Mike Curtiss (15 Nov 2011)
"Eurozone bail-out fund has to resort to buying its own debt"

Dear Doves,

         Why blame Europe for buying up it's own debt. The Treasury has been buying US debt since 2009. Come right in Europe the waters fine.

What's Propping Up Stock Market?

TrimTabs President & CEO Charles Biderman discusses how global financial markets are suffering from years of borrowing to pay entitlements to citizens, stock buybacks by corporations, and other topics in a short 2:16 video.
Bilderman Video:

Biderman had predicted a collapse in equity markets but says stochttp://beta.blogger.com/img/blank.gifk buybacks by corporations have, for now, prevented that collapse.

Ending Quote

"In 2009 with interest rates dirt cheap companies have sold around $3 trillion in bonds and about $800 billion in new shares. Companies are currently the only buyers of stocks as individuals remain net sellers. $2 billion a day of company buying can take the market higher. That is until companies stop buying and start selling lots of new shares."

Here is a link if the video does not play: Biderman's Daily Rant for 11/3/2011

For every buyer there is a seller and vice versa. Moreover, stocks can go up or down whether corporations are buying or selling. However, it is important to note that the frequently touted corporate "cash on the sidelines" is for the most part debt.

A handful of tech companies with huge piles of cash and little debt is the exception, not the rule.

If companies squander their "cash" on buybacks, they will once again be back in a situation of high debt and no cash when the market bottoms, because buybacks or not, the market is overvalued and eventually will get to where it's going.

EFSF Bail-Out Fund Buys Its Own Debt Because Not Enough Others Will
To raise "bailout" money the EFSF sells bonds. In its first auction after the new Merkozy agreement, not enough investors wanted the garbage and the fund ended up buying some of its own bonds.

The Telegraph reports Eurozone bail-out fund has to resort to buying its own debt
The European Financial Stability Facility (EFSF) last week announced it had successfully sold a €3bn 10-year bond in support of Ireland.

However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.

Sources said the EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt.

The failure of the EFSF will increase pressure on the European Central Bank to effectively become the lender of last resort for the eurozone, a move it has strongly resisted.
Bizarre Setup

The EFSF raises money by selling bonds that few investors want. So it buys its own debt effectively raising no cash. Is this supposed to work?

Given there are still no terms on the EFSF debt, agreements on leverage, amount of guarantees, etc., the amazing thing is not that the EFSF had to buy some of its debt, but rather anyone else was interested at all.

This helps explain why the IMF went on a tour of Russia and China begging them to buy the garbage. No one else wants it, and the EFSF suspected as much in advance.

For details on the IMF dog-and-pony show in Asia, please see World has Major Funding Gap; IMF Begs Russia and China for Money; Italy and Greece Demand Deposits Collapse; Run on Greek Banks?