Princely Moment

I thought it was clear
The plan was we would share
This feeling just between ourselves
--Shannon

In 2007, then CEO of Citigroup Chuck Prince made a statement that goes down in the annals of moral hazard history. Despite the increasingly visible problems in the mortgage market, Prince placed his confidence in the Fed's efforts to 'liquify' the markets, saying:

"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance."

This of course, is just another way of saying that you have to be long as the Fed has your back. During the Greenspan regime, this became known as The Greenspan Put. As long as the Fed is pumping easy money, you want to take risk. If there's a problem, then your friendly neighborhood central banker will bail you out.

The Fed's efforts since have only reinforced this notion. As the Dow marks daily all time highs, I have heard multitudes of opinions that go like this:

"We know that the Fed wants to levitate assets higher by printing money and monetizing debt, and that this will likely end badly, but right now you have to be long."

They're playing Chuck Prince's tune...

position in SPX, Treasuries