Meaning of the Federal Reserve's intent to "unload their balance sheet"

[Dachsie]

unloading means selling off, getting rid of their ownership.

still not clear who is going to buy in this selling off.

If you read between the lines here, Mannarino, is saying people who own bonds and T bills are screwed, and interest rates of sales of new bonds will be even lower than they are on existing bonds. We're talking all kinds of bonds, even municipal bonds that the Lefities and Blue mayor theives love so much. The chances of people who have purchased bonds ever getting their principle paid back to them at the end of the instrument's term is basically nill.

This also means the Federal Reserve is taking the money and running now on all those rotten mortgage backed securities they bought to bail out the banksters, and then the Fed will have popped the real estate / mortage bubble and people will be thrown out on the streets again just like in 2008, and 1987/88 etc.

Batten down the hatches matey, there's a blow a comin!


https://www.youtube.com/watch?v=_aoanW8uoos

[cheka.]

if that's what he said, he's a moron. lower yields = rising prices. people could sell for profit if new-issue bonds are selling for higher prices/lower yields

also, fed doesnt have to do anything with the toxics they bought. they can sell/hold/burn/smoke em if they want. the outrage is that they have the legal authority to buy the shit in the first place. note that the price they paid was often double or triple the market price. goldman bought a bunch of it for 30 cents, then frbny bought the crap from goldman for 100 cents. outrageous

[Ares]

still not clear who is going to buy in this selling off.

You are, the ever forgiving, loyal and loving taxpayer.

[Dachsie]

"if that's what he said, he's a moron. lower yields = rising prices. people could sell for profit if new-issue bonds are selling for higher prices/lower yields"

It does not work that way for bonds, the "debt market" and I believe he stated that in this video.

[cheka.]

"if that's what he said, he's a moron. lower yields = rising prices. people could sell for profit if new-issue bonds are selling for higher prices/lower yields"

It does not work that way for bonds, the "debt market" and I believe he stated that in this video.

that's the way it works for bonds. i'll listen to the video when i get time, to understand his point

[old steel]

Who is going to buy the Fed?


https://pbs.twimg.com/card_img/851824550413205504/X7vQlli4?format=jpg&name=600x314

[Dachsie]

Manarino is not a moron. I have heard several financial money commentators say the same thing about the debt market, bonds and Tbills. Martin Armstrong is one and he's not a moron either. People are going to get out of bonds and the only place to go will be the stock market so he thinks, at least in the short term, we can see the stock market go up.
People will not buy in to the debt market at any price and those holding debt will be out of luck. good bye nest egg.

There are numerous videos on YouTube explaining this by professor types.

[Joshua01]

I'd rather carpet bomb the bastards actually!
You are, the ever forgiving, loyal and loving taxpayer.

[old steel]

A micro-preview for those who think they can buy protection once they spot trouble. Good luck... Once the risks are obvious, its too late.


https://pbs.twimg.com/media/C9JEmPdXgAAHcWE.jpg

[cheka.]

Manarino is not a moron. I have heard several financial money commentators say the same thing about the debt market, bonds and Tbills. Martin Armstrong is one and he's not a moron either. People are going to get out of bonds and the only place to go will be the stock market so he thinks, at least in the short term, we can see the stock market go up.
People will not buy in to the debt market at any price and those holding debt will be out of luck. good bye nest egg.

There are numerous videos on YouTube explaining this by professor types.

moron might be strong. ignorant beginner better for you?

i watched the video -

everybody with half a brain knows that people run to treasury bonds and gold during stock market, credit (non treasury) market turmoil. his epiphany is the first layer of ignorance being peeled back. common knowledge -

he has yet to figure out that a plunging stock market is what will drive people into US treasury bonds (but not corporate, nor junk corporates - they will go down with stock market). this will drive up prices of treasury bonds (and yields down). so people holding treasury bonds will be able to sell them at profit...and if he's right by calling for PLUNGING - the sellers of treasury bonds could DOUBLE their money

so he should have said the fed is portending a stock market correction or crash -- as they prepare to sell their treasury bonds into the feeding frenzy. but he should NOT claim fed will sell their mbs into same frenzy. they'll be losing their asses on that trade -- they will lose value alongside stocks

this is why the old axiom of holding stocks and bonds (treasury) for diversity. when stocks fall, bonds go up (which drives yields down)

[Joshua01]

If it ain't bought by now it may already be too late
A micro-preview for those who think they can buy protection once they spot trouble. Good luck... Once the risks are obvious, its too late.


https://pbs.twimg.com/media/C9JEmPdXgAAHcWE.jpg

[old steel]

As long as there is no more escalation in the war rhetoric i smell another big smack down coming.

[Dachsie]

No, ignorant is not better for me because both men have almost a stellar track record. At one time I could explain this but right now I just can't, but I appreciate lively rebuttal and will throw in a few random comments here.. Maybe someone with economics degrees here can explain it better. I find this subject interesting but get frustrated with commentators I listen to not explaining this in good old corn bread English. I am of such low income status that stock market and capital gains and taxes is of zero concern to me.

" plunging stock market is what will drive people into US treasury bonds"

just the opposite.

The stock market will drive people out of debt market as the only place they can be driven, i.e., there is nowhere else to park money. Does not make much difference whether stock market going up and down because bond market is in certain death spiral.

"this will drive up prices of treasury bonds (and yields down)"

The "price" of a treasury bond IS the yield, i.e. yield rate. Some countries will be selling "negative rate bonds" and maybe US too. That is default plain and simple.

"the sellers of treasury bonds could DOUBLE their money"

In this case the buyers may well be the sellers and even if we say the taxpayers are the buyers and the losers, the sellers being the Federal Reserve, the Federal Reserve IS one and the same as the big Wall Street banks, and the Federal reserve just seizes opportunities to "take real profits and run" and the Federal Reserve never risks any losses because they print the money out of nothing.

[cheka.]

No, ignorant is not better for me because both men have almost a stellar track record. At one time I could explain this but right now I just can't, but I appreciate lively rebuttal and will throw in a few random comments here.. Maybe someone with economics degrees here can explain it better. I find this subject interesting but get frustrated with commentators I listen to not explaining this in good old corn bread English. I am of such low income status that stock market and capital gains and taxes is of zero concern to me.

" plunging stock market is what will drive people into US treasury bonds"

just the opposite.

The stock market will drive people out of debt market as the only place they can be driven, i.e., there is nowhere else to park money. Does not make much difference whether stock market going up and down because bond market is in certain death spiral. SEE 2008 FOR PROOF - STOCKS CRASHED - PEOPLE SCARED, ONLY TWO ASSETS WERE POSITIVE FOR THE YEAR - 1. TREASUREY BONDS 2. GOLD.....OTHER BONDS WERE NOT TREATED SAME, ESP JUNK BONDS AND PREFERRED STOCKS (JUNK BONDS BY ANOTHER NAME). YOUR BOY IS RIGHT IF THIS HAPPENS AGAIN. HE JUST DOESN'T KNOW/DOESN'T STATE THAT STOCK OR FINANCE INDUSTRY TROUBLES WILL BE WHAT MAKES IT HAPPEN.

"this will drive up prices of treasury bonds (and yields down)"

The "price" of a treasury bond IS the yield, i.e. yield rate. Some countries will be selling "negative rate bonds" and maybe US too. That is default plain and simple. EXACTLY WRONG. BONDS DO HAVE PRICES. AS THEIR PRICE RISES THE YIELD DROPS. RISING PRICES = RISING DEMAND

"the sellers of treasury bonds could DOUBLE their money"

In this case the buyers may well be the sellers and even if we say the taxpayers are the buyers and the losers, the sellers being the Federal Reserve, the Federal Reserve IS one and the same as the big Wall Street banks, and the Federal reserve just seizes opportunities to "take real profits and run" and the Federal Reserve never risks any losses because they print the money out of nothing. YOU BUY A BOND FOR $100 THAT YIELDS 2%. IF YIELDS FALL TO 1% YOU CAN SELL YOUR BOND FOR $200. YOU JUST DOUBLED YOUR MONEY. THIS IS WHAT DRIVES A LOT OF BOND VOLUME - PEOPLE SPECULATING ON THE PRICE.

dachs, I appreciate you working to learn this stuff. not many do. i'll embed comments above -

[Dachsie]

"YOU BUY A BOND FOR $100 THAT YIELDS 2%. IF YIELDS FALL TO 1% YOU CAN SELL YOUR BOND FOR $200. YOU JUST DOUBLED YOUR MONEY. THIS IS WHAT DRIVES A LOT OF BOND VOLUME - PEOPLE SPECULATING ON THE PRICE."

Won't debate this anymore because as I said, I just lack depth of knowledge about this but would say...

please double check your math on the above statement.

"The "price" of a treasury bond IS the yield, i.e. yield rate. Some countries will be selling "negative rate bonds" and maybe US too. That is default plain and simple. EXACTLY WRONG. BONDS DO HAVE PRICES. AS THEIR PRICE RISES THE YIELD DROPS. RISING PRICES = RISING DEMAND
"
I do not think you have clearly explained your defintion of a bond's price.

2008 was a very different situation than today.

The kind of people who "invest" in bonds and Tbills historically were people who needed a safe haven for their money that would yield CERTAIN, though modest returns compared to the stock market which most acknowledge is simply a big crap shoot.

The certainty of getting at least your initial "investment" back because the government has "taxing authority" and therefore the government will always have the money to pay back investors is no more. The "full faith and credit of the United States government" is no more. It is a thing of the past.

[Horn]

Whatever they do, it is my thinking that higher level banking sharks in "emerging markets" (by selection) are going to start trembling.

Those guys dont have nearly the room to inflate currency the way the Fed does.

At the same time they are pushing them to take large denominatiins off the street...

If they are not a part of the IN crowd they will be dead cold.

[cheka.]

"YOU BUY A BOND FOR $100 THAT YIELDS 2%. IF YIELDS FALL TO 1% YOU CAN SELL YOUR BOND FOR $200. YOU JUST DOUBLED YOUR MONEY. THIS IS WHAT DRIVES A LOT OF BOND VOLUME - PEOPLE SPECULATING ON THE PRICE."

Won't debate this anymore because as I said, I just lack depth of knowledge about this but would say...

please double check your math on the above statement.

"The "price" of a treasury bond IS the yield, i.e. yield rate. Some countries will be selling "negative rate bonds" and maybe US too. That is default plain and simple. EXACTLY WRONG. BONDS DO HAVE PRICES. AS THEIR PRICE RISES THE YIELD DROPS. RISING PRICES = RISING DEMAND
"
I do not think you have clearly explained your defintion of a bond's price.

2008 was a very different situation than today.

The kind of people who "invest" in bonds and Tbills historically were people who needed a safe haven for their money that would yield CERTAIN, though modest returns compared to the stock market which most acknowledge is simply a big crap shoot.

The certainty of getting at least your initial "investment" back because the government has "taxing authority" and therefore the government will always have the money to pay back investors is no more. The "full faith and credit of the United States government" is no more. It is a thing of the past.

simple example:

US treasury issues 10 year bond for $100 face value yielding 2%. they pick 2% because this is what other existing US treasury 10 year bonds in the market are trading at when this new bond is issued. you buy the bond for $100.

the price of your bond will fluctuate in correlation with the price that people are willing to pay for that stream of interest payments. if there is increase in demand to buy that stream of interest payments, the price of your bond will rise.

so let's say there's a derivative implosion (again). people will be selling risky debt instruments and buying bonds like the one you hold. they may even pay $200 for your bond. if they do, they can expect to receive 1% interest on their $200. because they paid twice as much as you did for the same interest payments. you doubled your money. buy price $100, sell price $200

================================================== ============

as for the 'kind of people' that invest in gov bonds....

today, most are what they call institutional investors (term used VERY loosely for everything nyc financial/casino related)

[Dachsie]

"so let's say there's a derivative implosion (again). people will be selling risky debt instruments and buying bonds like the one you hold. they may even pay $200 for your bond. if they do, they can expect to receive 1% interest on their $200. because they paid twice as much as you did for the same interest payments. you doubled your money. buy price $100, sell price $200."

No, the buyer will only ever receive 2% on the bond face value, $100.

The smallest T bill is $10,000 and there are varying terms starting at 10 years and going up to 30 year bonds and maybe longer.

Many retirees buy T bills because they want a SECURE investment and just want to live off of interest. The security factor of buying a government bond is what is at stake now. Our government is 20 trillion in debt that will never be paid so many are realizing there is not much "full faith and credit there." The low interest rates on bonds does not really even maintain and preserve principle. Inflation erodes principle and so do fees charged by brokers.

Institutional investors like big pension funds have to earn at least 7 or 8 % on their investments to remain actuarially sound and be termed "fully funded", that is, being able to meet their obligations to their annuitants. Pension funds don't want their money sitting in cash or government bonds anymore because those rates of return have been falling so low for a long time so they have moved to more risky investments promising the kinds of returns they need but there are rules on what they can invest in and what they cannot invest in. The "blue chip" stocks of the stock market seem to be best chance for profitable investment, at least for now anyway.

[cheka.]

dachs, I'm going to have to ask for help.....anybody out there to explain it a different way?

maybe this will help, here is quote showing that the price of the bond (aka 10 yr note) is 100 5/32, up 3/32 on the day:

http://quotes.wsj.com/bond/BX/TMUBMUSD10Y


Price

$100 5/32

3/32 (0.09%)

that is the price that you would have to pay to get the FIXED stream of interest payments. the interest payments are fixed, the price floats. how much are buyers willing to pay for those interest payments? that is the price