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Reply #91: What Does the Fed Know That We Donít? [View All]

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Demeter Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-01-11 12:32 PM
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91. What Does the Fed Know That We Donít?
http://www.zerohedge.com/contributed/what-does-fed-know...


The thought that should be on every investorís mind today is ďWhy did the Fed have to stage the coordinated intervention yesterday?í Put another way, what exactly does the Fed know that we donít?...The whole thing smells fishy to me. Aside from the fact that the Fed clearly leaked its intentions as early as Monday night (hence the reason stocks rallied while credit markets weakened), thereís something peculiar about the fact the Fed chose to do this at the end of November. Why November 30? Why not today or Tuesday? I think the answer is that the Fed stepped in to help its institutional investor/ hedge fund buddies. November was a horrible month for this crowd. And with Bank of America approaching $5 per share (a level which would require many institutions to liquidate due to regulations), the Fed was also helping out its favorite insolvent bank as well.

Aside from this, Europe was approaching the End Game. Germany wonít permit the ECB to print nor to issue Euro-bonds. The EFSF plan was dead before arrival, failing to even stage a 3 billion Euro bond auction without having to step in and buy the bonds itself. And the IMF wasnít going to be an option either...Put another way, ALL other bailout options had failed for Europe. The Fed was the lender/ intervener of last resort. That alone should have everyone worried as it indicates just how dire things had become in Europe. However, thereís something far more worrisome about the Fedís move which is that: IT SOLVES NOTHING.

Europe is facing a solvency crisis. Lowering the cost of borrowing Dollars does absolutely ZERO to help European banks raise capital. All it does is provide even more easy creditÖ which of course is the entire problem to begin with...Banks across Europe are leveraged at an average of 26 to 1. This means that they own 2,600 times more assets (read: loans made to consumers, businesses, etc) than they do equity. At these leverage levels, if the assets fall even 4% in value, youíve wiped out ALL equity, rendering the bank bankrupt. In this situation, providing more liquidity to these banks helps in terms of short-term operations, but it does nothing to address the core issue which is too little capital and too much leverage. So this move, as dramatic as it was for the stock market has done NOTHING to solve Europe's solvency crisis. Indeed, we have reports that a large European bank was on the verge of collapse last night. Things are so bad that Germany has drawn up legislation to allow countries to leave the Euro while remaining in the EU.

I believe Germany itself will be using this option in the next few weeks as it realizes that it cannot and will not be able to prop up the Euro any longer (even Germany doesn't have the 1 TRILLION Euros' in capital that European banks need). So do not be fooled. The Fed's move today didn't fix anything. At most its bought the markets a few weeks' time before the whole mess comes crashing down...Neither math nor common sense indicate that this will turn out well. Indeed, when this mess finally comes undone, itís going to make Lehman look like a joke. Weíre now talking about entire countries collapsing, not just private institutions.
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  -STOCK MARKET WATCH, Thursday, December 1, 2011 Pale Blue Dot  Dec-01-11 05:52 AM   #0 
  - Today's Reports  Pale Blue Dot   Dec-01-11 05:53 AM   #1 
  - Unemployment Higher than Expected, Imagine that!  Demeter   Dec-01-11 08:31 AM   #44 
  - Oh, noes!  hamerfan   Dec-01-11 01:42 PM   #104 
  - Beige Book Shows Stronger Growth, but Europe a Major Threat  Demeter   Dec-01-11 08:52 AM   #52 
  - Have We Turned The Corner on Jobs?  Demeter   Dec-01-11 08:54 AM   #53 
  - U.S. Economy Barely Moving Amid Creeping Disinflation, Beige Book Shows  Demeter   Dec-01-11 08:56 AM   #54 
  - Oil rises to near $101 amid global stocks rally  Pale Blue Dot   Dec-01-11 05:53 AM   #2 
  - U.S. Futures Decline; S&P May Snap 3-Day Gain  Pale Blue Dot   Dec-01-11 05:54 AM   #3 
  - 400 Dow Points Arenít What They Used To Be...  rfranklin   Dec-01-11 06:05 AM   #4 
  - Central Banks Treat Fever - Not Bank Disease  DemReadingDU   Dec-01-11 07:17 AM   #12 
     - Fed leads central banks in effort to ease funding woes  Demeter   Dec-01-11 08:20 AM   #40 
        - Commodities Rise to Two-Week High as Fed, Central Banks Boost Liquidity  Demeter   Dec-01-11 08:58 AM   #55 
  - Good morning.  Tansy_Gold   Dec-01-11 06:27 AM   #5 
  - morning miss tansy! nt  xchrom   Dec-01-11 06:48 AM   #6 
  - i'm heading into a different kind of insanity in 48hrs  Roland99   Dec-01-11 06:49 AM   #7 
     - Best wishes to you both! May you find a bit of sanity, safety and security together  Demeter   Dec-01-11 07:21 AM   #13 
     - Congratulations!  DemReadingDU   Dec-01-11 07:35 AM   #16 
     - Wishing you both many fine days together. Being in love is a good thing. eom.  Hotler   Dec-01-11 07:42 AM   #20 
     - that is so sweet! congratulations!  xchrom   Dec-01-11 07:58 AM   #28 
     - Congrats....  AnneD   Dec-01-11 08:33 AM   #45 
     - Congrats to you and your future spouse, Roland99.  Hugin   Dec-01-11 09:09 AM   #60 
     - **Thanks everyone!!**  Roland99   Dec-01-11 11:43 AM   #86 
     - Congratulations  DoBotherMe   Dec-01-11 11:51 AM   #87 
     - Best wishes! n/t  westerebus   Dec-01-11 04:47 PM   #111 
  - europe: Spanish, French Bonds Climb After Auctions; Euro Strengthens  xchrom   Dec-01-11 06:57 AM   #8 
  - European shares turn negative in choppy trade  xchrom   Dec-01-11 07:37 AM   #17 
  - ECB hints at action if euro zone adopts fiscal pact  xchrom   Dec-01-11 07:39 AM   #19 
  - The dash for cash Europeís troubled banks are running out of money  xchrom   Dec-01-11 08:02 AM   #30 
  - Did we not just read that American banks were so stuffed with cash  dixiegrrrrl   Dec-01-11 08:38 AM   #46 
     - All that money stuffed into US banks is Capital in Flight from Europe  Demeter   Dec-01-11 08:40 AM   #48 
     - as someone raised in the 50s -- nothing about modern finance & banking makes  xchrom   Dec-01-11 09:06 AM   #59 
        - It's All FRAUD, is What it is  Demeter   Dec-01-11 09:14 AM   #63 
           - +1  xchrom   Dec-01-11 09:26 AM   #67 
           - +++  DemReadingDU   Dec-01-11 09:42 AM   #76 
  - Moscow issues Trans-Caspian Project warning  xchrom   Dec-01-11 08:05 AM   #32 
  - Resource wars getting serious, as predicted.  dixiegrrrrl   Dec-01-11 10:19 AM   #80 
  - Finance Ministers Agree to EU Debt Guarantees  Demeter   Dec-01-11 09:05 AM   #58 
     - Banks row hampers EU bid to halt credit freeze  Demeter   Dec-01-11 09:09 AM   #61 
     - EU Ministers Back National Bank Guarantees With Common Rules  Demeter   Dec-01-11 09:13 AM   #62 
        - Obamaís morbid fear of EU meltdown  Demeter   Dec-01-11 09:35 AM   #73 
           - The Never-Ending Eurofiasco By Mike Whitney  Demeter   Dec-01-11 11:07 AM   #83 
           - Yves Smith Snipes:  Demeter   Dec-01-11 12:35 PM   #92 
     - Does Anybody Who Gets It Believe Central Banks Did All That Much Yesterday?  Demeter   Dec-01-11 12:52 PM   #99 
  - Cotton Crop Reaching Record Makes Goldman Bearish: Commodities  xchrom   Dec-01-11 06:59 AM   #9 
  - U.S. Bank Funds Wonít Cover MF Global Shortfall, Trustee Says  xchrom   Dec-01-11 07:01 AM   #10 
  - A Hole TOO Big to Fill In  Demeter   Dec-01-11 07:22 AM   #14 
     - I suggest we start filling it with  Tansy_Gold   Dec-01-11 08:14 AM   #37 
        - Is He a Big Enough Man for the Job?  Demeter   Dec-01-11 08:22 AM   #41 
           - He may or may not be, but we won't know until we actually see him there. n/t  Tansy_Gold   Dec-01-11 09:40 AM   #75 
  - Forget Job Creators: The Best Stimulus Is For Shoppers  xchrom   Dec-01-11 07:14 AM   #11 
  - The payroll tax thingy scares the bejeebers out of me  Tansy_Gold   Dec-01-11 07:38 AM   #18 
  - Sing it loud sister. I'm right there with you. eom.  Hotler   Dec-01-11 07:48 AM   #23 
  - And so am I - every word (n/t)  bread_and_roses   Dec-01-11 10:31 AM   #82 
  - Did I Say That?  Demeter   Dec-01-11 07:59 AM   #29 
  - Yes, you did.  Tansy_Gold   Dec-01-11 08:12 AM   #35 
     - That was the purpose of Money  Demeter   Dec-01-11 08:26 AM   #42 
  - Seems like a stealth way to dismantle social security  DemReadingDU   Dec-01-11 08:11 AM   #34 
  - Absolutely.  Tansy_Gold   Dec-01-11 08:13 AM   #36 
  - I am resigned to NO SS for people in their 30/40's.....I fear it will not be there  dixiegrrrrl   Dec-01-11 09:03 AM   #57 
  - Do people think we will continue to receive those SS checks?  DemReadingDU   Dec-01-11 10:03 AM   #78 
     - I have been preparing for the worse since 2007.  dixiegrrrrl   Dec-01-11 10:18 AM   #79 
     - me too, n/t  DemReadingDU   Dec-01-11 03:22 PM   #110 
     - His Discussion of Derivatives is Enlightening and Chilling at the Same time  Demeter   Dec-01-11 11:26 AM   #84 
        - And then, there's the Bibical Jubilee  Demeter   Dec-01-11 11:29 AM   #85 
        - Ilargi has interesting perspective over at TAE  DemReadingDU   Dec-01-11 03:22 PM   #109 
  - yeah...I like the extra money but I'd rather SS be fully funded on its own  Roland99   Dec-01-11 12:04 PM   #89 
     - my opinion  wordpix   Dec-01-11 01:59 PM   #105 
  - This is a tax-scam shell game.  Loge23   Dec-01-11 08:20 AM   #39 
  - +1 n/t  Hotler   Dec-01-11 02:02 PM   #107 
  - Robbing Peter to pay Paul.  westerebus   Dec-01-11 08:29 AM   #43 
  - asia: Nikkei surges as central banks' move calms jitters  xchrom   Dec-01-11 07:35 AM   #15 
  - China's manufacturing activity falls to a 32-month low  xchrom   Dec-01-11 07:52 AM   #24 
  - Asian markets up on central banks' move to help lending  xchrom   Dec-01-11 07:53 AM   #25 
  - U.S. Ratchets Up Economic Pressure on Iran By Barbara Slavin  Demeter   Dec-01-11 07:42 AM   #21 
  - The Obama Predicament-and the Final Option! Rev. Richard Skaff  Demeter   Dec-01-11 07:45 AM   #22 
  - Low-intensity? Asia Times is interesting...  Ghost Dog   Dec-01-11 01:15 PM   #101 
  - It's so fucked up. eom.  Hotler   Dec-01-11 02:17 PM   #108 
  - Wells Fargo is an ADMITTED money laundering concern.!  dixiegrrrrl   Dec-01-11 09:16 AM   #64 
     - Not even gonna prosecute or break them up  Demeter   Dec-01-11 09:18 AM   #66 
  - south asia: India traders strike against retail reform moves  xchrom   Dec-01-11 07:55 AM   #26 
  - India Transparency International corruption index blow  xchrom   Dec-01-11 07:57 AM   #27 
  - Food inflation rises to 8%  xchrom   Dec-01-11 08:09 AM   #33 
  - Sensex rallies 360 pts on positive global cues  xchrom   Dec-01-11 08:49 AM   #49 
  - Latin American Poverty Levels Fall To Lowest in Two Decades, UN Report Finds  Demeter   Dec-01-11 08:03 AM   #31 
  - Morning Marketeers....  AnneD   Dec-01-11 08:19 AM   #38 
  - Our water is so hard, I'd have to go liquid  Demeter   Dec-01-11 08:38 AM   #47 
  - Just look it up on You Tube.....  AnneD   Dec-01-11 08:50 AM   #51 
  - Making soap!  Juneboarder   Dec-01-11 12:02 PM   #88 
     - It is so easy as to be sinful....  AnneD   Dec-01-11 01:28 PM   #103 
  - Global Capital Descends on Berlin Tech Scene  Demeter   Dec-01-11 08:49 AM   #50 
  - S&P downgrades hit bank funding, counterparty cost  Demeter   Dec-01-11 08:59 AM   #56 
  - Bank of America stock ( BAC) down again today.  dixiegrrrrl   Dec-01-11 09:34 AM   #72 
  - BofA, Goldman Sachs, Citigroup Credit Ratings Cut by S&P  Demeter   Dec-01-11 01:10 PM   #100 
  - Somewhere in the past few days, I've picked up a virus  Demeter   Dec-01-11 09:17 AM   #65 
  - I had one that laid me out all of last week.  Fuddnik   Dec-01-11 09:53 AM   #77 
  - A Banker Speaks, With Regret By NICHOLAS D. KRISTOF  Demeter   Dec-01-11 09:27 AM   #68 
  - Unwittingly, we actually made out good on the mortgage loan game.  dixiegrrrrl   Dec-01-11 10:28 AM   #81 
  - Former Award Winning Chase Banker Describes Predatory Mortgage Lending Practices  Demeter   Dec-01-11 12:50 PM   #98 
  - Congress push to relax US securities laws  Demeter   Dec-01-11 09:30 AM   #69 
  - Yves Smith Opines:  Demeter   Dec-01-11 12:37 PM   #93 
  - US faces pension bill for AMR restructure  Demeter   Dec-01-11 09:30 AM   #70 
  - Buffett makes headlines as he buys local paper  Demeter   Dec-01-11 09:31 AM   #71 
  - FT investigation: A realm fit for a tsar  Demeter   Dec-01-11 09:37 AM   #74 
  - Fed saves Europe's banks as ECB stands pat MUST READ  Demeter   Dec-01-11 12:26 PM   #90 
  - What Does the Fed Know That We Donít?  Demeter   Dec-01-11 12:32 PM   #91 
  - Foreclosure fraud whistleblower found dead  Demeter   Dec-01-11 12:42 PM   #94 
  - Economy is So Good People are Living in Cars  Demeter   Dec-01-11 12:44 PM   #95 
     - Millions of people to become expendable next year  Demeter   Dec-01-11 12:47 PM   #96 
     - Is a Universal Social Net Good Macro Economics?  Demeter   Dec-01-11 12:49 PM   #97 
     - "superfluous people" ...  AnneD   Dec-01-11 02:00 PM   #106 
     - "here in my car. I feel safest of all."  Roland99   Dec-01-11 01:22 PM   #102 
 

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