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Submitted by John Bougearel of Structural Logic
Good read. Thank you.
But at what point does the fact that over the next few years we must issue more T-Bills than there is money on the entire planet finally factor into the yield? Although it is clear the current operators of the green shoots puppy mill are capable of completely ignoring fundamentals, I still have this uneasy feeling that a new and brutal "Captain" will be assigned any day now to our economic ship, and promptly set course to the 250 latitudes in the S&P500 seas... Tom
Fact is we don't quite know the timeline for that event risk as yet. We can certainly "feel" the inevitable is coming. The tricky part is that because we can sense or feel this inevitability, that event risk seems closer to us than it actually is, not unlike objects in the rear view mirror seem closer than they actually are. Both can bite you in the ass if you perceive that either the event risks that are past us or ahead of us are actually closer than they really are.
That uneasy feeling is good to keep with you, but it is helpful to keep in mind that market behavior is determined much less by fundamentals and everything to do shifting expectations and sentiment.
i agree with his conclusions but his logic is backwards. the bond market isn't reacting to anything Bernanke or anyone else says. it doesn't care about CPI or GDP. and bond yields are completely normal, they are merely discounting the current and future economic growth rate, real and nominal, which is what is abnormal. most of the weakness in the long end has nothing to do with "green shoots" but is the bond market steepening the curve due to unprecendented inflationary pressures (risks). if these risks subside the curve will flatten and bonds will outperform. if these pressures persist or actually begin to manifest into actual inflation, the curve will continue steeper and likely begin to drag short term rates with it to discount a Fed tightening. the main question i am trying to figure out is whether the bond bull market that he is watching has topped or needs another high.. deflation or inflation? the bond market is in charge and will let us know way before Bernanke... and we don't need a HFT algo to tell us either.
5-0 to Mexico? Dudes, we're fucked!
I stopped reading after the first sentence when it said that their analysis is based on the premise that "the markets are rational and structured." I haven't seen much of that since the Dow was at 740
Is there no level of supply which will break the 26 year bull market? This is the fundamental economic question of the age in my mind.
its completely monipulated anyway
Super typo! I'm adding that to my lexicon...
Just a little tidbit from B'berg in case you missed the article...
July 27 (Bloomberg) -- The highest inflation-adjusted yields in 15 years are helping provide the Treasury with record demand at auctions as the U.S. prepares to sell $115 billion of notes this week.
Here's the link. It is a fairly good read. http://www.bloomberg.com/apps/news?pid=20601087&sid=asvejtieUyRc
The person who gets this disturbance down on paper right will get a nobel prize. For now, the myriad pieces of this puzzle are not fitting together very well.
My sense this minute after this and Warren's suggestive piece which I did not watch, too impatient, is that we are going up in equities al a 10/2007 not to that peek just up blindly, blithely and herd/heard mentallity and then.....
We are all sensitive here to the 'what's out' of it all. And my best movie image here is Life Boat, second to Brazil, sorry TD and Marla. There is a lot that will be dumped over board to stay afloat. Whether it is Japan now or Germany in the 20's, we need to stay online with it all and prep the best we can.
Prediction-Bond market is also manipulated. Upcoming auctions have already pretty much been "sold" to ensure auctions do not fail.
We are likely far worse off than boobis americanus realizes.
Still the juggling is fun to watch.
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