On Thursday, Federal Reserve banksters announced another intervention in a series of market manipulations. The functioning of the markets have long been in the ICU, but now they’ve been euthanized.
Guggenheim’s Scott Minerd declared exactly what the Fed has done with its actions: “The Fed has made it clear that it will not tolerate prudent and responsible investing.”
Even the Wall Street Journal’s editorial board was forced to weigh in on this one: The Fed is “putting Wall Street ahead of companies across middle America” and it’s “protecting Wall Street first.”
Although many market analysts are appalled, I am not seeing too much about the ultimate end of the line and downgrades of U.S. Treasury credit and the U.S. dollar. There is an assumption that borrowing of trillions in deficits and backstops can be financed at sub 1 percent rates.
Another $2.3 trillion will be allocated to lard up on debt carcasses strewn across the land, namely new Special Purpose Vehicles to buy $500 billion of municipal bonds. It will also expand existing SPVs. There’s even a special program to buy junk bonds downgraded after March 22, the so-called “fallen angels.” It will buy junk bond ETFs (such as HYG), and small business PPP and CARES loans.
As these are non-recourse, in reality the Fed is taking no risk. It provides the financing. The Treasury (taxpayer or, more accurately, future generations saddled with debt via SPVs) will backstop all losses. If you are not up to snuff on how this works, a read of “Extra $2 Trillion Looted from Public Coffers to Replenish US Treasury’s Murky Exchange Stabilization Fund” is critical.
The Fed is just providing the financing for Treasury Secretary Mnuchin and Trumpenstein’s Rolodex (contact list). This is a defacto nationalization of a large swath of the financial “markets” based on no actual price discovery.
You see, the overriding issues is that there is a real non-cartoon world economy out there that that won’t be cured by a pump and dump.
There’s a bacon glut and a chicken wing glut
You have your mission…now execute it…. https://t.co/Il7uBJzwC1
— Michael Antonelli (@BullandBaird) April 9, 2020
For further reading:
For example, here’s the data for trading in the junk bonds of Ford. Do you not think some cronies in the corrupto Rolodex were tipped off on this pump-and-dump operation? When the Treasury enters this position at 80 (as the funds exit), and then the bonds crater to a more natural level, it is the American people who will take the loss. Classic example of privatizing gains and socializing losses.
As the Big D Depression unfolds, Fed machinations and front running are creating the most overvalued stock market ever. And this is before earnings are properly adjusted downward. We will get a taste of how unforgiving the Wall Street algos will be on earnings disasters soon enough.
Mnunchin himself chimed in on the lock down, stating he was hopeful it would be wrapped up by the end of May. That should be about right to finish phase one of the looting.
MNUCHIN: POSSIBLE U.S. ECONOMY COULD REOPEN BY END OF MAY, TOP 1% COULD OWN 99% OF EVERYTHING BY JUNE -AP
— Rudy Havenstein, making spirits bright. (@RudyHavenstein) April 9, 2020
Late May is six weeks from now. Two weeks ago, there was a record 3.3 million initial unemployment claims. Last week, there was an additional (upwardly revised) 6.875 million in initial claims. This week, another 6.606 million claims. That’s 16,781,000 claims, or 10 percent of the U.S. work force.
When the Society for Human Research Management surveyed American workers between March 12 and 16, they found that 60 percent of respondents would not be able to meet their basic financial needs, if we had a month or less of quarantine. Some are in even worse shape than that. One in five people said they would not be able to afford their rent, groceries and essential bills, like water and electricity, after a mere week of quarantine.
Last month, the Disaster Distress Helpline at the Substance Abuse and Mental Health Services Administration (SAMHSA) saw an 891% increase in call volume compared to March 2019, according to a spokesman for the agency, which is part of the Department of Health and Human Services.
Wait until full-tilt Weimar kicks in. The Trojan Horse operation will be complete.
According to a report cited by the Wall Street Journal, just 69% of tenants paid any rent between April 1 and 5.
The National Multifamily Housing Council data comes from 13.4 million rental apartments analyzed by several real-estate data firms, including RealPage, Yardi and Entrata. The properties included are considered investment grade with a tenant base that may skew higher-income than the median renter.
The total number of loans in mortgage forbearance grew to 2.66% as of April 1; just one month ago, on March 2, the rate was 0.25%, or a 1,064% increase in just one month.
For loans backed by Ginnie Mae, which serves low- and moderate-income borrowers, the surge was much greater, with total loans in forbearance soaring to 4.25% from 0.19% one month ago.
Over the past two years, Ginnie Mae has guaranteed $583 billion of 30-year mortgages with FICO scores below 715, according to data compiled by Bloomberg. These will become more losses, and the U.S. Treasury will take the hit. Separately, the Federal Reserve holds a large portfolio of these securities.
The largest bank, JP Morgan, announced that when it comes to small business it would only make PPP business loans. As a reminder, there is one way that PPP loans are unique: They are guaranteed by the Treasury, which means that JPMorgan carries absolutely no risk when it issues the loan.
Worst case, the loan defaults and the bank issues a refund request to Uncle Sam, which then quickly makes JPM whole. Privatized gains, socialized losses. Get use to this in the American death spiral.
But there are other loans that flooded the system and are still flooding the system. They don’t have a government guarantee. They only have a loan-to-value. If the value of the underlying assets is virtually nil — as would be the case in a depression — it would mean a wave of defaults.
If indeed it is the case that JP Morgan is stepping away from the non-government backstopped lender market, expect all other banks to soon do the same. Other big and not-so-big U.S. banks — such as BofA, Citi and Wells Fargo — to follow just as quietly in JPM’s footsteps and halt loans to all small business across America due to fears of a default tsunami.
There’s a new Twitter feed on the site, on the posts pages. Start following us there as we will tweet details and events during these tumultuous times, especially when there’s far too much to cover in mere posts and stories curated from the Web. Twitter also allows for capsulized comments and retweets of other’s worthwhile commentary, which is now more necessary.