Monday, March 12, 2007

Asia is all green . Europe is a sea of red . I am biased to the short side unless we break last weeks highs on strong volume. There is still a lot of concern about the subprime mess .

3 comments:

65Trader said...

IM,
What are your thoughts on the PPT at work last week?

IM said...

The PPT were apparently hitting the snooze alarm on Tuesday Feb 27.
Last week they were probably shorting yen to save the 'carry trade' :)

The Fed went to work last week and injected the market with liquidity via the big broker dealers. There was a good article about this somewhere. I need to go dig it up. Liquidity is the name of the game here. Where we go from here depends on how much easy cash is available.

IM said...

Ah. Found it !

http://etf.seekingalpha.com/article/29112

"The Fed has been conducting one-day repurchase agreements ["repos" or short-term loans] for much of the past week in amounts ranging from $4-7 billion. These funds are bid for by the primary dealer network, and recently have been done beneath the Fed Funds rate.

A pretty good deal for the borrowers, right?

Sometimes repos aren't even repaid, and when that happens money is created out of thin air. [Think money supply growth.]

The primary dealers will use the money as they see fit, but may route much of it to their trading desks to play trade with.

Today's 14-day $15 billion repo gives the dealers two weeks ["your tax dollars at work"] to "use" that money. If the money should wind-up at trading desks you can rest assured program trading, "this machine starts automatically," will be the result. Or, the funds could help cover some subprime lending problems which we featured in a Bloomberg article yesterday."