We have met the Enemy, and He is Us

SEC investigating big players in bond market, but not the biggest:
"The lopsided bond market has caught the attention of the U.S. Securities and Exchange Commission. Not only is the SEC examining whether the biggest players get preferential prices and access because of their influence...Bill Gross and Larry Fink manage a $3 trillion pile of bonds...". What?!?!, the Fed balance sheet just surpassed $4 TRILLION all by its little ol' self. You take Mortgages + Treasuries and you're right around the $30 trillion mark, and the largest investors are the US Treasury and the Fed, and its almost impossible to mark the size of the exposure the US Treasury has but their risk is certainly higher than the Fed, and canyons of risk larger than any group of private funds.

You have to assume the article was written by a comedian, except they're being serious and we really do live in a world where the government creates a false market, private companies change their rules so they can operate in the fake market place, and then the government investigates the private companies for "creating" new risks. "We're going to need new regulations to regulate the private players who adapted to our old regulations, which in hindsight caused more problems than they solved, but, hey, we didn't see that coming". (that isn't an actual quote from the article, it is an attempt at sarcasm)

Here is another one, from the article, "While regulators have looked at the threat to the financial system posed by too-big-to-fail banks, hazard has migrated to money managers." Bless their hearts. They still don't realize they are, themselves, the problem.

"Investors typically get worse prices when they trade smaller blocks of bonds. One day last month, dealers sold $15,000 of steel company ArcelorMittal SA’s bonds maturing in 2041 for 3.5 cents on the dollar more than they paid to buy $25,000 of the same securities an hour later. By contrast, two exchanges of $100,000 or more of the debt that day were within 0.05 cent of one another, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority." I saw a plus-sized lady just this weekend buying a 12 pack of pepsi with extra sugar and the per can price was far below a single-can price. We need a regulator to start looking at this type of activity at CostCo and Super Walmart, someone call their congressman pronto!