Latest FED Open Market Activity Clarification
In my last post I covered the story about the FED possibly juicing indirect bid results in last weeks 7 year bond auction, as reported by both Zero Hedge and Chris Martenson. I qualified my presentation that there may well be an easy explanation of the event, but I did think the story was a big one.
What can happen overnight and into a day can be stunning.
There has been a billion pixels spilled out on this topic across the web all day, and I really do not think I can add too much more. A summary for those with an interest:
John Jansen, who pens the site Across The Curve, offered this response to the possibility that the FED was acting out of bounds:
Monetizing the Debt: Disinformation in the Blogosphere
Mr. Jansen is a sharp bond market observer and I was very impressed with his knowledge. After spending some time looking over his work on the site I came away with the feeling that he knows more about bonds and bond markets than Bill Gross!
The key to his write up is that the FED purchase of the 7 year bonds was withing the scope of the quantitative easing program they have already disclosed. On this I appreciate the clear information; I thought this purchase came from another set of money outside the known QE pool. I was clearly wrong in that thought.
I would still offer that the FED actions so soon after the 5 year sale went so bad is certainly a directed use of their purchases to influence results, but that cannot be known.
We can actually resolve this argument very soon. The 300 billion set aside for QE will be used up by mid September. The FED will have to either extend the program, or close it and use other avenues to target bond sales and yields. This is where the rubber meets the road in my view. If the FED was just doing their regular business, then come early October the assist to the markets will have to stop. If they still want to have influence on sales and target yields they will have to reopen the program, or try something else that at this point is "No Disclosed". That should settle the matter.
There was enough concern over the FED being seen as "monetizing the debt" that Bloomberg carried this item today with this quote:
“Given the worries in financial markets that the Fed might be monetizing the debt, the sooner they disabuse the markets of that notion, the better off they’ll be,” Gramley said.
Don't worry, the FED was not monetizing debt, other than the 300 billion they are monetizing that is.
If you would like another possible strange FED based bond buying tale, check out Housing Doom today where he covers the ever expanding agency debt purchases by the FED through various channels.
As for me, I guess I should stick just to what I know about. I guess i could redo the blog as:
DNA Polymerase Disconnect
Examining the disconnect in polymerase fidelity between PFU and Taq isolates
Somehow I do not think I would get many visitors!
Monetizing the Money System with Gold?
Over at The Big Picture think tank section, I saw this article that really got me excited (small snippet):
Trade of the Century?
"..It would work like this: The Fed would monetize gold at a substantial premium to its current nominal price. As we quantified through the SGP, the gold price peg would have to approximate $6000/oz to remediate all past monetary inflation. We doubt this would occur. It would be more likely that the Fed would announce a public tender for privately held gold at, say, $3000/oz. Any gold tendered would be funded with the creation of new Federal Reserve Notes."
Now that is exciting. Check out the entire piece.
The attributed reason for the market moonshot today was a better than expected (is there any other kind of data anymore?) jobs report. Only 300,00 or so folks lost their job this month on an annualised basis. That sure sounds great!
This data point conflicts with both the ADP report and the TrimTabs information, so it is far from clear what is really going on.
Parsing the numbers, if you work for the government or in health care you are doing ok, otherwise things stink. There are jobs out there, you just have to look! Today from Yahoo Finance:
Now hiring: Everywhere you didn't want to work
In this job market, even slaughterhouses and sewage plants look good to long-term unemployed
Some of the dirtiest, smelliest, most dangerous jobs are suddenly looking a lot more appealing in this economy. People who have been out of work for months are lining up for jobs at places they once considered unthinkable: slaughterhouses, sewage plants, prisons.
"I have to just shut my mouth because I can't do anything about it," said Nichole McRoberts of Sedalia, Mo., who pictured more for herself at age 30 than working in a poultry plant, cutting diseased or damaged flesh off chicken carcasses.
Recessions and tight job markets always force some people to take less-desirable or lower-paying work than they are used to. But this recession has been the most punishing job destroyer in at least 60 years, slashing a net total of 6.7 million jobs.
All told, 14.5 million people were out of work last month, with a jobless rate of 9.4 percent. The result is that many people have had to seek jobs they would not have considered in the past.
Take Kristen Thompson. Before the recession, she worked at an upscale Los Angeles-area gym arranging pricey one-on-one personal training sessions. Now she's a guard at a women's prison in rural Wyoming.
After the gym laid her off last year, Thompson spent months looking for work. Even fast food restaurants failed to respond to her application. For each opening, dozens of other people seemed willing to work for less money. When she heard that a prison in Lusk, Wyo., (population 1,447) was hiring, she leapt at the chance.
In her new job, she patrols cellblocks and monitors the mess hall. Back in L.A., she never had to worry about inmates with weapons or drug stashes or prisoners getting into fights. Yet she's hardly complaining. It's a job.
"People have to pay the bills, so what we see is people kind of grasping at straws and taking anything that's available," said Matthew Freedman, assistant professor of labor economics at Cornell University.
I applaud the people highlighted in the story; they could (many do) just complain but instead they are doing what they have to. Nothing but respect for that kind of drive. Any job is a good job if you keep at it, but I think the story shows that we are far from real job creation in this country. My only weed be gone for the green shoots is that should the jobs number even swing positive for the next year, things are still way behind.
It is like a stock that is down 50%; you need to gain 100% to get back to even. With a year of tremendous job losses, even a positive print will have to be huge and long running, it will have to make up for lost time. But that matters very little in the current thinking.
Friday Night Entertainment
After some serious debate and another monster market move up, I need a break! At least until I have to face the enormous amount of yardwork ahead me both days of the weekend.
There are a few readers here that are car lovers, as am I. I wanted to point out that the NASCAR race this weekend is at Watkins Glen. For those that think driving around in circles is dumb, this race is a roadcourse. The track features plenty of elements; S turns, hairpins, and extreme elevation changes. If you like road course racing, check it out around 2pm on Sunday.
The first preseason game for the NFL is on Sunday night, and I am so desperate for football, I am actually looking forward to a meaningless game. So sad.
Perhaps my favorite film ever (there are a few contenders) is Ben Hur with Charlton Heston. I especially appreciate the depiction of a strained friendship and how heart breaking a fall out can be. In this clip (please ignore subtitles, all I could find!) Judah and Messala finally see that they are worlds apart, and the pain is palpable:
I actually got some requests, and here at Economic Disconnect I strive to deliver the goods!
Loyal reader GawainsGhost (or the soothsayer if you will) requested "happy music" in the form of Jackson Browne and "Rosie". If this is happy for Gawains, I would hate a request for sad music! "Running on Empty" is my favorite Jackson Browne tune BTW:
Another reader that visits regular is Watchtower. While I may be inclined to say no to his request for inspiring Jeff form The Housing Time Bomb to make Beatles requests, I am the forgiving sort. Up now is The Pretenders and "Brass in Pocket". I prefer to have silver in my pocket, but I digress:
The Cult have always been a secret favorite of mine. Why not let it all out then? Enjoy "Sweet Soul Sister":
Up front let me say that I hate rap. I hate pop. I hate the Beatles, well you knew that. Given that, one could argue that the Beastie Boys feature rocked out rap, as was the song "Bring the Noise" by Anthrax/Public Enemy. After an exhaustive search I was able to find an old school Ice-T rap song that is almost metal in influence. Try out "Party People", trust me it is not bad at all:
I often have a hard time finding contemporary music to feature as I really do not like new rock. One song I do find very good is the Shinedown song "Second Chance" and I hope you might too:
Ok, I am now a big Depeche Mode fan! Close the night with a more sensual selection than you would not expect from me, undulate to "In Chains" (song stars really at 1:10 mark):
Ok, I dug, I searched, I explored and I found what maybe a Beatles song I can tolerate. If you are of the persuasion, then my favorite Beatles song is here, as I could not find the strength to embed it!
Have a good night.