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Are You Prepared For Another 2008? Pt 4
So why is
Bill Gross, the Bond King, dumping US Treasuries?
This is the
28-year weekly chart of the 30-year Treasury’s performance. As you can see, we
are about to break the trendline that has supported Treasuries for more than 20
years.
In fact, by
some metrics, we already have.
Bill King
whose research I respect recently noted that the yield on long-term Treasuries
has already broken above its 84-month (7 year) moving average:
This is the
first time this has happened in 20 years. In fact, the picture is even uglier
when you perform a close-up of the above chart: it’s clear that the yield has
not only broken above its 84-month average, but that it has fallen to re-test
this level and BOUNCED, indicating that the 84-month average is now SUPPORT
instead of RESISTANCE.
In simple
terms, higher interest rates are coming very soon. I’ve stated before that I do
not believe there will be a QE 3 and that it’s very possible QE 2 will not
reach completion in June 2011. If things get much uglier on the long end of the
Treasury curve it’s highly likely both predictions will come true even faster
than I expected.
As you can
see, the 30-Year Treasury only has one support line left before it gets to the
line that has supported it throughout its bull market of the last 28 years. When
we take out that line, the US Debt Crisis will hit in full force, as our
overleveraged financial system breaks down once again.
On that
note, if you’re getting worried about the future of the stock market and have
yet to take steps to prepare for the Second Round of the Financial Crisis… I
highly suggest you download my FREE Special Report specifying exactly how to
prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival
Kit. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
of 2008).
Again, this
is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com
and click on FREE REPORTS.
Prepare Now!
Graham
Summers
PS. We ALSO
publish a FREE Special Report on Inflation detailing three investments that
have all already SOARED as a result of the Fed’s monetary policy.
You can
access this Report at the link above.
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q3 is already happening, some head fakes going on as effective as spitting in the ocean. but the fed game continues
some how the paid letter people like to make headlines with
BS,,,,
Japan is and will print like heck,,, sell bonds .. sell stock ,, who's buying ,, need another 2 trillion too back up national debt .. where is that coming from .
the fed will print , send out streams of fiat unreported, into the caymans .. into the isle of man.. into the city of England
into the nations of euro land ,
what is this magic wand that the fee only letter writers wave into the land of bullshift
the fed is a political appointment . a bank appendix,,, the banks will not go down this easily,, they are setting on tons of noxious paper worthless mortgage,
QE endless.
The largest passenger ship in the world at the moment is the QEII
If we get QEIII we'd have to build another damn ship ;)
now for an encore I think i'll just go and junk myself
I just read this newsletter. Its like reading Steve Quayle's blog. QE 3, named or unnamed, will happen. Book it.
Oh One other thing to the people who advertise their newsletters on here. Show your client losses as well as gains. I hate when I look at only the winning trades, it screams bull ^^*^. Be honest. Thanks for the charts.
This report is _ part series until QE3 is unleashed in some form or another. All of a sudden everything is cyclical. Here's some sobering news for Graham, 2008 is over it's 2011.
I think the FED will act to end the zero rate interest rate enviroment while keeping the POMO's and QE going. This will probably lower food and engery prices (speculators might have to unwind some trades) without damaging the real economy.
So if the FED raises interest rates what happens to /ZB futures then? Do you guys think maybee they will only adjust part of the rates, IE long term or short term as a start?
you've struck on a deep topic that is usually overlooked on the basis that interest rates are usually applied as a blunt instrument
what if the Fed were to split interest rate rises in certain tranches, by certain dates, to certain market segments etc
if it had any imagination it could open a shop window to mum and dads to still get 0-1% interest loans on their homes, but raise rates for commercial loans , or only for borrowers outside the US. Or it could issue a rule to say 'any mortgages taken out from today onwards are at ++ interest %, but any loans taken out prior to this date remain on the lower % - or vice versa.
Of course each of these measures have their own inherant drawbacks as well as benefits.
I know I know, deck chairs, titanic. But in a less screwed economy it might be a useful tool to apply more differentiation and imagination with rate setting policy.
This isn't a deep topic--it's not even a topic at all! The Fed does not dictate market rates other than the discount window and the Fed Funds rate. That's it! The rest is up to the market.
The yield curve can invert, flatten, or be steep--but there's nothing Ben and Co can do about yields out the curve except through his targeting the middle of the curve with QE. The last 2 years have not been a normal functioning bond market. We are monetizing our own debt for God's sake.
This is how the capital markets work: It's based on risk/reward. The further out the curve you go, the more risk you assume therefore usually the more yield you get (except when the curve inverts).
This QE bullshit has blinded people unfamiliar with how the bond market works. Rates reflect the perceived risk in the ability to pay back debt, from the consumer to small business to big business to governments. Notice Portugal lately???The market decides what those rates should be.
The Chairsatan can't decide the interest rate for mortgages for Joe Q Public from here on out are x. The Fed can only tighten or lower the discount rate and fed funds. Period. Right now we are living in ZIRP--zero interest rate policy.
unless as a regulatory response the Fed or other agency is given powers by which it can limit or place conditionality on market rates.
my reference to a lack of imagination is a regulatory one, rather than the existing power/mandate of the Fed
If the Fed were given any more power we should all just pack up and leave. We have an academic moron debasing the dollar from monetizing the debt without any exit strategy other than monetary genocide.
With 3 trillion on the balance sheet, do you understand the ramifications if they were to tighten to some sort of normalcy that didn't punish savers? It would not be pretty.
Your reference is the end free markets or what little we have left of them. Manipulation of the bond market to serve the Fed is just another bubble creater from ZIRP.
Policy making of which you speak doesn't even exist in socialist countries. Maybe Chavez sets rates in stone, I really don't know. But no one else I know of (and I am not all knowing so such a place could exist) doesn't use market rates for loans to consumers, corporations, or governments. You check out Portugal this last week?
"if they were to tighten to some sort of normalcy that didn't punish savers? "
Another example of blunt instrumentality
there's nothing stopping regulators from saying to banks "whatever interest you charge customers, your interest paid to savers has to be at minimum 2x , or minimum+3%
I mean, its not like this tethering of interest to savers with interest from borrowers is based on a zero sum game. It would be if banks didnt engage in fractional reserve banking (making credit from nothing ) .
If anyone thinks it is a zero sum game, ask yourself why u arent allowed to fractionally reserve the money in your savings account? Now there's a thought.
Hi there! Whatcha been smoking? So you think that the Fed will tighten and still provide endless easing. Not quite how it works, Sparky. You are obviously well-medicated. Take care now.
Hard to believe no QE3. We shall wait and see, but won't some other bullshit program need to be rolled out to fund the deficits?
Charts are dull.
Why is USA broke and our boys getting mashed up for nothing much?
The burden, loneliness and corruption of America's chosen role as world policeman.
http://www.newstatesman.com/uk-politics/2011/03/war-mill-leone-intervene-iraq
Vietnam taught me that not only do i love the smell of napalm in the morning but also 'War is a racket'.
....a racket. ... + 100
Not me that said it, but a true american hero
http://en.wikipedia.org/wiki/Smedley_Butler
Judging by the lack of discussion here mr summers is getting a bit repetitive.
Excellent info! Thanks Graham.
And, emphasising that your linked reports are "FREE" is really much more palatable. Inviting actually. (ZHers are a tough crowd.) Thanks.
I am not Chumbawumba.
breaking a historical trend only suggests that it is WISE from any sence of fiscal prudence for the fed to raise interest rates
however, there is no mechanism compelling them to observe wisdom - as witnessed time and again of late.
I've never had anyone on Zero Hedge explain to me how the Fed would be compelled - if the music stops its all over, so the music never stops
Why would the fed stop the music by raising rates? Its only bringing its own demise forward, no?
I agree. We've already witnessed the Fed's robotic incantation of "inflation is expected to remained at low levels" despite price action and revolutions to the contrary. There may come a time when the Fed is truly forced to raise interest rates, but I wouldn't want to bet my money that it will happen by June.