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August 03, 2009



This is appears to be happening rather often. Typically, days before the Fed announces a issuance purchase, certain firms that I do not need to name (I see their IDs!) seem to gobble up the cash in advance.

I have seen this occur at least several times and I am certain its prevalent. This seems to be especially occurring in the newer, less liquid markets like the 7s and the 3s. The Fed will purchase the cash bonds at the market price and when you voraciously lift offers (as they have been, but more in a systematic, calculated fashion) you tend to pump the price a bit. When you do this in the less liquid markets that you KNOW the Fed will buy, you will make that much more money.


The government is currently at Phase II of the Minsky cycle, servicing its leverage with more leverage.

We know that Phase III (servicing through asset appreciation) is going to be a blood bath, because there is no hope in hell that the government will be able to service its leverage with the crap it is buying. Uncle Sam averted Wall Street's Minsky Moment by turning on the spicket and going to the Dumbo buy side. Now Minsky's monkey is on Uncle Sam's back.

The US government's "Minsky Moment", the point that it realises that it needs to dump assets, raise taxes and interest rates to survive, is going to be one big Kahuna.

Imagine Geithner and Bernanke having to go for an emergency meeting with the Central Politburo of the PRC to tell them the global economy is going to meltdown on Monday AM unless they pull out their wallet.

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