I am pretty sure... All sorts of repo (old and double-old 2s, as well as 3s and double-old 3s) was trading very negative yesterday, as well as some short bills. We'll see what happens today. I could be wrong, of course, but I don't think I am. EDIT: Actually, there's one other thing going on, which is the maturation of the SFP bills. 35bn so far and counting. It may have something to do with the softness of FF effective, but, in my view, it should also be transitory.
As to the various discussions of bubble criteria, I have achieved my purpose. Specifically, I wanted to show just how difficult it is to actually agree on what constitutes a bubble. There's so many different questionable assumptions people make. Even using the chart attached below (time series of monthly Dow since 1945) and assuming the stock mkt trend growth indicated by the red line (assumes no significant productivity improvements since arnd 1985), we're not really overvalued by a lot. Problem, of course, is that by the time overvaluation is significant, you're in a bubble and it's too late. All these things make bubble detection rather tricky, in my view.
How are you tracking this?I'm looking at the Fed balance sheet and as of sep 24 the SFP was still at $199b, unchanged w-w
I follow these things. You can see the repayment schedule here, among other places (scroll down): http://www.morganstanley.com/views/gef/archive/2009/20090924-Thu.html The maturity would probably settle T+1 , so you should be able to see the impact from the 25th onwards.
"The prospective decline in Treasury bill supply has triggered a rally in the bill market" maybe this is affecting the fed funds market
I daresay bills and GC trading negative is a bit more than a "rally in the bill mkt". So I still think it's mostly quarter-end.
It's certainly diffficult to AGREE on what constitutes a bubble but for some it's not so difficult to identify a bubble, the reason it's "difficult to identify " for the Fed and Wall St folks is because a bubble is a golden goose for the financial sector and for politicians who get to ride it and enjoy its associated apparent prosperity. Nobopdy wants to end it, it's too good for business. Actually a bubble should not be defined by valuation standards but by crowd behaviour, keeping in mind that this will not pinpoint the top more accurately than valuation measures. I thought the Fed had integrated behavioral finance in its economic analysis but apparently not . For ex., back in 2007, everybody kept saying valuations were OK, or even cheap, stocks thus had further to go. Certainly valuatiosn were not overly stretched such as in 2000. Yet there was the mother of all asset bubbles all over the world, the world was in a gigantic bubble and if you wre a chartist , you could have lived like a hermit not talking to any of those caught up in a mania and still realize there was a bubble. That bubble has not gone away, I say we are in a big pullback phase, then a second wave will come later, could be months ahead or it could be 2-3 years or even more but we are still in a deflating bubble, that the Fed is trying to reflate, but the problem is that as in 2002, the reflation if succesful will only serve the elite again , and raise raw material prices and gas prices while jobs won't come back .
Totally agree. 'Bubbles are lovely!' is a line that a UK central banker used once and it's absolutely true. I am not sure I agree with this. The reason to use valuations/prices is simply that they're actual tangible numbers. How do you propose to define and quantify 'crowd behaviour'? Use investor sentiment polls?
Jef Lacker from the Fed just said that as the Fed liquidity facilities expire but the purchases keep it up, reserves will rise and this 'will keep downward pressure in yields of assets that are similar' like bills, or something to that effect. So the SFP and all the QE might drive down the EFF for a while. Do you have the todays EFF?
I have a better idea. End the Fed. The problem is the Fed. Research the federal reserve. Act of 1913, it's time for congress to take back control of our money supply. JFK was killed because of executive order 11110 which he printed Notes: and was going to End the Fed. Wake up, please.