Not Hans Delbrück’s Market

When Eyegore is sent to get the brain of Hans Delbrook in Young Frankenstein, the glass jar reads "Scientist and Saint." Clearly, the re-animated monster capital market running around the countryside today is neither and functioning on Abby Normal's brain.

As bad dates began popping up in the Bill market faster than Saula could snatch them from Indy's mouth, auction jocularity ensued. A week earlier, when none of this was foreseeable I guess, a .04+ lock issue proceeded to jump to zero bid. Yesterday, a .09+ lock issue came at 12+ and puked to .15 before returning to .07 today. At a base level, players are penalizing the Government for its ineptitude. Abby Normal deniers find succor in the fact that liability payment mismatch causes "natural" aversion, but only for 16 hours I guess.

When viewed in the context of the prior week's action, the test firing of the FAFRRRF (Death Star so much better) and the relentless drip of LIBOR sets lower, we see this as yet another symptom of dysfunction at the most basic building block of the capital structure. Record amounts of Government obligations and debt ceiling fantasies have the villagers up in arms, while meta-problems of collateral shortages squeeze repo transactions negative. (Thus bringing about the creation of the Death Star) Earlier this week, with repo at .08, 87 wannabe Hans Delbrooks bid 58B to the Fed at .01......no one asked WHY ?

I can only say that a market displaying this much malfunction and requiring this much attention is sick and dangerous. The Fed has played the role of Frau Blucher, soothing the insanity with constant monetary violin playing. Sooner or later, a spark sets the Monster loose.

Oh sweet mystery of life, at last I've found you.

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