The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who wrote (25807)	2/3/2005 12:28:21 PM
From: ild	Read Replies (2) of 110194

From today's CI: As we have said many a time, Greenspan has been cushioning the Fed Funds rate increases with very heavy doses of liquidity injections (repo market and coupon pass activity, as well as Treasury activity as of late). We believe this is creating unintended consequences. His “measured approach” (of which the Fed really has no other choice given the extent of leverage in the system), coupled with the backdoor liquidity, is allowing his buddies playing the carry trade to continue partying. The distortion in foreign buying of US financial assets is simply fanning the flames. For now, the leveraged carry trade crowd isn’t even blinking. After all, telegraph operator Al is at the wheel. But it’s probably a good bet that a few folks are blinking – shareholders of Countrywide, Fannie, and the banks who lost a billion and a half in interest rate derivative transactions in 3Q of last year. What other unintended consequences of the new period of liquidity and yield curve “distortion” lie around the corner? Don’t blink.

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