect the biases...to effect the interpretation of information.....and thus effect the prices of assets...stocks ...bonds...whatever.
3/ Asset prices are constantly changing because future information is constantly becoming current information and is being measured and interpreted to determine asset prices.
Or we can look at this as a QUANTUM FIELD effect.
Future prices are determined by fluctuations in the future information field (FIF)
The future information field interacts with the Price/Time field to create fluctuations in price over time...ie. a price chart.
Cryptonite is the Future 5/12/22
in The Daily Stool - Stock Market Message Board
Posted
2022 - THE YEAR OF THE BAGHOLDER
Yes as the year unfolds, 2022 is definitely the year of the bagholder....as all the cyptographers are finding out.....
Stablecoins ....what a joke......ponzi coins in reality.......
Yes the year reality came to ponziville.
One presumes some sort of stock bear markety rally thingamebob whatever should probably break out about now.
Ho Hum Ho Hum.
On banks
As doc says they are hiding massive bond losses (bagholder alert bagholder alert).
Also deposit rates will have to be raised dramatically to keep the depositors from fleeing.
Its not going to be pretty.