Now You Know Why The Fed Targets Asset Prices

The Fed, bless their hearts, loaded their balance sheet with junk to alleviate some of its customers' distress during the financial crisis.

However, since the Fed is in the business of making money, it needed to reignite the market's animal spirits in order to breed as many bulls as possible. In order to get rid of it at good prices.

Maybe we're getting close to the end of the run, because yesterday they moved out some inventory.

April 6 (Bloomberg) -- The Federal Reserve Bank of New York sold $1.3 billion of mortgage securities in the first round of its auctions tied to the U.S. rescue of American International Group Inc.

The New York Fed had offered $1.5 billion of the securities, according to a posting on its website. The central bank didn’t disclose the amount paid. In a separate statement today, the Treasury Department said it sold $3.9 billion last month of a different type of mortgage bonds, which are guaranteed by government-supported Fannie Mae and Freddie Mac.

The Fed is selling its securities in blocks, after saying March 31 that it would refuse an offer from New York-based AIG to buy back the entire pool for $15.7 billion. The current balance of the investments had totaled about $31 billion, according to the insurer’s disclosures.

“Round one appears to have been a success,” said Bryan Whalen, co-head of the mortgage-backed bond group at Los Angeles-based TCW Group Inc., which oversees $115 billion in assets. “There was a fair amount of interest from investors and it seems like the dealers are willing to fill in the gaps” on less-popular securities, he said.

Notice AIG made them an offer for the whole thing, but the Fed refused. The price was too low, and the Fed is in the business of making money.

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By the way, tonight I saw my first ever TV commercial devoted solely to silver. It's all gone apparently. It's a fraction of the price of gold. Secure your future. People say it's going to 200.

No doubt the bulls are running in silver, but these are the conditions of a top. I'm not selling mine, but I'm not buying either.