Thinking out loud. OK, fed needs something. Banks do some exotic swap, then prices some other off-the-run bonds, price them with crazy mark-up and then make money. But 5 billion? OK, banks had tons of weird option stuff sold at higher volatilities...in bed with the Fed...market goes higher, vol. implodes, and banks make bank. ?
Don't understand why this is big news... Yes we already know these banks are market makers, what's so special?
who? Buddy, it was a straight long-only market since March and most bank players knew that and were massively long. Who sold to them? Well the dumb retail investors of course. A ton of people were so bearish all the way until now that they happily sold what they had left. I am short-term bearish now and you can see my call couple days ago during the first profit taking wave. It may come all the way back but I already re-set better than at entry and think it was a great risk reward trade. A lot of suckers try to predict the market and lose tons over time with their inability to predict.
Most of these profits are made on fixed income flow... There's virtually no prop left at banks, for all the obvious reasons. Fixed income mkt makers are in a particularly sweet spot at the moment. On the one hand, bid/offers are wide and commission rates are tasty. On the other, govts and corps both are issuing record amounts of paper, which a whole variety of investors are snapping up like hot cakes. It's a paradise for middlemen and they are making an absolute killing.
I concur, this fixed-income market is just yesteryear stock market. Baby-boomer and institutions alike flocked their money into MM like no-tomorrow.
on the equity side i dont fully agree with you. From what I heard and saw some houses took heavy prop positions in April/May on the equity side. Those investment decisions trickled all the way down from senior management. Agree that most prop groups have been dismantled since back in 08.
I think something that most everyone overlooked was this: Profit. What does it mean profit? Accounting profit or cash profit? A lot of funds/banks were looking good and making <b>huge</b> amounts of <b>"profit"</b>. But in the end it was all funny money and they failed. Something to keep in mind. -troll
Could be, for sure... I don't really know what goes on in equities all that well. All I know is that all the FI franchises have been absolutely printing money. It's been a bumper year for a whole bunch of people.
...and they better funnel the bonuses to papa as long as it is not capped. We are heading back to the stone age with this global socialist attitude...