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It's a monumental and precedent setting event. It's probably the first time the Fed has done anything like this in terms of taking in securities that have such tenuous valuations like MBS. MBS issued by Ginnie Mae's and Fannie Mae's are trading for something like 70 cents on the dollar or worse.
Quite bizarrely, the current pricing model for these securities is guaranteed to generate declining prices. Apparently, a prepayment (that is a mortgage holder refinancing at a lower rate) causes the securities to decline in value. Equally, a default would also cause the securities to also decline in value. This logically contradictory as a prepayment is the inverse of a foreclosure, and means that the loan is being paid back 100 cents on the dollar. In the current environment of mass hysteria, it looks like the Fed has found that there is a extraordinary logical error in the models for valuing these securities and what should be interpreted as a sign of health (prepayment signifying the ability of the mortgage holder to pay the loan in full) has the same impact as a foreclosure. This is probably the main reason why the Fed has chosen to act now.
But it is truly extraordinary is that they are willing to take unlimited amounts of it. The headlines actually understate what the Fed is willing to do. It should read more like:
"Fed to auction AT LEAST $200 billion dollars per month."
The Fed will not actually do this for very long because, the Fed's willingness to act will cause various parties to become more rational and start to bid for these securities in the credit market,
which in turn will move the stocks associated with these securities. Since psychology, not real financial distress is the issue at present,
this could represent the turning point for this crisis.
The financial press is clueless. Generally, I wouldn't trust them to dig out the critical news that mattered if it were to be stuck on their heads. Today's (meaning Saturday) news reporting is an excellent example of why the financial press is deserving of its dumb and stupid tag. Unquestionably, the most important story for financial markets to come out on Friday is this story which is buried somewhere fairly deep in the WSJ and nowhere to be seen in the NY Times but does get some billing in the Washington Post Business section.
Below references the Bloomberg story (link below)
"The Federal Reserve moved to add as much as $200 billion to the banking system over the next month to offset a deepening credit crisis that may have already pushed the U.S. economy into a recession.
The central bank raised to $50 billion each from $30 billion the amount intended for auctions of funds on March 10 and March 24. The Fed also said in a statement in Washington today that it will make
$100 billion available through weekly 28-day repurchase agreements, where the central bank will lend cash in return for assets including mortgage-backed bonds."
http://www.bloomberg.com/apps/news?pid=n...
It's an extraordinary announcement. It's even more extraordinary when you go to the Federal Reserve website and read the full press release
which says:
http://www.federalreserve.gov/newsevents...
First, the amounts outstanding in the Term Auction Facility (TAF) will be increased to $100 billion. The auctions on March 10 and March 24 each will be increased to $50 billion--an increase of $20 billion from the amounts that were announced for these auctions on February 29. The Federal Reserve will increase these auction sizes further if
conditions warrant. To provide increased certainty to market participants, the Federal Reserve will continue to conduct TAF auctions for at least the next six months unless evolving market conditions clearly indicate that such auctions are no longer
necessary.
Second, beginning today, the Federal Reserve will initiate a series of term repurchase transactions that are expected to cumulate to $100 billion. These transactions will be conducted as 28-day term repurchase (RP) agreements in which primary dealers may elect to deliver as collateral any of the types of securities--Treasury, agency debt, or agency mortgage-backed securities--that are eligible as collateral in conventional open market operations. As with the TAF auction sizes, the Federal Reserve will increase the sizes of these term repo operations if conditions warrant.
Critical are the statements in the first paragraph that "The Federal Reserve will increase these auction sizes further if conditions warrant" and then in the second paragraph they state that they will accept an extraordinary variety of debt, including critically "mortgage backed securities" as collateral with no limit as to how much they will accept" given that they state "the Federal
Reserve will increase the sizes of these term repo operations if conditions warrant."
Looks like the Thornburg and Carylyle margin calls will disappear as the securities they own are "mortgage backed securities" issued by agencies. They will now be able to provide these securities to
dealers who can present them to the Fed and get hard cash in return. The auction began on Friday.
Effectively the Federal Reserve is now guaranteeing all agency paper and its being treated like Treasury debt. The implications of this are immense. Yet, I don't see one reporter clued in sufficiently to write about it.
The only thing keeping this crisis alive is the mass hysteria and crowd behavior. I think the Fed's actions above along with another cut in the rate will alter the chemistry of the hysteria. I think the days of the crisis are numbered.
"Second, beginning today, the Federal Reserve will initiate a series of term repurchase transactions that are expected to cumulate to $100 billion. These transactions will be conducted as 28-day term repurchase (RP) agreements in which primary dealers may elect to deliver as collateral any of the types of securities--Treasury, agency debt, or agency mortgage-backed securities--that are eligible as collateral in conventional open market operations. As with the TAF auction sizes, the Federal Reserve will increase the sizes of these term repo operations if conditions warrant."
tma is a great buy. The feds will not let this company go BK. There will be some type of money coming in from the feds, even though the feds cant give them the money directly, has to be done through a bank. This company has a great CEO. Let him work out of this. I have known shareholders in this company since its been trading in the 20's. DOesn't make sense to sell at $1 now. Also if TMA announces any type of positive news it will probably bring this stock back to the $4 range in a blink of any eye.
great BUY at these prices
big if you want to buy more shares at 0.002 imo
keep dreaming
i wouldnt boast about that
come to think about it, i could of sold at 0.006 today. Now i will have to sell at 0.002 monday morning
i hope you know this is that one investment that losses imo
WHERES YOUR PICK?!!?!?!?!?!?!?!?!?!?!?!??!!!??!
wheres the buyers???????????
same old same old POS imo
cant break 0.008
who can knock-out NITE
hahahaah i dont know if i would buy 100 shares, maybe 50 though
someone wants in
if this can break 0.008...i'll stop standing on the sidelines and buy a lot more
am i bagholder now? i bought at 0.0027
i dont buy pump and dumps buddy
you know what happens to chasers?
they become bag holders
HERE COMES THE DUMPPPPPPPPPPPPPPP
with the volume being so high today, this can reach .20 guys!
chapter 11 must be pissed he sold too early on SSYO
he needs to come out with a pick today to prove his manhood!
MM'S NEED SHARES AND THEY ARE STUCK SHORT
WOW!!!!!!!
man i wish i had more than 15 posts. I'll miss you guys
good luck today
take care of my baby, "mstf"
she's about to explode!
bye yall!
quote of the day "SELL SELL SELL"
why dont you buy some at at the ask to get this going? how about that sammy boy
lets loosen up guys
i love you
and we will all be rich very soon
its 4 weeks since ceo left correct?
who are they operating under? can they update shareholders?
i love you guys, but this stock is not going to make you money...
nope...just warning investors about this company before they buy in
this looks like it will close at 0.004
yeah right. shares are for sale!!!!!
you guys are wasting your time with the stock imo
this company doesnt care about us!!!!!!
best to sell and move on....this is done
this company doesnt care about shareholders
no buyers = 0.004
NEWS TOMORRROW!!!!!!!!!!!!
if everyone puts a GTC order who owns shares at .10 or higher, then the mm's will have to come get them
but you guys arent smart to do that, right?
think about it, if 15 million shares go for sale right now at 0.10, then what choice do the mms what then let this run
whos in??????????
fake walllllllllllllllls