5 ms·

I generally as a rule dislike ZeroHedge, but there is good pertinent information in the following link. https://www.zerohedge.com/markets/944-trillion-reasons-w

by yasp 7y ago

I generally as a rule dislike ZeroHedge, but there is good pertinent information in the following link. https://www.zerohedge.com/markets/944-trillion-reasons-why-fed-quietly-bailing-out-hedge-funds https://www.zerohedge.com/markets/944-trillion-reasons-why-f... (Commence the downvotes.)

mywittyname 7y ago
A broken clock is right twice a day. ZH has an overt political bias and is a perennial pessimist, but they do actually perform meaningful economic analysis. Edit: Then again, their articles sometimes feature near complete fabrications, i.e., "Minneapolis Fed president Neel Kashkari [...] said that it was time for the Fed to pick up where the USSR left off and start redistributing wealth", which is not even remotely close to what was actually said.
- hogFeast 7y ago
  Read further. They explain this view. It is 100% correct, based on the evidence they provide. What they are saying is that this was LTCM but instead of banks coming in and forcing losses at 50 cents on the dollar, the govt came in and bailed everyone out at par. I have no first-hand knowledge of the extent of this trade but a lot of it sounds correct (the key premise of the Fed is that this isn't leaking into the market...whether you believe ZH or not, you should be extremely suspicious of this line).
  - hcknwscommenter 7y ago
    > It is 100% correct, based on the evidence they provide. This is very wrong. The "evidence" they provide is nonexistent. The ZH link is typical ZH garbage. A bunch of assertions without basis with a few misconstrued quotes thrown in.
    - hogFeast 7y ago
      It isn't. Read the quoted section from Russel Clark, the BIS has been talking about this (they specifically mention levered hedge fund positions), and they specifically mention an arb between cash bond and derivatives (do you know the history of this trade? It blew up twice in the 90s)/point out that some funds are running with a lot of leverage (is this repo? I don't know, but it is likely given that this has always been a financing source and the BIS are saying that it is). So not nonexistent. The quotes look completely fine (I have looked at clearinghouses quite a bit, Russel Clark understands them...obv, the guy is not an idiot).
      - hcknwscommenter 7y ago
        The FED would love for hedge funds to INCREASE their cash bond and derivative Arb activity. This would arb away the differential and hedge funds would make a tidy profit in performing this service for the market. The problem is that hedge funds, prop desks, banks, and pretty much everyone DIDN'T step in and arb away the differential. This led to a massive 10%! rate for O/N repo, which is supposed to be a risk free instrument.
        hogFeast 7y ago
        Yes buddy, the reason LTCM went bust was they didn't have enough money. Don't get me wrong, I am glad people like you exist (literally, this is the reason it is so easy to print in markets). But that isn't how arbs work. If you are levered 100x, the solution isn't to go 150x. We need someone to tap people on the shoulder and say: "Stop digging buddy, wrap it up, your done". This is capitalism. Instead, we have this engineer mindset where the market moving against you is a sign that everyone else is an idiot and you just need to borrow more money. In terms of your answer, the reason HFs didn't step in is because they are the ones BORROWING from the market. How do you not understand this? Seems like you didn't read the post. The big 4 provide liquidity to HFs, that is the function of the market so HFs can't suddenly turn into liquidity providers themselves. If you are levered 10x+ and running a $10bn+ overnight position, you can't just magic up another $10bn from nowhere...that is the point, you have tapped the market, nothing is left. I remember having this convo in 2007 where people legitimately got angry when you questioned whether more leverage was the answer (it isn't, it doesn't go anywhere)...it is amazing we are here again (and again, this is the engineer mindset...never mark your book, never stop borrowing, keep picking up quarters until someone taps you on the shoulder and says you don't work here anymore). And as then, people with a deep understanding of the structure of these markets are basically non-existent.
- vkou 7y ago
  It's also not remotely close to what the USSR actually did. Which was practice a weird form of state capitalism, where most corporate profits flowed into subsidizing the political class, the military, infrastructure, and a couple of really inefficient industries. The government, of course, was adamant that this was just a temporary transition period, and that communism would be achieved soon - like, in a few decades. This 'transition period', of course, lasted nearly 70 years.
tempsy 7y ago
Why would you expect downvotes on ZH? HN is more aligned with ZH than not in the sense that it seems most on here believe the stock market is rigged or a bubble or otherwise not a sound investment.
- adventured 7y ago
  > Why would you expect downvotes on ZH? For one thing HN doesn't allow ZeroHedge on the frontpage, it's banned from getting there. I suspect posted links to ZeroHedge get auto killed as well at this point (haven't checked lately, however it used to be the case). It's considered a non-reputable source, filled with propaganda and comically absurd pessimism about the world ending every other day of the week (they've been wrong about the last ten years to such an extreme degree that they should shut down the entire site if they had a conscience). It also posts very pro-Russia propoganda on an almost daily basis. Their bias is interesting, although most sites have one; theirs just happens to be Russian in nature (not a great bias for an economic / business site, given Russia has no functioning market economy, a dictatorship, and has seen zero net economic growth for a decade plus). Every great once in a while they post an article that is actually interesting, correct and outside of the normal channels of what the mainstream sites are willing to say. They publish a few of those per week, you have to dig through the trash to get to them.
  - vkou 7y ago
    What makes you say Russia has no market economy? It's got dutch disease, due to its oil reserves, with most of the economy focused on resource extraction (and the rest being the service sector), but that's still a market economy.
  - nsporillo 7y ago
    I can confirm there is loads of trash you need to dig through to found interesting content. I browse daily to find counter viewpoints to mainstream media, and there is a lot of useless junk.
- nsporillo 7y ago
  https://mediabiasfactcheck.com/zero-hedge/ https://mediabiasfactcheck.com/zero-hedge/
agorabinary 7y ago
ZH is unmitigated garbage. It began by pushing the standard tropes of goldbug interpretations of the economy with the banker bad, armchair (amateur) realist good and an unrealized schadenfreude of global economic pandemic. Now it's realized that its early readership is just a subset of the broader misinformed armchair conspiracy theorist and has expanded its message to them as well. Just as easily as someone in software can bullshit their way through a presentation with a couple years cursory understanding of SWE topics, same goes with "researching" and writing a ZH econ article. ZH does not do meaningful economic analysis, look elsewhere.
- nwah1 7y ago
  Bingo. Also this argument in particular is wrong because even if you want to describe the current repo operations as QE, it isn't inflationary or doing much to "prop up the economy" given that none of the other QE rounds were inflationary. At the end of the day, fiscal policy is extremely important, and almost no amount of monetary policy can do much on its own. Unless we decide to start actually minting money, like the trillion dollar platinum coin idea.
  - patricius 7y ago
    What do you mean none of the other QE rounds were inflationary?
    - nwah1 7y ago
      Overall consumer prices and aggregate demand were virtually unaffected by QE. All the individuals who, for ideological reasons, believed QE would be inflationary got wiped out. Peter Thiel's hedge fund, Clarium Capital, lost huge amounts of money on such a bet.
      - patricius 7y ago
        If you use the original definition of inflation, i.e., increase of the money supply, there has been massive inflation. It hasn’t resulted in a substantial increase in the consumer price index, but you can see huge increases in certain areas such as the stock markets, housing markets in certain areas, health care and education.

by yasp 7y ago

mywittyname 7y ago

A broken clock is right twice a day. ZH has an overt political bias and is a perennial pessimist, but they do actually perform meaningful economic analysis. Edit: Then again, their articles sometimes feature near complete fabrications, i.e., "Minneapolis Fed president Neel Kashkari [...] said that it was time for the Fed to pick up where the USSR left off and start redistributing wealth", which is not even remotely close to what was actually said.

hogFeast 7y ago
Read further. They explain this view. It is 100% correct, based on the evidence they provide. What they are saying is that this was LTCM but instead of banks coming in and forcing losses at 50 cents on the dollar, the govt came in and bailed everyone out at par. I have no first-hand knowledge of the extent of this trade but a lot of it sounds correct (the key premise of the Fed is that this isn't leaking into the market...whether you believe ZH or not, you should be extremely suspicious of this line).
- hcknwscommenter 7y ago
  > It is 100% correct, based on the evidence they provide. This is very wrong. The "evidence" they provide is nonexistent. The ZH link is typical ZH garbage. A bunch of assertions without basis with a few misconstrued quotes thrown in.
  - hogFeast 7y ago
    It isn't. Read the quoted section from Russel Clark, the BIS has been talking about this (they specifically mention levered hedge fund positions), and they specifically mention an arb between cash bond and derivatives (do you know the history of this trade? It blew up twice in the 90s)/point out that some funds are running with a lot of leverage (is this repo? I don't know, but it is likely given that this has always been a financing source and the BIS are saying that it is). So not nonexistent. The quotes look completely fine (I have looked at clearinghouses quite a bit, Russel Clark understands them...obv, the guy is not an idiot).
    - hcknwscommenter 7y ago
      The FED would love for hedge funds to INCREASE their cash bond and derivative Arb activity. This would arb away the differential and hedge funds would make a tidy profit in performing this service for the market. The problem is that hedge funds, prop desks, banks, and pretty much everyone DIDN'T step in and arb away the differential. This led to a massive 10%! rate for O/N repo, which is supposed to be a risk free instrument.
      - hogFeast 7y ago
        Yes buddy, the reason LTCM went bust was they didn't have enough money. Don't get me wrong, I am glad people like you exist (literally, this is the reason it is so easy to print in markets). But that isn't how arbs work. If you are levered 100x, the solution isn't to go 150x. We need someone to tap people on the shoulder and say: "Stop digging buddy, wrap it up, your done". This is capitalism. Instead, we have this engineer mindset where the market moving against you is a sign that everyone else is an idiot and you just need to borrow more money. In terms of your answer, the reason HFs didn't step in is because they are the ones BORROWING from the market. How do you not understand this? Seems like you didn't read the post. The big 4 provide liquidity to HFs, that is the function of the market so HFs can't suddenly turn into liquidity providers themselves. If you are levered 10x+ and running a $10bn+ overnight position, you can't just magic up another $10bn from nowhere...that is the point, you have tapped the market, nothing is left. I remember having this convo in 2007 where people legitimately got angry when you questioned whether more leverage was the answer (it isn't, it doesn't go anywhere)...it is amazing we are here again (and again, this is the engineer mindset...never mark your book, never stop borrowing, keep picking up quarters until someone taps you on the shoulder and says you don't work here anymore). And as then, people with a deep understanding of the structure of these markets are basically non-existent.
vkou 7y ago
It's also not remotely close to what the USSR actually did. Which was practice a weird form of state capitalism, where most corporate profits flowed into subsidizing the political class, the military, infrastructure, and a couple of really inefficient industries. The government, of course, was adamant that this was just a temporary transition period, and that communism would be achieved soon - like, in a few decades. This 'transition period', of course, lasted nearly 70 years.

tempsy 7y ago

Why would you expect downvotes on ZH? HN is more aligned with ZH than not in the sense that it seems most on here believe the stock market is rigged or a bubble or otherwise not a sound investment.

adventured 7y ago
> Why would you expect downvotes on ZH? For one thing HN doesn't allow ZeroHedge on the frontpage, it's banned from getting there. I suspect posted links to ZeroHedge get auto killed as well at this point (haven't checked lately, however it used to be the case). It's considered a non-reputable source, filled with propaganda and comically absurd pessimism about the world ending every other day of the week (they've been wrong about the last ten years to such an extreme degree that they should shut down the entire site if they had a conscience). It also posts very pro-Russia propoganda on an almost daily basis. Their bias is interesting, although most sites have one; theirs just happens to be Russian in nature (not a great bias for an economic / business site, given Russia has no functioning market economy, a dictatorship, and has seen zero net economic growth for a decade plus). Every great once in a while they post an article that is actually interesting, correct and outside of the normal channels of what the mainstream sites are willing to say. They publish a few of those per week, you have to dig through the trash to get to them.
- vkou 7y ago
  What makes you say Russia has no market economy? It's got dutch disease, due to its oil reserves, with most of the economy focused on resource extraction (and the rest being the service sector), but that's still a market economy.
- nsporillo 7y ago
  I can confirm there is loads of trash you need to dig through to found interesting content. I browse daily to find counter viewpoints to mainstream media, and there is a lot of useless junk.
nsporillo 7y ago
https://mediabiasfactcheck.com/zero-hedge/ https://mediabiasfactcheck.com/zero-hedge/

agorabinary 7y ago

ZH is unmitigated garbage. It began by pushing the standard tropes of goldbug interpretations of the economy with the banker bad, armchair (amateur) realist good and an unrealized schadenfreude of global economic pandemic. Now it's realized that its early readership is just a subset of the broader misinformed armchair conspiracy theorist and has expanded its message to them as well. Just as easily as someone in software can bullshit their way through a presentation with a couple years cursory understanding of SWE topics, same goes with "researching" and writing a ZH econ article. ZH does not do meaningful economic analysis, look elsewhere.

nwah1 7y ago
Bingo. Also this argument in particular is wrong because even if you want to describe the current repo operations as QE, it isn't inflationary or doing much to "prop up the economy" given that none of the other QE rounds were inflationary. At the end of the day, fiscal policy is extremely important, and almost no amount of monetary policy can do much on its own. Unless we decide to start actually minting money, like the trillion dollar platinum coin idea.
- patricius 7y ago
  What do you mean none of the other QE rounds were inflationary?
  - nwah1 7y ago
    Overall consumer prices and aggregate demand were virtually unaffected by QE. All the individuals who, for ideological reasons, believed QE would be inflationary got wiped out. Peter Thiel's hedge fund, Clarium Capital, lost huge amounts of money on such a bet.
    - patricius 7y ago
      If you use the original definition of inflation, i.e., increase of the money supply, there has been massive inflation. It hasn’t resulted in a substantial increase in the consumer price index, but you can see huge increases in certain areas such as the stock markets, housing markets in certain areas, health care and education.