Goldman Advises Clients To Front Run The Fed Via POMO

Feed: zero hedge
Posted on: Friday, October 22, 2010 01:20 AM
Author: Tyler Durden
Subject: Goldman Advises Clients To Front Run The Fed Via POMO

 

After a few months of breaking down what the simplest trade in the world is, that would be frontrunning the Fed for the cheap seats, Zero Hedge is happy to advise our readers that finally Goldman Sachs itself has capitulated and is now indirectly telling its clients to frontrun Ben Bernanke via POMO. No complicated value investor nonsense, no pair trades, no cap structure arbitrage, no hedging, no levered beta plays. Buy ahead of POMO. Sell. Rinse. Repeat. From a GS distribution to clients: On the interplay between the FED and STOCKS: Since Sept 1 – when QE was becoming a mainstream focus – if you only owned S&P on days when the Fed conducted Open Market Operations (in US Treasuries), your cumulative return is over 11%.  in addition, 6 of the 7 times when S&P rallied 1% or more, OMO was conducted that day. this compares to a YTD return of 5.8%.  the point: you would have outperformed the market 2x by being long on just the 16 days when – this is the important part – you knew in advance that OMO was to be conducted. The market's performance on the 19 non-OMO days: +70bps. And there you have it - the top in frontrunning the Federal Reserve is now in. The most recent Fed POMO calendar is linked (there is one tomorrow). Frontrun away. Tentative Outright Treasury Operation Schedule Across all operations in the schedule listed below, the Desk plans to purchase approximately $32 billion. This is the amount of principal payments from agency debt and agency MBS expected to be received between mid-October and mid-November. Operation Date1 - Settlement Date - Operation Type2 - Maturity Range   Oct. 22, 2010 – Oct. 25, 2010 - Outright Treasury Coupon Purchase - 4/15/2013 – 9/30/2014   Oh, and Ben, your criminal organization will one day pay for making a complete manipulated travesty out of capital markets.

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