Tuesday, August 17, 2010

Pomo FMP's

This from Zero Hedge -- More bearishly than thou


The Tradition Of Mindless Stock Ramping On Fed POMO Days Is Back

Tyler Durden's picture




One of the most beloved phenomena of Fed intervention is the "miraculous" ramp in stocks on days in which the Fed's Permanent Open Market Operations (POMO) occurred: while this was a requisite in 2009 when the Fed monetized $700 billion in Treasurys, it had gradually disappeared from the public consciousness after the termination of the Treasury portion of QE1 in October 2009. Well, now that POMO is back courtesy of QE Lite, and with the help of various sellside analysts, Primary Dealers knew precisely which Treasury CUSIPs to purchase in advance of the auction for a quick leveraged pick up of a few hundred bps. And now that the money is funded back to the PDs, as of the end of the POMO operation at 11am Eastern, it needs to find a new home. And with the PDs providing the initial impetus for a risk asset (read stock) ramp, and momo quants picking up the sloppy seconds as they jump over each other to send the momentum driven ramp ever higher, the result is presented below.
What this means is that going forward, every single day that the Fed is monetizing bonds via 10:15-11:00am POMOs, it will be very foolhardy to short into the Fed's stock surging offensive. As a reminder, here are the immediately upcoming POMO days through the end of August: August 19, August 24, August 26, and September 1. Shorting on those days has once again become implicitly illegal.

5 comments:

  1. those guys crack me up. so what? I mean, what, they want the market to behave differently so they can find another conspiracy? and if they know this is the way things have been going, why don't they just point it out and trade the damn thing instead of sounded like arrogant scolds about it?

    at any rate, correlation does not mean causation. how much money do you think the conspiratistas at ZH make on trading? do they even trade?

    another big scoop from the zeroes. lol!!!

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  2. I know, I used to read them, but why spend all that energy on conspiracy? I do more than enough already....thats why I kind of think they are funny.

    That said....I think I will watch things on the 19th, 24th, and Sept 1. Todays ramp job was not, IMHO, just a bullish upwave.

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  3. It seems to follow a pattern - TPTB do something manipulative, ZH catches on after a couple weeks, it goes on for several more until ZH's hammering at it causes TPTB to stop or reverse course, wait a few weeks, rinse, repeat.

    They have no way out except to inflate, so they are finding new and creative ways to monetize.

    The thesis of inflation leading to deflation leading to higher inflation leading to deflation leading to REALLY HIGH INFLATION seems sound to me, personally.

    It's just a matter of figuring out where they are doing it, and getting off after they have to stop and find another place to pump.

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  4. OK I will bite, what is TPTB?!

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  5. Moo? How many proofs does one need to recognize that its not conspiracy? Its truth. Im sure many, perhaps even myself, recognize these free money days and do trade them. But what does that say for the whole process? Free Money Day? Since when? The helicopters are overhead, are you deaf?

    -The Bose Einstein Oracle.
    -There is no future if time does not exist.

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Insightful and Useful Comment!