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Guest Post: Financial Markets Begin To Repudiate Green Shoots Story, 30 Year Poised For New Q3 Highs
Submitted by John Bougearel of Structural Logic
Green shoots are no longer producing bullish signals for the stock market. At best, they are a mixed signal. On yesterday’s Consumer Confidence upside surprise, the high tick for the day was at exactly on the announcement at 9:00 am. The market “gets it” that the green shoots have been but a temporary elixir for the consumer. What now, brown cow that the Clunkers program ended Aug 24 and the new homeowner tax credit has largely been used up (those that wanted to take advantage of the tax credit would have done so by July for the new school year).
The bond market of course has been all over the waning of the green shoots story long before the stock market as it bottomed on August 7. This is GDP week. The chart below shows a correlation between this GDP week and last month’s GDP week. The correlation is weakened by the fact that we will not have an ECI number. But the fact remains that the rate of change off this Monday’s GDP week low is faster than the rate of change off of last month’s rally off the Monday July 27 GDP week low.
As such, the time and price model suggests the 30 year can breach the Q3 highs at 12109-12111 set on Alcoa’s earnings and Meredith Whitney’s bullish banking call on July 8-11 (when the stock market bottomed in Q3). The upside target is the upper 122 handle by Friday. The catalyst for a bond rally/equity selloff would presumably come on this Friday’s Personal Consumption or PCE report for July. Personal consumption is expected to decline from 0.4 n June to 0.2 in July. Personal Income is expected to be flat at 0.0 from a -1.3% decline in June. However, Michigan Sentiment out 45 minutes later that day should rebound and upside surprise economists given the upside surprise in Consumer Confidence which had upticked from the govt’s Clunker incentive program.
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in other news,
History Will See Bernanke As Worst Fed Chairman Last update: 8/26/2009 6:48:00 PM FORT LEE, N.J., Aug 26, 2009 /PRNewswire via COMTEX/ -- The National Inflation Association today released the following statement to its members: President Obama reappointed Ben Bernanke as Federal Reserve Chairman on Tuesday and it is unbelievable how everybody in Washington and the mainstream media is praising Bernanke for helping prevent the next Great Depression, as if the economic crisis is already over. It's unfortunate how forgetful Washington is and how the media fails to talk about how Bernanke has simply taken Alan Greenspan's mistakes and made them bigger. Nobody has the foresight to see the disaster that lies ahead because of Bernanke. Facing a recession in 2001, Greenspan lowered interest rates down to 1% and created the Real Estate bubble, which led to the economic crisis we have today. Bernanke, by lowering interest rates down to 0% and taking worthless mortgage-backed securities, auto loans and student loans onto the Federal Reserve's balance sheet, has temporarily given our economy a short-term artificial high that will soon wear off and cause our financial markets to crash again even harder. While Greenspan's destructive actions gave our economy a high that lasted for a good five years, today there are no more asset bubbles in the U.S. left to inflate. All of the inflation being created will soon drive up the prices of gold, silver, agriculture, oil, and other commodities. Unfortunately, our country does not produce enough of these commodities to benefit from the upcoming boom. Most of our wealth will be transferred abroad and the only people in America who will benefit are those with the cash to purchase these commodities and the stocks of the companies that produce them. It's interesting how on the same day that Obama announced Bernanke's reappointment, the White House Office of Management and Budget announced that they are raising the projected federal budget deficit over the next 10 years from $7 trillion to $9 trillion. This out-of-control deficit spending will only be possible if Bernanke monetizes it and creates massive inflation, and it's obvious to us that he is committed to doing so. Nobody in Washington understands that as the Federal Reserve starts printing this $9 trillion, the U.S. dollar will rapidly lose its purchasing power and if the government doesn't dramatically reduce its size, the real deficit over the next 10 years will likely be $20 trillion or more. In that case, we will most certainly have hyperinflation. In order to prevent hyperinflation, we need a Federal Reserve Chairman who has the courage to raise interest rates and force our country to endure a steep recession, rather than pushing our problems down the road and making them bigger. We will never again have a prosperous economy until we have a severe recession and rebuild a sound viable economy from the ground-floor. It is better to have our much needed recession now, than a Great Depression coupled with hyperinflation a few years down the road. Our fiat currency is very fragile and every action taken by our Federal Reserve Chairman should be for the purpose of preserving the purchasing power of the dollar. Although Bernanke talks about having a strong dollar policy, every single action he has taken has been destroying the dollar underneath the surface. While Bernanke is being hailed as someone who is smart enough to mop up the excess liquidity before we see a rampant increase in consumer prices, we know this is an impossible scenario and the world will eventually look at Bernanke as being the worst Federal Reserve Chairman of all time. Today, the corporate-controlled mainstream media is working with our elected officials and the Federal Reserve to set the American people up as sheep to be slaughtered. They are encouraging Americans to go out and spend on things they don't need, when what little savings they have left will soon be worthless. Americans need to be encouraged to buy gold and silver with their savings and prepare for the real economic crisis that is ahead. Our movie being released on Friday, Debt Slave, will be a wake up call for our country. It is important for you to spread the word this weekend about Debt Slave to everybody you know, to help prevent your friends and family from being slaughtered by Bernanke." Please spread the word about NIA and have your friends subscribe for free at . About us: The National Inflation Association is an organization that is dedicated to preparing Americans for hyperinflation. The NIA offers free membership at and provides its members with articles about the economy and inflation, news stories, important charts not shown by the mainstream media; YouTube videos featuring Jim Rogers, Marc Faber, Ron Paul, Peter Schiff, and others; and profiles of gold, silver, and agriculture companies that we believe could prosper in an inflationary environment. Contact: Staff Editor@inflation.us 1888-99-NIA USSOURCE National Inflation Association Copyright (C) 2009 PR Newswire. All rights reservedWoulda been happy with a link...
You are hit by Wall of Text.
Wall of Text hits you for 1000 damage.
You die.
Look pal, I told you three weeks ago that these people are not going to go for this type of stuff. Take it from the fool of this site. They do not like it and, do not take long to realize they do not like it. ( about 3 lines). I appreciate the time you put in on this thing. I went to the middle and read one line and knew it was you. Not only are we cutting off your country's food stamps, but, we are also no longer sending de-wormer to your women.
Can't the Fed (or some proxy thereof) just buy Uncle Sugar's 30y and suppress the yield using their magical balance sheet trash can? Will they?
They can simply print alternate currency that buys up the bonds that the fed have printed. Do it over time suck up the fractioning that is inherent in the system. But probably wouldn't take long as so much of it is defaulting anyway. It wouldn't affect anything other than removing all the horsing around that is going on. Then you simply keep the currency based on population. Inflation and deflation then occurs only for very very short period of times as it's not sustainable due to either supply constraints or demand constraints.
Watch the movie "The Money Masters" it explains everything about currency.
actually the treasury issues and prints bonds
via bureau of engraving....
They should change the name from engraving to enzombying and enresurrecting.
Market looks like a stall right now. I see sideways chop until Labor day and then some selling volume. Statiscally,and self-fufilling prophesy-wise,
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
*sigh* Why are people still so scared of the 30 year???? At least you'll GET your money back.... Especially when half of the companies out there issuing paper still have a high probability of failing..... Funny. I bet Rates drop into the 2's again before they launch into the 8s
Maybe the Chinese would love to sell you those treasuries too. You might get your money back over 30 years, but will it be worth anything? If rates spike in the meantime you will be sitting on some ugly mtm losses until you "get your money back".
The only thing scarier than holding a large amount of US Dollars is holding a promise to get paid a large amount of US Dollars in 30 years...
Now this is a man you want in congress, minus the bat of course. Can you imagine the press conferences? good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Beautiful.....
The higher bond prices go...
The cheaper speculators can borrow...
And more and more vast quantities of deficit spending can be financed....
Its pretty much Nirvana for the Fed.
And Nirvana for the quadrillions of interest rate swaps out there, luxuriating in record low volatility throughout the curve...
He who constantly surrounds himself with pictures, lacks the real thing.
Sorry man.
I have a somewhat divergent thesis. In a world awash in liquidity (for financial players at least) folks are now seeking higher yields. I see the appreciation of the 30-year as more of a money looking for a home theme. PBs don't want all this overpriced short duration debt while the steep yield curve gives people opportunities in longer durations (one would think if they've drunk the kool-aid).
I'm watching 2's n 10's. Looks like we've got a trend toward flattening which I would actually expect to continue in the face of higher equity markets.
So we can have appreciating longer dated govt debt w/o that indicating deflation expectations.
History Will See Bernanke As Worst Fed Chairman Last update: 8/26/2009 6:48:00 PM FORT LEE, N.J., Aug 26, 2009 /PRNewswire via COMTEX/ -
You are pimping a news release off of a PR wire?
Please
stupid fat fingers....
*sigh* We are in an "inflation" bubble...... When inflation hits too hard too fast, people seeking yield cause malinvestment, businesses continue to pursue unproductive activities that are not sustainable going forward.... I'm so glad we paid for all those new cars to be built :)
Have you ever read the descriptions of hyperinflation in Argentina? People spending money they received in the morning because prices would rise by evening? It is scary, far scarier than the Great Depression scenario. there will be panic when it hits here.
We've had a little bit of that here. During the 70's if you were a contractor on anything that occured slowly by the time you bid on a job and then got the go ahead you couldn't afford to do the job. Everything kept getting delayed massively. You literally couldn't do any very large project because it wasn't stable enough to price.
the inflationary agnostic need to take note
of this which is one reason why inflation is so
pernicious....it distorts price signals
without justification and without value....
and that was only with inflation in the 8-13%
range....
And we could 25 to 50 percent inflation easily once the distortions crack.
I was there in 1977-78. It was a total mess, especially when they lopped four zeroes off the peso. Half the stores had stuff marked in old prices and half in new prices. Everybody was living like there was no tomorrow...which made for some great unexpected intimate liaisons.
The latest rumor is Ben Bernanke will take a 90 day leave of absence for "family reasons". His baby printing press developed a bad case of diarrhea. Hopefully all will be well by 2Q2010, Ben's on deck for "Save the World Part II".
I didn't hear that... but I did hear that Uncle Ben will be taking a few days off for a new portrait.
Apparently, rumor has it Benny will be the new face on the new Trillion Dollar Bill.
You heard it here first.
To comment past macro data with the actual
stock market trend is nonsense, if you start
to trade on macro data, you are always behind
the curve. Like those folks who start to buy
the good news this week, when the market
has rallied already 50 %.
I agree completely with your insight that attempting to factor in macro data with the current market trend, as this always puts you behind the curve.
The lion's share of the technical indicators, though -- and here I mean the GOOD technical indicators, not mystical nonsense such as Fibonacci retracements -- indicate that this rally at least has a few more days to go. It's still too early to short. We can't see the whites of their eyes yet.
there seems to be reasonable opinion that it will
go to 10300 - whether that is a fibonacci
retracement or some other factor i don't know...
but fed money cannot be discounted and it may
well string the market along for quite some
time yet...even into october....
mob needs to burn down washington dc and hang
all of the clowns who own the town! this country is
a powder keg and the 1% elite are in for a RUDE
awakening! Not soon enough imo!
Market looks like a stall right now. I see sideways chop until Labor day and then some selling volume. Statiscally,and self-fufilling prophesy-wise, Sept and Oct are 90% losing months. People want out in the Fall. The news would have to be stunning for the markets to drive really high. I suspect there will be some anticipation of this which will force the FED to halt shorts again and maybe shitcan inverse-leveraged ETFs. So, selling will have to be done by profittaking only.
If that's the case, the options markets will be reeling it in.
The FED should know by now how gosh awful ineffective halting shorts has been.
As for inverse-ETFs, one only needs to find another exchange. I hear Vancouver is nice in the fall.
This market is going down in the next two weeks and will stay down for 2-3 months as H1N1 grips the world in fear. But maybe the death toll will be bullish because it will reduce the worker pool.
The only folks buying the 30Y to hold to maturity are stuck pensions and life insurers. That's a lot of demand, mind you. Then there are the deflationists looking for a trade. Not a very crowded space. Yet...
queued for moderation? wtf!
Since when was a two line comment on the long end of the yield curve potentially scurillious?
all anon posts are moderated.
the treasury market is rigged. duh. the stock market is rigged. duh. It has been for years. One giant sham. The future we fear already arrived. Blue Pill Prison.
.that money
will not stay in fed unless the pd are buying
massive amounts of citi and other zombie banks...
but they in fact may be doing so as evidence
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
I wonder how many folks took a lesson from the transfer of wealth from bondholders to unions at GM and Chrysler, and now are in treasuries instead...
Which would be ironic, indeed, since it was the government that forced those deals through.