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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (8554)	12/12/2007 8:57:43 AM
From: John Pitera	Read Replies (2) \| Respond to of 33421

Hello Bob, Auctioning off collateral that is marked to model changes it to mark to market. It allows a real time valuation vs some killing for a few hedge funds to land on. Market auctions are a brilliant and very " American way" to do it. Simply brilliant would be my first comment. Let's just get market values and transparency those observations are music to my ears, I'm still reading up on precisely what they are doing. Their was a fair bit of talk on Kudlow's panel with Steve Forbes initiating the discussion of floating the Fed Funds rate until the Commercial Paper Market and Libor came down from these extremely high spreads ( that are in fact back to the levels of Mid August at the Peak of the First big round of the Credit Meltdown of 2007.) I'd like to see exactly how this New Fed trading facility works. Art Cashin's comment from this morning. If the Market does not like what it sees when it opens this latest gift box from the FED, we may have to put Santa's picture on the side of the Milk Carton.

To: robert b furman who wrote (8554)	12/12/2007 9:26:33 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

The key question this raising is how will the market interpret the bidding at the first auction if it is 4 times oversubscribed, in terms of bids and non competitive bids.... what happens if you get 80 billion in bids or 115 billion bided for. Does that rattle the market if we hear that there are really big amounts out there, on the other hand, the FED could turn around and Expand the size of the Auction. Point Number 2: If I were on some of these trading desks I would be working to get some trading activity going and to get the prices these securities moving higher in price so that OIS rates ((established at the overnight indexed swap (OIS) rate corresponding to the maturity of the credit being auctioned.)) are higher in price and lower in yield when I look to submit this stuff as collatorate to borrow against at the TAF Term Auction Facility. wow 30 basis point rally in the 2 Year note in half and hour this morning. John

To: robert b furman who wrote (8554)	12/12/2007 12:49:05 PM
From: ahhaha	Read Replies (1) \| Respond to of 33421

It is a free pass to not keep required reserves in the fed's system ie create inflation. Nonsensical and false. This is a NO NO to the highest order for the fed. What is "this"? A pointer to itself? Auctioning off collateral that is marked to model changes it to mark to market. There is no auctioning of collateral. One must post appropriate collateral in order to get the kind of money that others will accept. Otherwise they(open market) will give you 10 cents on the dollar if you try to post your collateral for some rationalization why you shouldn't be closed down. It allows a real time valuation vs some killing for a few hedge funds to land on. The "others" I mentioned above aren't hedge funds. It's C, or MER or WM, ...presumably solid banks and institutions, for it is they who hold the final liability for the stuck, no market, RE oriented quasi loans.