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 .
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3 comments:

Matt said...

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

6:54 AM
TheCapitalGame 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.

2:03 PM
TheCapitalGame 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."

3:08 PM

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