Once More For Emphasis: SOMEONE INVENTED A MONEY MACHINE
by ilene - May 18th, 2010 11:27 am
Once More For Emphasis: SOMEONE INVENTED A MONEY MACHINE
Courtesy of Joshua M Brown, The Reformed Broker
I don’t know what it takes to get people’s attention these days. Peel your eyes away from the latest episode of Glee and drop the spork you’re using to shovel artificial mashed potatoes into your face for just one moment.
Is everyone following? OK, read this, please:
The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said.
That gem appeared in a New York Times article about high frequency trading. The article came out on May 16th and no one is talking about it. Nobody seems to think that the invention of a machine that has made its owner a profit EVERY SINGLE TRADING DAY FOR FOUR YEARS is such a big deal.
Have you all Green Mountain Coffee’d yourselves into a zombie trance? Well?
An automatic money machine. Seriously. Plug it in, maintain the gears and software and voila! Money.
There isn’t any stock research or economic musing going on. According to the article, the automatic money machine’s operators don’t even know what the stocks are that it’s trading. Again – the machine almost can’t lose money because it’s holding stocks for an average of 11 seconds.…
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Treasury to Resume the Monetization of the Fed’s Balance Sheet to Support the Wall Street Banks
by ilene - February 23rd, 2010 4:56 pm
Treasury to Resume the Monetization of the Fed’s Balance Sheet to Support the Wall Street Banks
Courtesy of JESSE’S CAFÉ AMÉRICAIN
This Treasury Supplemental Financing Program is designed to provide public funds for the Fed’s efforts to purchase and then liquidate toxic assets and derivatives from the financial sector, effectively absorbing their losses and monetizing them.
The Treasury creates new notes and sells them on the open market. The money obtained in these sales is deposited at an account at the Federal Reserve. The Federal Reserve uses this money to purchase toxic assets from the banks at its own discretion and pricing, subject to little oversight and market discipline.
Senator Chris Dodd said "the Fed could become an ‘effective Resolution Trust Corporation,’ purchasing and ultimately disposing of depreciated assets.
It looks very much like a stealth bailout. It is even more of a scandal because of the Fed’s resistance to any disclosures on the principles and specifics by which they are allocating taxpayer money.
Where this gets even more interesting is that the Fed in turn is buying Treasury debt after issuance through its primary dealers, debt that was issued by the Treasury to provide funds to the Fed.
Even more than a stealth bailout, this is starting to smell like ‘a money machine.’ Money machines are what Bernanke euphemistically called ‘a printing press.’ What is odious about this particular printing press is that the output is being given directly to a few big banks by a private organization which they own.
I believe that it is still illegal, by the letter of the statutes, for the Fed to directly purchase Treasury paper. But in this case, the Fed is buying Treasury paper with money supplied by the Treasury. Since the paper is passing through the marketplace, and the Primary Dealers are taking their commissions, it may be in conformance with the letter of the law. But it looks like it violates the spirit of the law.
And given that in many cases the Primary Dealers are the principal beneficiaries of the subsidy programs, selling their toxic debt to the Fed at non-market prices, this starts to appear like a right proper daisy chain of self-dealing and fraud.
As you can see from the background information below, this is a ‘temporary’ program from 2008 that the Treasury keeps promising to ‘wind down.’
This is not a resolution trust by…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site