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Controlling The Implosion Of The Biggest Bond Bubble In History

Sunday, June 23, 2013 - 4:01 PM
In theory, the Fed could continue to print money and buy Treasuries and mortgage-backed securities, or even pure junk, at the current rate of $85 billion a month until the bitter end.

But the bitter end would be unpleasant even for those that the Fed represents – and now they’re speaking up publicly.

“Savers have paid a huge price in this recovery,” was how Wells Fargo CEO John Stumpf phrased it on Thursday – a sudden flash of empathy, after nearly five years of Fed policies that pushed interest rates on savings accounts and CDs below inflation, a form of soft confiscation, of which he and his TBTF bank were prime beneficiaries.

Controlling The Implosion Of The Biggest Bond Bubble In History - Business Insider
9
ShorebreakShorebreak2,602 posts since
Apr 6, 2010
Rep Points: 14,087
1. Sunday, June 23, 2013 - 4:15 PM
"As stocks were heading south, three hours before what might have been a very ugly Friday close, after Thursday’s plunge, Jon Hilsenrath was dispatched. He is considered a backchannel mouthpiece of the Fed, and markets feed on his morsels. “The markets might be misreading the Federal Reserve’s messages,” he wrote in the Wall Street Journal. Stocks turned around on a dime. Others chimed in. The cacophony grew. And any consensus of when the Fed might actually taper its bond purchases dissolved into hot air."

This sounded like "manufactured" stock market gain.  There will be instability in the market at least till the end of the year.  Hang on to your hat and your asset.  It may be a wild ride ahead.
2
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,425
2. Sunday, June 23, 2013 - 4:33 PM
As was stated in the article:

"That’s the plan. To accomplish its goal of preventing, as Haldane called it, “a disorderly reversion” of yields, the Fed will redouble its efforts to spread dissension and uncertainty, to intersperse periods of misery with periods of false hope, to stretch out the process over years so that big players have time to reposition themselves – and make some money doing it, or fall off the cliff and get bailed out, while others will end up holding the bag. Which is how bubbles end."
4
ShorebreakShorebreak2,602 posts since
Apr 6, 2010
Rep Points: 14,087
3. Sunday, June 23, 2013 - 7:31 PM
The real question is whether the economy has actually reovered; I personally do not think so.

So, assuming the QE adjustment factor to stock market is a net zero (i.e., over-reacting market with the calming Fed. balance themselves off), the ultimate market will follow the economic trend downward.
2
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,425
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