The Phone Call

by Larry Levin


I could only imagine what transpired over the past few days: The Phone Call!

Tax- Cheating-Timmy: “Dang, those last few IOU sales we issued from the Treasury didn’t go so well. I better get Bernanke on the phone to rig this, ah-hem, fix this.”
“What was the number over at the Fed again? Oh here it is.”

…call…ring…ring…

Tax- Cheating-Timmy waits patiently for the line to be answered when he hears: “Welcome to the answering service of the Federal Reserve. Press #1 to continue in English. Press #2 to continue in Spanish. Press #3 for tailored bailouts.” Tax- Cheating-Timmy mashes the phone with his palm and shrieks for someone to pick up.

Tax- Cheating-Timmy: “Hello, is Ben available?”

Fed flunky: “Ben who?”

Tax- Cheating-Timmy: “Ben who? Ben Bernanke.”

Fed flunky: “Ber..nan..keeee? Doesn’t ring a bell. You sure you have the right number? We give away free money to banks here.”

Tax- Cheating-Timmy: “Oh for goodness sake. I want Ben…ZIMBABWE-BEN Bernanke! Does that ring any bells?”

Fed Flunky: “I’m sorry. One ZIMBABWE-Ben coming up. Hold the line. Oh, feel free to press #4 while holding for an interest free loan. Of course, ‘I AM’ assuming you are someone special, like a bank CEO or a politician. In that case help yourself to the free money.”

Yes sir, the recent 10-YR Note and 30-YR Bond auctions were very weak. Many speculated that the next auction would be a disaster and with over $120-BILLION more IOUs flowing from Tax-Cheating-Timmy’s Treasury next week, there would be several chances for said disaster. The auction results have been wilting under the strain of both the overall massive debt of the USA and the Lilliputian-like rate paid to the marks funding this governments insatiable spending spree.

However, Ben Bernanke has come to the rescue – maybe – by raising interest rates by 50-basis points. He knows exactly where global interest rates should be. Like Greenspan, he’s prescient.

Although all prior rate hiking or cutting has never been a “one and done” deal, Zimbabwe-Ben is saying “this time it’s different.” He is trying to be clear that this is not an indication of a tightening bias: he is just saving a future failed Treasury auction.

However, Zimbabwe-Ben is an academic – an egghead. He doesn’t realize that market moves are made from people’s perceptions and the perception will surely be of future rate hikes. Moreover, this should give a big boost to the US dollar, thus slamming those still holding the carry trade.

It will be an interesting Friday to be sure.



Previous Day's Trading Room Results:

Trade Date: 2/18/10

E-Mini S&P Trades*
(before fees and commissions):

1) VA sell @ 8:40am at 1098.25 = b/e & b/e (2 lot)

2) 80% sell @ 9:37am at 1098.25 = -.25 (1 lot)

3) Algorithm positions (4)

4) “Reading the Tape” positions (4) …combined Secret’s, Algo, & “Reading the Tape” total…+6.50



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