MarketsMuse Editor Note: Below excerpt from this a.m.’s edition of macro-strategy newsletter Sight Beyond Sight..

While commentators largely ignored the Financial Times article released yesterday it garnered a fair amount of attention by investors in our circle. The article stated that “Federal Reserve officials have discussed imposing exit fees on bond funds to avert a potential run by investors, underlining regulators’ concern about the vulnerability of the $10tn corporate bond market.”

Here is one interpretation on why this trial balloon was sent out. Please forgive our attempt at satire; we mean to inform, and hopefully amuse, not insult.

Rick at Blackrock:  Hi Lloyd. Our “Yellen Index” is flashing imminent Fed tightening. We can’t tell you the inputs but this is our internally used proprietary index and is made up of the economic statistics she most favors and right now it is saying the Fed should already be tightening.” (FT Article)

Lloyd at GS:  So what does that mean to me Rick? We are an M&A and asset management shop now.

Rick at Blackrock:  Whatever helps you sleep at night, Lloyd. I need a bid on a 16 billion corporate bond portfolio ASAP.

Lloyd at GS:  We are not in that business anymore due to new capital requirements, balance sheet constraints and regulation.

Rick at Blackrock:  Lloyd, we go back a long-time and we pay your firm nine figures per year. I need a bid now.

Lloyd at GS:  What do you think this is Rick? The 2004 interest cycle? Send over a list and we will work it on an agency basis.

Rick at Blackrock:  Screw you Lloyd. I am calling my friends at Bank of America.

One hour later and a repeat of the same call… Continue reading →