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10 Year Drops Below 2.90%
For those who are unlucky enough to be on vacation and having to keep track of the deranged lunacy that passes for markets, the 10 Year just dropped below 2.90% as futures turn green! This is so insane, that it makes all the sense in our bizarro world now. Remember, last week we warned of a 10% meltup in stocks and bonds. So far it is working. In Europe, the same thing as Bund stops are triggered, and as 10 year Gilts trade to lowest yields since April 2009. Thank you Ben Bernanke: you have once again destroyed any semblance of logic in the market and driven another batch of traders out of the market: those who have no recourse to lose other people's money. Bloomberg's Matthew Lynn sums it best in Risk Is the New Black in World Turned Upside Down: "Investors need to reverse everything they thought they knew about risk. Assets such as property, the dollar and developed-country bonds are only for those who don’t mind losing their shirts. Small-time investors who depend on getting their money back should be buying into small companies, emerging markets and private-equity or hedge funds. We don’t know precisely what will emerge as “safe” once the dust has settled on both the credit crunch and the sovereign-debt crisis. But emerging markets are safer than developed ones, equities beat property, and corporate bonds are preferable to government notes. Sometime around 2015, don’t be surprised if bankers are advising widows and trust funds, which need to preserve capital above all else. They will be offered Turkish bonds, a hedge fund or two, and a portfolio of small emerging-market stocks. Real estate, Treasury bills, and dollar or euro blue-chips will only be for people who fancy a flutter -- and have already been warned they may lose everything." Logic is now dead.
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Its not so bizarre at all:
Market is pricing in the early stages of QE2 - which will involve the Fed buying bonds with the proceeds of the maturing securities on its book.
Therefore bonds are supported, reflation trades are on - stocks, oil etc.
Dollar of course is going down as per the Fed's wishes. Look with monetary policy maxed out on all fronts there is only one thing the Fed can do to engender further easing - let the Dollar go down - say 10-20%. I believe this is what the plan is.
April 2009 redux?
I think the smug complacency around QE2 and its effects are setting up a trap of monumental proportions. QE1 didn't work and yet everyone is sure QE2 will rocket stocks higher. What happens to all the retards who pile into risk assets when QE2 is launched when it turns out to be an epic failure (as it will because there really are no free lunches).
Gold should be skyrocketing as the market prices in QE2. But - then again - gold does'nt trade in a normal way does it.Heheheh.
At this point, nothing should surprise us. With the fed creating so many distortions in our markets, the question, as always is: when will this correct? What event, what trigger will cause the rubber band to snap....back to reality?
Will we ever return to normality? GDP falls off a cliff and the markets rise. We witness daily pump and spin by the media, telling the masses bad data prints are actually solid reads. How did we end up stuck in this Twillight Zone of distorted perception?
I'm begining to think we'll never crash, never correct, never return to a time of markets operating normally. What did we expect the elitists to do? Let the system that enriched them so long collapse without a battle? Without twisting reality?
Maybe 'normal' was never 'normal' in the first place. Maybe what we are witnessing is the manipulation that has always been present.
Think of a large crowd of one hundred or so people at a house party...some people begin to leave...then more leave...pretty soon all you are left with are the hosts of the party.
The market party hosts are more visible than ever right now because all of the guests have left the building.
The funny part of your post was the broad inference that the "elitists" are participating in this system. Nope, you may have heard of the next market for suckers called carbon.
I'll give you a crystal ball reading of the next driver of growth - corporate elections in the US (aka elitist erections).
So the "safe" money is thinking "emerging markets are safer than developed ones, equities beat property, and corporate bonds are preferable to government notes"
That's the best example of bizazrro world I've ever seen. Next: processed food healthier than fruits and veggies; smoking better than breathing; coke fueled orgies better rest than 8 hours on your serta.
this emerging markets thing confuses me...havent we read many times the situation ahead of China.....may be the Indian banking system is a bit safer than the west but still that doesnt mean growth .........
I still think we will see 2% on the 10 yr. The fed is just jaw boning the markets, deflation is here.
Bingo. End of credit expansion in earnest. We'll have diminishing QEs along the way... allowing some to get siphoned off to the rape van. The hope is a controlled demolition that lasts long enough to bolster cash reserves/balance sheets of the club and allow additional consolidation, feeding off the lame. At each level of consolidation, it becomes monumentally harder to break them up... and the game gets to last a little longer. Austerity is a bitch.
my July shorts are dead too....
As echoed from FOFOA, the only item one can now count on is that with which the fiat currencies value themselves, Gold.
Look at the 2 year: 0.53%
Holy smokes. If this isn't a forward looking warning, I do not know what is.
Always reminded me of the Dave Attel gag about when you see a naked man running down the street, "YOU RUN WITH THAT MAN!" Something bad is behind him.
The situation is eerily reminiscent of 2007. Then, after an eventful summer which marked the start of the subprime rout, the fed started to cut rate agressively and the S&P made its final high in October. The logic was "buy anything but don't keep cash, inflation is coming, the Fed won't let the nuclear kondratieff winter run its natural course". The anticipation of QE.2 is having the same (temporary?) effect.
+100
By August the HFs were content with the "worst being over" and the S&P was on to new highs.
Of course, then the Fall season came...
So basically lower bond yields with a higher POS market doesn't surprise me.
All I can think is someone is going for broke.
Desperate manifestations.
Lol! Logic is indeed dead. I wonder if the moves we're seeing are a symptom of internal stress in the markets. Liquidations and low liquidity that we can only guesstimate about.
Oil may spoil the otherwise perfect plan of the Fed. There are no "bond vigilates " left. But maybe we now have the "oil vigilates". If evry easing move by the Fed is met with a 10% higher oil price - the message will be clear - you cant win that way.
If we are looking ahead to a pedal to the metal Fed - then it seems to me oil, gold and related equities are relatively cheap. Bond yields will of course be artificially held down by the Fed - but bonds are stupidly expensive and a pure bet on the Fed successfully manhandling the markets - maybe short term - but with a black-swannish risk to it.
And how exactly are they able to do that? Don't give the Fed the credit they don't deserve.
Bernanke moves the market with the breath of his nostrils. Wow. Hes like God parting the Red Sea. First Commandment. Thou shalst buyith Google whilst I begat the Tax payer
Property is always a good investment done intelligently. But I suppose you could say the same for almost any investment.
Though you can't be the fee simple absolute as a hedge in perpetuity. Especially if we're moving toward corporate feudalism.
The world appears to be perfectly bifurcated into deflation and inflation camps, thereby supporting both markets. But then, if the bond and equity markets are rising simultaneously, then they will eventually fall simultaneously. Being that the global financial structure is just one giant ponzi scheme, they won't fall, they will collapse when the unforseen trigger event hits. Like a neutron bomb, money will disappear, leaving only hard, tangible assets standing. The joke's on all of us.
Indeed. No need to pick a camp: It's going to be deflation for things that people either do not want or wouldn't afford at any price. It's going to be inflation for everything we NEED.
Me: Long toilet paper
Postscript: Um, dudes? Please don't give me math problems whose answers don't fit in the CAPTCHA box. Multipy 2 digits with a negative two digits and . . . Well here goes, this is probably my second attempt to post.
may be we should be looking upto the HEAVENS for some logic:
http://www.safehaven.com/article/17678/global-catastrophe-alert
You had me until that guy referred to Pluto as a planet!
(kidding...)
And to think only 30 degrees separated the Jews and the Nazis.
This was some seriously funny shit...especially the part about technical analysis being more useful than astrology.
Sorry, I think I'll get some PMs now, and reserve some fiatscos to get more later.
Planning on the crash absolutely taking down PMs is asking for it.
I know a safe bet...French Revolution 2.0; coming to a Fed near you!
Turn that one into a synthetic why don't-ya!
"If it were possible to take interest rates into negative territory, I would be voting for that."
- Janet Yellen -
Nuff said.....
Mambo #99:
One, two, three, four, five
Everybody in the car, so come on
Let's ride to the liqueur-store around the corner
The boys say they want some gin and juice
But I really don't wanna
Beerbust like I had last week
I must stay deep
Because talk is cheap
I like bernanke, yellen, mishkin and Rita
And as I continue you know
They are getting sweeter
So what can I do I really beg and you my Lord
To me q-easting it's just like sport, anything fly
It's all good let me dump it
Please set in the trumpet
Chorus:
A little bit of Geithner in my life
A little bit of Owebama by my side
A little bit of CONgreff is all I need
A little bit of interest is what I see
A little bit of Bullard in the sun
A little bit of Mary Schapiro all night long
A little bit of Dimon here I am
A little bit of you makes me your man
And jump and down go and move it all around
Shake your head to the sound
Put your hand on the ground
Take one step left
And one step right
One to the front and one to the side
Clap your hands once
And clap your hands twice
And if it looks like this
Then you are doing it right
Chorus:
A little bit of Geithner in my life
A little bit of Owebama by my side
A little bit of CONgreff is all I need
A little bit of interest is what I see
A little bit of Bullard in the sun
A little bit of Mary Schapiro all night long
A little bit of Dimon here I am
A little bit of you makes me your man
I do all
To fall in love with a clownbux like you
You can't run and you can't hide
You and my gonna touch and sky
Chorus:
A little bit of Geithner in my life
A little bit of Owebama by my side
A little bit of CONgreff is all I need
A little bit of interest is what I see
A little bit of Bullard in the sun
A little bit of Mary Schapiro all night long
A little bit of Dimon here I am
A little bit of you makes me your man
@buzzsaw99
This made me strangely happy. I guess it's all laughs on the way to the asylum.
It makes perfect sense if the objective is to relieve us of what's left of our monies. They're shakin' us upside down just in case there's anything left in our pockets.
This is enough to signal danger ahead. Pricey UST's with low yields are still safer than over priced equities with little to no dividends.
On a recent afternoon, Lucy Johnston, 37, an accountant from Tulsa, Oklahoma, could be found at the Fashion Show mall on the Strip in Las Vegas. She’s cutting back on shopping and eating out because of the recession.
“It’s really tough right now,” Johnston says. “I don’t do many full-on spa days anymore.”
Yet there she was, shopping and vacationing in Vegas with her husband.
“We’ve pulled out all the stops. We’re staying at the Bellagio,” she says.
Those zany, devil may care, damn the torpedos accountants sure are a hoot.
This is a perfect example of why "tax reform" (simplification) is nothing more than a pipedream. If any meaningful reform was implemented, the need for tax accountants would plummet which would probably force "Lucy" to find another profession that likely pays significantly less. Therefore, no more pulling out all of the stops and living large at the Bellagio. The chance that highly compensated service employees would accept this in return for a manager position at their local McDonald's is zero. IRS and state tax employees would be raising their torches and pitchforks in support.
WTF should investors buy into small companies in this paradigm?
You have got to be f***ing kidding me
2015!? Unlikely.
There will be a new system in place by 2012.
There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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