Thursday, January 14, 2010

Mystery Buyer!

Greetings good citizen,

I’m an hour ahead of market close and at last glance the US markets are, er, ‘out-performing’ our Western Hemisphere, er, ‘peers’.

I once again ditched a MSM story for ‘more reliable’ source to use as tonight’s offering

By way of comparison, the title of tonight’s article isn’t even ‘newsworthy’ as far as the MSM is concerned. They want you to keep believing that our creditors are tripping over themselves to buy up our, er, ‘recycled’ debt.

Um, there should be no irony lost on the fact that there are news stories which directly contradict that particular meme. China is buying up commodities like there was no tomorrow AND they just slammed the brakes down on their internal ‘stimulus spending program’.

In another ‘interesting development’ it seems retailers ‘overbought’…but the fucktards on Wall Street choose to view this as ‘confidence’ in the consumer rather than what it really is… an expensive fuck up that somebody’s bound to get canned for!

Without further adieu, let us proceed with tonight’s offering:

[Purloined from: Jesse’s Crossroads Café]

Who Is the ‘One Big Bidder’ For US Treasuries?

There are a number of possibilities for the identity of the non-primary dealer domestic source of enormous purchases at the longer end of the yield curve in recent US Treasury auctions.

It could be a misclassification, a branch of a bank representing a foreign power. The problem with this theory is that they have a particular reluctance to buy the long end of the curve.

It also could be a legitimate domestic purchaser like a pension fund compelled to match duration of obligations, as is required by a little noted ruling of the US government a couple of years ago. They might be shifting out of other long term instruments with similar durations but more risk.

And of course, it might very well be the Federal Reserve Bank, or the Treasury via the Exchange Stabilization Fund.

It could also be the one big bidder who comes in with some regularity and smashes down the price of precious metals with the obvious intent of manipulating the market like clockwork just after the PM fix in London.

It might even be the big bidder who stands ready to buy the SP futures market at every turn, maintaining a floor on the market and a steady drift higher in prices with no change in fundamental underpinnings. Their hand in the market is apparent.

It is less probable, given the state of market manipulation by a few big proprietary trading desks riding another wave of cheap Fed money, but it might even be the party that entered the US equity market yesterday at 12:03 PM with a HUGE order (228,000 contracts) to buy the SP futures. As Larry Levin noted, "As of now I don't have a firm answer, but whether it was HFT activity, the "Helicopter," or a massive cross trade, it sure set the bottom in for the afternoon. Everyone in the Dow, Nasdaq, and S&P pits were talking about it and nobody was willing to sell into that massive bid." And so the market rallied once again into its current peak.

As the article from the Financial Times indicates, it might never be possible to find out who this is, unless there is an audit of the market that is made public. As Edmund Burke noted, "Fraud is the Minister of Injustice" and it is my experience that opacity is the accomplice of fraud.

If this is price manipulation, no matter the intentions or beneficiaries, it is likely that it is mispricing risk in a big way, and will eventually will fail, and that its failure will cause a great deal of pain in the real economy for innocent bystanders, and will end in tears. And when that time comes, expect those who created the crisis to make you another offer that they think you cannot refuse.

You decide what is most likely, and what needs to be done about it, if anything. More than a few people are wondering at the lack of response from the people in various nations, particularly in the UK and the US.

Here is some old knowledge that might prove illuminating.

National Madness
Gilbert Keith Chesterton 1910

"This slow and awful self-hypnotism of error is a process that can occur not only with individuals, but also with whole societies. It is hard to pick out and prove; that is why it is hard to cure. But this mental degeneration may be brought to one test, which I truly believe to be a real test.

A nation is not going mad when it does extravagant things, so long as it does them in an extravagant spirit. But whenever we see things done wildly, but taken tamely, then the State is growing insane...

For madness is a passive as well as an active state: it is a paralysis, a refusal of the nerves to respond to the normal stimuli, as well as an unnatural stimulation. There are commonwealths, plainly to be distinguished here and there in history, which pass from prosperity to squalor or from glory to insignificance, or from freedom to slavery, not only in silence, but with serenity."

And in this slow descent into madness, the worst is yet to come.

Gegner here: I’m sure most of you will draw the correct meaning from the above passage, but paranoid types like myself fear you’ll miss the deeper message. Those who fail to realize that nobody is waiting to rescue us will be caught ‘unprepared’ for what will prove to be a very, er, ‘violent collapse’.

Which is to say that the people who are supposed to ‘warn us’ are in on the crime…that’s where the ‘surprise’ will come from.

Back to our article:

Financial Times
Direct bids for US Treasury notes lead to speculation over buyer
By Michael Mackenzie in New York
January 14 2010 02:00

Auctions of US Treasury notes this week have attracted extremely strong buying from domestic institutional investors, fuelling speculation that "one big bidder" has decided to defy the conventional wisdom on Wall Street that US government debt is due for a fall.

Yesterday, direct bids accounted for 17 per cent of the sales of $21bn in 10-year Treasury notes, far higher than the recent average of 7.4 per cent. It was the highest percentage of direct bids in a 10-year Treasury auction since May 2005.

On Tuesday, direct bids accounted for a record 23.4 per cent of the bidding for $40bn in three-year notes, up from an average direct bid of 6 per cent.

Market participants say the unusually high level of direct bidding suggests that a large investor is looking to accumulate Treasuries without alerting the primary dealers on Wall Street to its intentions.

"It appears to us that someone is trying to hide their apparent interest in owning these auctions from the rest of the market," said David Ader, strategist at CRT Capital.

Rick Klingman, managing director at BNP Paribas, said: "It is unusual to see such a spike in the direct bid and I would imagine it is one big bidder. There is no way we will find out who it is, not now, or ever." [How convenient…]

The surge in direct bidding is particularly notable because it comes after predictions that the record levels of Treasury debt issuance would exhaust investor demand, driving yields higher.

Among the most high-profile warnings came from Pimco, manager of the largest bond fund, which raised concerns about the escalating supply of US Treasury debt.

Attention will now focus on whether there is similar direct demand for today's $13bn 30-year bond sale.

The 10-year notes were sold at a yield of 3.754 per cent yesterday, the highest rate awarded for a note sale since June, when they were issued at 3.99 per cent. At the start of the year the yield on 10-year notes briefly traded at 3.90 per cent, as many investors talked down the prospects for Treasuries. The note traded at about 3.70 per cent earlier this week and was at 3.70 per cent late yesterday.

Under the three main classifications of buyers in Treasury debt sales, direct bidders are generally domestic non-primary dealer banks and large institutional investors. Normally their presence at Treasury auctions is small, as they usually buy debt through the primary dealer network, which currently numbers 18 banks and broker/dealers.

Posted by Jesse at 10:02 AM

What do you think good citizen? Who do you suppose our ‘mystery buyer’ of US debt is if it isn’t the Chinese? Understand that even the wealthiest individuals wouldn’t risk putting that much of their personal wealth in one basket. Government debt may be the safest but history is full of governments that no longer exist.

And given the actions of what passes for our current government, I’d say their days are numbered too.

Which brings us to the most disturbing aspect of our times…has our government AND the media been captured by the few who control the multi-national corporations?

You can’t believe the news and those poor slobs have to do what they’re told if they want to see their next paycheck, so how ‘free’ are they to report the truth?

There’s your answer, they aren’t…and neither are you.

Leaves you without any decent options, doesn’t it? You either listen to nutjobs like myself who are, er, guessing at what’s going down or you listen to bought and paid for shills who can’t tell you the truth because their superiors don’t want you to know.

How’s that for a fine kettle of fish?

Thanks for letting me inside your head,


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