Posted on 07/08/2010 8:51:43 AM PDT by TigerLikesRooster
This has been going on for years. It’s not surprising. When I was on the trading floor, those orders were called good till close, then it’s cancelled. The specialist at one point could freeze the book and the order could not cancel, unfortunately the sec disallowed freezing the order. Now the orders pop in and out. Technology sometimes gets abused, we are stuck with it.
How much can this really effect the market at any time?
Can this cause wild fluctuations? or is it more just aggregate?
Without for one moment trying to sound like I have any call to tell you or anyone else what to do wrt investing....
I believe that it is de facto impossible to be a prudent investor in today’s stock market. Not because of intervention, and not because of high-frequency or other computer-driven trading.
I believe that it is impossible to make the case that one can be long this market because:
1: Because the normal requirement for mark to market accounting on the part of the banks has been eliminated. This overarching change in accounting rules is beyond dramatic. The class of banks above the regionals but below the “gods” (GS & JPM) would be flat out insolvent if their bad loans were brought onto their books. I mean, implode right now, today. Wells Fargo has bad debts on their books (partly from their own operations and partly from their takeover of Wachovia) about ten times their market capitalization!
One day, on a day nobody can predict, this might matter. What do you think would happen on that day if WFC, BAC, GE (Capital) and 30% of GS and JPM just kind of vaporize? My view is that it would be kind of like that “flash crash” we had 5-6 weeks ago except *there would be no snapback* on the back end. Given the pure mathematics that a loss of X% must be made up by a gain of 2X% in order to break even, I don’t consider the LT stock market (long) investing environment to be favorable.
2: The SEC’s monitoring and prosecuting activity is simply nonexistent. There is in effect no regulatory authority being exerted over the markets. None, zero. And the banks know this.
So I just don’t think one can be a complacent long. Trade all you want.
I'm asking for affirmative proof.
Namely some documented evidence that there is such a program.
Surely you realize how ridiculous it is to state that there is "no question" that a conspiracy exists when there is not a shred of hard evidence to back up the claim?
I doubt I would be able to transcend or penetrate the same rules that would apply to your or my or anyone else’s stock brokerage account.
Certain private operators with far smaller books and fewer employees could not manage to control information leakage on market-rigging schemes for very long without being caught dead to rights.
The case of Brian Hunter springs to mind.
Quite simply, this alleged activity has been going on far too long, with too many folks directly involved and involving far too many counterparties to plausibly be a secret.
Yet no one - in a scheme that spans decades, which would require enormous amounts of internal records, and which has involved thousands of individuals directly - has ever come forward to expose it?
Really?
Works for a different brokerage now - one which apparently does not let him represent them on television.
It’s almost like a game to these hedge funds. The market went down last week and up this week. The news is the same. While they are playing, they put phony orders on the book to shake out sellers or buyers. There is no policing by the sec. It’s a sad state.
That’s a shame. So many here took him so seriously.
Tarp and stimulus money in the market perhaps ???
And I am asking you to name, specify, delineate precisely what pieces of evidence would satisfy your notion of proof. I can tell you in advance, I will not be able to supply a paper trade confirmation from the CME with Tim Geithner's or Hank Paulsen's or Alan Greenspan's name nor fingerprint residue.
Surely you realize how ridiculous it is to state that there is "no question" that a conspiracy exists when there is not a shred of hard evidence to back up the claim?
I don't consider that ridiculous especially considering I didn't call it a conspiracy. Surely you realize that the transcripts of FOMC meetings are sealed, by practice, for 3 weeks, and in some cases for years after they occur? We have no way of knowing what goes on in those meetings or if they are edited. The Fed has already violated its charter to the tune of trillions of dollars by buying unsecured debt, an act as contrary to the black letter law of its charter as it's possible to be.
Certain private operators with far smaller books and fewer employees could not manage to control information leakage on market-rigging schemes for very long without being caught dead to rights.
That line of reasoning escapes me. It is not the size of the book, it is the number of people involved and the "effect" they are trying to "cause". An individual broker or firm would "probably" have demonstratable confirms on both sides of a transaction; the buy, the sell. But not necessarily; they could buy the SPX and execute a hedge> sell on the e-minis. The Fed may not need to do so at all. If the Fed were to decide to intervene, it could be Timmy calling GS to pre-arrange them taking a big fat long off his hands (no record) moving his mouse (no record) buying the SPX futures (no obtainable record) and selling same (no obtainable record.
Quite simply, this alleged activity has been going on far too long, with too many folks directly involved and involving far too many counterparties to plausibly be a secret.
You are disparaging my lack of evidence by your characterization of how implausible the situation seems to you. You want my hard documentation against your "impression", and I think that's a lopsided request. Apart from a trade confirmation signed by Turbo Timmy, I'm just asking you to name the type of thing you are looking for. A letter on FRBNY letterhead? A copy of a FAX from Geithner to the CME? What? Just state what would constitute the evidence you're looking for. We have already seen and heard Ben Bernanke refuse to release the names of any bank or banks who utilizes the discount window, for fear that disclosing such info could start a run on any so-named bank. That's practically a quote from BB. A bank or other entity using the discount window is an event that I would guess occurs 100x as often as the PPT operates, maybe 300x. In 2009, we saw the Tsy, through the Fed, issue then repo bonds bearing the same CUSIP numbers in very rapid succession in transactions that absolutely reek of monetization, while Bernanke was literally on the witness stand stating that no such monetization was occurring or would occur. In 2008 we saw FNM and FRE paper that states on its face, on page 1, that the debt of FNm/FRE is explicitly NOT the debt of the US gov't converted explicitly to US gov't guaranteed debt.
We have seen the Fed undertake extraordinary actions, for example Maiden Lane I and 2, which would appear to permanently park hundreds of billions of dollars in rotten debt somewhere who knows where, maybe in some bank in the Bahamas, I don't know. NOBODY DOES except for a very few officers at the very top of Tsy and the Fed. That being my point.
Yet no one - in a scheme that spans decades, which would require enormous amounts of internal records, and which has involved thousands of individuals directly - has ever come forward to expose it?
Since Reagan explicitly and inarguably brought the PPT into existence as "the Working Group on Financial Markets" post 1987 I don't think it involves more than 200 people, all of whom are Fed governor level or higher. And it's not an ongoing scheme, at least as I conceive it. It is an impulsive activity in response to paniced market conditions that is unwound over time using proxies such as the primary dealer network and perhaps foreign banks. Or both.
Huh? Where is this charter, specifically the part that says they can't buy "unsecured debt"? Thanks.
Is Treasury debt "secured"?
(above refers to the trash purchased and stuffed into Maiden Lane 1 and 2)
http://www.federalreserve.gov/aboutthefed/section1.htm
(above is text of the Federal Reserve Act, starting from page 1)
I am trying to find the specific text in the FRA which prohibits the Fed from buying anything but direct obligations of the US gov’t. These regulations were summarily ignored during the collapse of Lehman and Bear, and the crap they bought was for the most part stuffed into ML 1 and 2.
http://www.newyorkfed.org/markets/maidenlane.html
As you might imagine, it is buried pretty deep. If you read language of the FRA, you’ll see that *anything* (meaning any kind of debt) the Fed buys that is not a direct obligation of the gov’t MUST be discounted, and heavily. (You’ll recall the payout on AIG’s debt to GS was not discounted despite its troubled [to put it mildly] status. The cash from that operation came from the Fed accepting AIG paper at par) And, that characteristic of said debt is reiterated at practically every mention. IOW, every time “it” (the buying of debt, whether a loan or by virtue of accepting it as collateral to infuse cash into a member bank or a regional bank or a private company is mentioned, there is always...”...as long as the collateral accepted is a direct obligation of the US gov’t.” That characteristic of any collateral is endlessly repeated throughout the charter.
In “exigent circumstances” the Fed is allowed to accept “investment grade” securities as collateal, but they are clearly bending the rules twice to 1: accept dogdoo and then 2: not discount it.
The characteristics of exactly what the Fed can “buy” or “accept as collateral for a loan” are detailed in sec 13 and 14 of the FRA.
http://www.federalreserve.gov/aboutthefed/section13.htm
http://www.federalreserve.gov/aboutthefed/section14.htm
I am a little tired to sort this out at the moment. In *rare* cases, the Fed can accept “investment grade” securities as collateral for lending operations. I do *not* believe the Fed can *buy* such debt.
On Thursday Sept 15, 2008 at roughly 11 AM The Federal Reserve noticed a tremendous draw down of money market accounts in the USA to the tune of $550 Billion dollars in a matter of an hour or two. Money was being removed electronically.
The Treasury tried to help, opened their window and pumped in $150 Billion but quickly realized they could not stem the tide. We were having an electronic run on the banks. So they decided to closed down the accounts.
Had they not closed down the accounts they estimated that by 2 PM that afternoon. Within 3 hours. $5.5 Trillion would have been withdrawn and the entire economy of the United States would have collapsed, and within 24 hours the world economy would have collapsed.
The above confuses taxpayers with the Fed. Kinda silly mistake.
I am trying to find the specific text in the FRA which prohibits the Fed from buying anything but direct obligations of the US gov’t
So we're off the secured claim?
*anything* (meaning any kind of debt) the Fed buys that is not a direct obligation of the gov’t MUST be discounted, and heavily.
I don't think that's what they mean when they're talking about discounts.
(You’ll recall the payout on AIG’s debt to GS was not discounted despite its troubled
Yeah, AIG paid what they owed. That's not the Fed.
The cash from that operation came from the Fed accepting AIG paper at par)
What AIG paper did the Fed accept at par?
(above refers to the trash purchased and stuffed into Maiden Lane 1 and 2)
The above confuses taxpayers with the Fed. Kinda silly mistake.
Oh, oh, OK. The Fed buys, then hands off to the Treasury. I feel much better.
I am trying to find the specific text in the FRA which prohibits the Fed from buying anything but direct obligations of the US gov’t
So we’re off the secured claim?
I never used the word “secured”. Where did you read that in anything I posted? You introduced the term. I spoke of “investment grade” debt and direct US gov’t obligations.
*anything* (meaning any kind of debt) the Fed buys that is not a direct obligation of the gov’t MUST be discounted, and heavily.
I don’t think that’s what they mean when they’re talking about discounts.
It is exactly precisely what they mean by “discount”.
(You’ll recall the payout on AIG’s debt to GS was not discounted despite its troubled
Yeah, AIG paid what they owed. That’s not the Fed.
You are being deliberately obstreperous. The Fed accepted AIG debt, debt which AIG owed to GS under terms of the CDO AIG sold to GS, at par. AIG owed it to GS because the conditions embodied in said CDO occurred, meaning AIG owed GS the money or some part of it. They lost their bet. The house burned down. AIG, the insurer, was compelled to pay. That debt, given that AIG was insolvent, was not payable in cash that AIG did not have. The Fed accepted that debt as “collateral” and made AIG’s payment to GS good at par. If the payment made to GS on behalf of AIG is not a loan, and there is no indication that it is, then the Fed “bought” it, a prohibited transaction. The use of the term “collateral” is essentially a deception on the part of the Fed. All these “borrowings” or “advances” have gone well past 90 days.
The cash from that operation came from the Fed accepting AIG paper at par)
What AIG paper did the Fed accept at par?
Hey, I thought you never mentioned secured? LOL!
Nope. And a Fed purchase doesn't make taxpayers the owners and doesn't put taxpayers on the hook.
I don’t think that’s what they mean when they’re talking about discounts.
It is exactly precisely what they mean by “discount”.
No. When the Fed buys something, they're buying it at the market price. If that price is less than par, that's the only discount involved. They don't get a discount below the market price. Sorry.
The Fed accepted AIG debt, debt which AIG owed to GS
The Fed did not take the liability from AIG to pay GS.
debt which AIG owed to GS under terms of the CDO AIG sold to GS
AIG did not sell a CDO to GS.
The Fed accepted that debt as “collateral”
How is money AIG owes to GS "collateral"?
How would the Fed know if money is being added to or subtracted from money market accounts? And an hour or two? LOL! Such precision.
The Treasury tried to help, opened their window
The Treasury has no window.
and pumped in $150 Billion
Or $150 billion sitting around to pump out the imaginary window.
We were having an electronic run on the banks.
Banks? I thought we were talking about money market accounts?
So they decided to closed down the accounts.
The Treasury decided to close down what accounts? On what authority?
Had they not closed down the accounts they estimated that by 2 PM that afternoon. Within 3 hours. $5.5 Trillion would have been withdrawn
On the average day in 2008, $1.664 trillion was wired thru the Fed system. Why doesn't the economy collapse because of that?
People keep repeating Kanjorski's story, but I've never seen any independent verification. It does make a scary story.
And I guess wires are different than "recalling Treasury securities"?
If the PPT means that the Fed, or some other entity, enters the market at very rare and crucial moments of definitive panic and terror that could cause major financial instability (as may only occur maybe once, maybe twice, a decade) I believe in it absolutely. It, in one instance in the 90’s, saved everything for my family. There was no other explanation for what the market did that day.
From your Maiden Lane link....
On December 12, 2008, ML II LLC purchased RMBS with an estimated fair value of approximately $20.8 billion, determined as of October 31, 2008, (Asset Portfolio). ML II LLC financed this purchase by borrowing $19.5 billion (Senior Loan) from the New York Fed. The Senior Loan proceeds, after adjustments (totaling $0.3 billion between October 31, 2008, and December 31, 2008) including principal and interest payments received by the AIG Subsidiaries on the RMBS, were used to purchase the $20.8 billion Asset Portfolio. In addition to receiving the cash purchase price on the closing date, AIG Subsidiaries received a contingent right to collect the deferred portion of the total purchase price of $1.0 billion (Fixed Deferred Purchase Price) plus a one-sixth participation in the residual portfolio cash flow, if any, each following ML II LLC’s repayment of the Senior Loan and accrued interest thereon to the New York Fed.
As of October 31, 2008, the Asset Portfolio had a par value of approximately $39.3 billion.
$20.8 billion paid for $39.3 billion par value. About 53% of par. Not even close to your claim.
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