2s10s Breaking Into A Deflationary Pattern

Tyler Durden's picture

Another chart for idiot day traders who think that having a snapshot of a developing market is sometimes relevant. Indeed, we do forget that every data point is always continuously priced in, and need to be violently reminded of that fact: thank you Efficient Market Hypothesis.

Anyway, 2s10s has broken out of its holding pattern from the past 5 months. And to continue, since we are quoting the University of Chicago School of Business, "deflation does miracles on upward stock valuations" and "inflating untenable debt via deflation always results in comic consequences."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Project Mayhem's picture

see attached technical diagram

pivot's picture

the flattener trade has been biggest no brainer for last 3+ months.

Steak's picture

+1 esp when the agressive steepener was the way to go in the prior six months, a shifting student body isn't as hard to predict as all the white noise might suggest.

bonddude's picture

All the steepeners I've put out in the last year have been called. Yahoo. turn and burn.

nopat's picture

Damn you and your IRC-driven front page polls.

Ok....so what's the play?  We print more dollars, inflation spirals out of control, and people refuse to hold our debt.  Or the economy shrinks, wages contract, deflation rears its head and we can't afford to pay the debt back.  Which scenario is more likely, or because of all the financial engineering used to keep the engine idling at tick-over are we going to see a whipsaw effect?

Crab Cake's picture

Thanks Mayhem, I just blew DrPepper through my nose...

Anonymous's picture

Thats nothing I just blew a snot bubble in a public library...funny to watch everyone run for their purell but a bit embarassing

Assetman's picture

ROFL!  That's the funniest thing I've seen posted in quite awhile, Mayhem.

Village Idiot's picture

Finally, a chart I can understand.  Thanks, PM. Also, I don't think that comments like this degrade the ZH experience - it's the content.  case in point.

economessed's picture

P. Mayhem:  best.  chart.  ever.

Anonymous's picture

I see what you mean Mayhem!

The deflation whale has become full and is gently throwing the stock market up to new hights.

Green shoots!

deadhead's picture

PM....absolutely your best pic to date!  that's some funny shit!

DaddyWarbucks's picture

I don't quite get it. Could you add some charts?

TumblingDice's picture

nice, this explains everything.

mule65's picture

Has anyone seen the PPT?

I need more cowbell's picture

Quarter's over, dude. Them boyz be exhausted, Monday was a piece of cake what with them Jewish fellers all gone, but shee-it after that this week's been a bitch. Catchin up on some Z's.

Gilgamesh's picture

Preoccupied in DC today.

Mos's picture

I know, for the time being, that demand for USTs will persist with the "flight to safety" episodes but what is the deal with Gilts?  Seems to me the sterling will(should?) collapse long before the USD.  Although in today's environment anything is possible and investors might take the never ending bid at Gilt auctions by the British government as a sign of strength.

Fruffing's picture

Note we're not hearing much from Tony Crescenzi at Pimco. 

 Smells like his job 1 was to talk down the long bond while Big Bill hoovered up 44 pct into the world's largest bond fund.

That's a timely verb, eh?


Steak's picture

To put it the trade in ETF terms...Long TLT, short HYG.  In the past 3 monts thats a break-even trade but i have a feeling its about to be a break-out trade.  Then again, PIMCO did miss 2008's Treasury parade.

Gilgamesh's picture

Been watching TLT technicals lately for sport.  Broke out on Monday, and now trading above the 200DMA.  Serious resistance starting just under 100 and up to 105, though.

bonddude's picture

Tony was on Fast Honey yesterday and he insulted Finerman good. "that's a bit of circular logic".

Anyway, Bill is buying Government backed bonds across the board with an eye toward upcoming

Deflation, which is a contrary view that by this article is gaining traction.It will be a good while before inflation kicks in IMHO.

etrader's picture

Those Chicago School of Business grads will be turning to disciples of  Chartalism to explain how Debt dose not matter anyway in a fiat system. :-)

Minsky's will have the last laugh though with those Chicago followers!


Cognitive Dissonance's picture

This is what I love the most about ZH. Very smart and witty comments from a diverse (and clearly aware) reader base.

Project Mayhem, you da man. More times than I care to admit, I've been the penguin.

Hubbs's picture

And the penguins behind it representing other assets no doubt will take the plunge.

Anonymous's picture

Just put tags like Crude,Gasoline,nat gas,copper,pork bellies, housing,CRs,gold,silver,labor,profits in sequential order after Happy Feet. And have the DXY walking in the opposite direction. Deflation is a Bitch...err...killer.

Daedal's picture

Chicago School Balance Sheet Equation:

Assets = Eh, Whatever + Equity

BlueStreak's picture

ROFL - My new signature will be "Don't be the penguin!"

madmax's picture

Crap...This flattening yield curve is killing my FAS investment.   I put my last unemployment check in that turd. Some Dick on CNBC said the banks were a buy and I fell for it...again. 

Looks like I am going to need a bailout.  GS, can you pull some strings for me--Thank you.

P.S. I promise to redirect a portion of any bailout funds I recieve back to the congressman of your choice if that will help grease the wheels on this process ;)



deadhead's picture

CIT has a very attractive price right now.

If you want to diversify that unemployment check, you could throw in some AIG as well.



madmax's picture

Regarding AIG, been there done that--where do you think my second to last check went.

CIT sounds interesting. I hear Cramer said some positive things about it.  That's all I need to know right there.  Perhaps I will buy CIT after I make a killing on AIG.

I hope these stocks start to pay off soon cause I'm running out of cigarettes and beer. 

LoneStarHog's picture

Pleonasm:  Idiot Day Traders -- The Paradigm Example!

Dr Horace Manure's picture

I've been asking for explanations for some of the posts on this site for several months.  Us "newbies" to ZH (and we are growing by the day) can't always figure out what is being said.

My prayers have been answered.

Thanks to TD and Project Mayhem for delivering the best one-two punch I've ever seen.


TumblingDice's picture

Have to confirm if it is not an underthrow of the recent channel first, before labling this as a trend.