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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: jimmg who wrote (76674)	12/26/2006 6:28:27 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

<stock market goes up because the Fed does a coupon pass.> I certainly have never claimed that the market goes up because of "a" (one) coupon pass, although there sure is a pattern. I do believe clusters or rapid sequences of passes combined with FCB purchases of $5-10 billion in a week exerts a real pricing distorting influence on financial markets. In otherwords if over a year you combine $45 billion in coupon passes with $300 billion in FCB purchases (almost all housing agencies and TIPS) that is NOT a casual relationship at all. Further as these are official purchases, and not private, it creates an added element of more moral hazard that emboldens Pig Men and Riskloves. If this pattern is so post hoc, let's see what would happen if CB did nothing, zip for two weeks? Or how about a reverse coupon pass? Volcker did that a lot, this bunch has never done one. Answer if they did: markets would wilt.