Papering Over Disaster, Temporarily – Professional Edition

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We now have an inkling of how the Treasury will handle the paydown of $185 billion in Treasury CMBs. It will turn what would have been a horrendously bearish period into something less so, but the respite will be temporary. At the very least, it should give the smart money the opportunity to tiptoe out the back door before the crowd stampedes later in the fourth quarter. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

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  3 comments for “Papering Over Disaster, Temporarily – Professional Edition

  1. Adam Butler
    September 21, 2009 at 3:35 pm

    Lee,
    Given that the increase in Institutional MMF assets since September 2007 is almost precisely equal to the contraction in CP outstanding, is it safe to say that the ‘cash on the sidelines’ argument the bulls are using to support their calls for higher stock prices is an illusion? My understanding is that CP was/is largely used as a cash management tool for corporate Treasury departments with excess working capital. Cash that would otherwise have been put to work in CP is not cash that is ready to be invested in stocks. Would it have been fair to say in 2007 that $2 trillion in CP was a reason to be bullish of stocks?
    Is CP outstanding included in MZM?
    I guess I am wondering to what degree the assets in IMM funds is ‘high powered’ money that is likely to be put to work in stocks and corporate bonds, or whether this is likely to find a new home in bank deposits or Treasuries given the evaporation of the CP market. Thanks Lee!

  2. Thomas
    September 21, 2009 at 3:49 pm

    I’ve never understood the cash on the sidelines argument at all. I think it is the refuge of dumb asses.

  3. September 21, 2009 at 6:31 pm

    Generally speaking I would think that MMF assets are largely held for purposes other than stock speculation, although obviously a percentage of it is held for that purpose. Russ Winter did some good work on that in Actionable which he discussed in our last podcast. He compares total MMF assets to total stock market cap. He felt it was too high last March, indicating a bottom, and he feels it is too low now, indicating a bubble and an approaching top.

    The collapse of MMF assets along with collapsing CP would normally correlate with falling stock prices. We’re in LaLa land at the moment. Dangerous. What happens when the music stops? I think we know the answer, and we have an inkling of when, as I discussed in the report.

    Thanks for your comments!

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