Fed Launches the Most Fraudulent Scheme Yet

ksammut

Fed Launches the Most Fraudulent Scheme Yet

Love to hear everyone's thoughts.

jmski52

Just talking about this in the big thread...

to wit:

I'm not convinced. The nearest out-of-the-money June put option is $1.25, which implies a cost of 9% annually to protect a yield of just over 3%. It's possible that there are more put options than call options on this ETF simply because more investors expect the price to fall rather than rise.

If the cost is 9% annually to protect a yield of just over 3%, then why in the world would investors buy puts at such a premium if the Fed just got finished saying that rates are going to stay low for a long time?

It seems to me that manipulating the market wasn't good enough. Now they have to gamble (rather poorly), in an attempt to leverage up our taxpayer dollars in order to keep Treasuries looking viable. These guys are really nasty.

Gold looks good under these circumstances. The only thing that's changed is the order of magnitude. Isn't leveraged gambling on Treasuries a way of disguising hyperinflation?

JCMhouston

As a wise man once told me, "Don't fight the Fed".

pf70collector

What else can they do. Ultimately the Fed will become insolvent due to these schemes. It will not be an act of Congress that dissolves them. They will self destruct on their own.

derryb

<< <i>As a wise man once told me, "Don't fight the Fed". >>


Learn to profit from their effort to appease their masters.

Overdate

<< If the cost is 9% annually to protect a yield of just over 3%, then why in the world would investors buy puts at such a premium if the Fed just got finished saying that rates are going to stay low for a long time? >>

The Fed has less control over long-term rates than over short-term rates. Investors may be betting that long-term interest rates will rise despite the Fed's efforts, due to rising inflation and excessive money printing. There's also a small but real risk of treasury-bond default if Congress fails to raise the U.S. debt ceiling. Such a default would likely slam the price of t-bonds, generating big profits for holders of put options.

derryb

<< <i>Such a default would likely slam the price of t-bonds, generating big profits for holders of put options. >>


and holders of TBT.

JCMhouston

<< <i>Learn to profit from their effort to appease their masters. >>



Exactly right. You just need to guess what would be the best answer for the JP Morgue, that's what the Fed will do, then have a strategy to take advantage of it.

Don't bet everything on the 00 though, and don't get greedy. Sometimes when the JP Morgue finds the little people riding their coat tails too long they try to throw them off.

RedTiger

It is difficult to read the tea leaves on options transactions. Almost all big option transactions are hedged with other options, or futures, or the underlying. Newsletter guys rarely even consider that fact, and tend to interpretate the tea leaves incorrectly. Most readers don't know squat about options, only that they are "dangerous" so buy the loaf of baloney. A recent forum example was a big trade that crossed the tape for SLV puts, that many interpreted as a big bearish bet, but I thought was more likely part of a bullish overall strategy. A much older example was a big trade on SPY puts, that some thought was Bin Laden making a huge bearish bet. It turned out to be a floor firm doing an essentially risk-free swap to make a few basis points over Treasuries. The Bin Laden story was much more interesting but in that case it was totally and completely wrong.

Also keep in mind that QE2 is still underway. One way to bid on bonds would be to sell puts, and be willing to buy at those prices. The Fed has a lot of firepower. Given that it is 20-somethings doing the actual trading for the Fed desk, my guess is that they are not leveraging heavily like the opinion piece believes. AIG was using 30x leverage in derivatives and when the market moved against them, they lost multiples of what they put up. The Fed ending up bailing them out, so it would seem insane for young traders to be making similar trades, though who knows these days.

lonelyp

Pardon me if I get this all wrong.
I'm no accountant, and math was never my best subject.

When they did the big bank bailout all the "BAD DEBITS" where transfered to the US TREASURY.

Doesn't this make the US treasury both the creditor and debitor of these "bad debits?

And if so can't they be done away with with the stroke of a pen?

If this is NOT the case, Who is all this money owed to? If noone knows who the creditor is anymore because of all the banks fenageling. Untraceable, untrackable, unpayable, and therefor worthless NONDEBITS?

Sorry if I'm a complete BOOB.

jmski52

Only the losses got dumped on Treasury. The Treasury is not holding the winning side of those bets. The other side of those trades - the winning bets - were paid off to the ones who placed the bets and also - the ones who got free money from the government to cover the mismanagement losses for their negligence.

The fact is that "friends of Goldman and JPMorgue" were the winning side of those bets because they were given free money. Fannie and Freddie and GE Capital and GM and Wells Fargo and Citibank and AIG and WaMu - all got free money to replace the money they all ripped off from their shareholders via crappy management, golden parachuting and sleasy dealings.

So, the entire ledger doesn't reside at Treasury, only the heap of bogus bad debt. The free money went into pockets of the managements who stole and gambled their firm's assets away. The fact that Treasury creates more debt and the Fed continues to monetize it to pay the bills for these pampered antisocials only makes the whole situation worse and worse.

The government has seen fit to stick you with *all of the penalties* for things you never did, things you don't agree to, and things you don't even approve of. And it is only for the benefit of the big banks & their cronies in government.

pf70collector

You don't read much about the mafia today because they got smart and are running the big financial institutions now.

Bear

Now that the bankers have our money, I think we should offer

them free food and board..........................At Folsom Prison, for

either 100 years or the rest of their natural lives, which ever comes first.

It is the least we can do, for all that they did for us.

Bear

With the revolving door now occurring between government jobs and financial

corporations,we are no longer a Democracy, nor a Republic. Rather we have become

a corprotocracy.We are now a Government by the financial interests, of the financial interests

and most important , for the financial interests. Its is really quite simple once you see the light.

roadrunner

The Fed has less control over long-term rates than over short-term rates. Investors may be betting that long-term interest rates will rise despite the Fed's efforts, due to rising inflation and excessive money printing.

The top 25 US banks carrying $200 TRILL in otc interest rate swaps is what gives the FED/Treasury control over the longer rates as well. This number is still growing by about
$10-$15 TRILL per year.

Fannie and Freddie are the new all purpose junk yards for all the bad assets that the FED/Treasury can pick up and pawn off to the American taxpayers. The cap is unlimited until
2012. So you can be sure a lot of unwanted/unsaleable but "valuable" assets marked 100% to model will be deposited for our benefits.

roadrunner

derryb

<< <i>You don't read much about the mafia today because they got smart and are running the big financial institutions now. >>



And government

lonelyp

<< <i>Now that the bankers have our money, I think we should offer

them free food and board..........................At Folsom Prison, for

either 100 years or the rest of their natural lives, which ever comes first.

It is the least we can do, for all that they did for us. >>



Why do you want to feed them? Possibly for years and years.

NAIL EM UP I SAY! NAIL SOME SENCE INTO EM.
(Monty Python, but I kinda agree).


PS.
You've got to admit this country is in a right bloody mess.