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Submitted by Kletus Klump
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Sweet Jesus, all is well for now, Jessul is pleased.
http://www.youtube.com/watch?v=cQ9sJVJMiYM
Now that's some hilarious sh*t! Well played.
That video is truer that anyone of us can imagine! Where is Adolfo Nicolas, the BLACK POPE?
http://www.youtube.com/watch?v=TMCf7SNUb-Q
Awesome!
As long as were posting absurdities.
http://www.google.com/hostednews/ap/article/ALeqM5iGvAw44XehrKzx43-IAcbH...
"By RYAN J. FOLEY (AP) – 9 hours ago
MADISON, Wis. — With the district in a financial crisis and hundreds of its members facing layoffs, the Milwaukee teachers union is taking a peculiar stand: fighting to get its taxpayer-funded Viagra back."
that's f'ing pathetic. unions. what is this, the 1890s?
I'm from the people's republic of madison, this town is far from anything rational. Our biggest debate right now is a high speed rail system to link our 200-250k populace town to ~2,000k populace metro milwaukee area at fares that are higher than what i would pay for gasoline. Funded by stimulus plans no less in a state that cannot balance a budget as it is.
Oh, when I drive from madison to milwaukee i pay less and still have my car to travel around in? We are so lucky to have been chosen to pay the long-run costs of this commuter system....
damn rusty, your leaving my draws in disarray
L O V E I R O N
Iron (Fe)
Hi velobabe!
...errrr rapunzel!
How dare anyone junk that?!!!
The truth about religion (Video)
http://www.youtube.com/watch?v=TjGkRFFBd0A
Why are we even looking at this !? The system is so broke it makes no since. Peter Schiff for Pres!! Seek truth and be prepared for all you can't handle..
We need more than that. We need something along the lines of Ted Nugent.
Or replace every member of the Party of Government with a Libertarian, and let them and the (R)s fight things out. That's the kind of balance we need.
i find it difficult to look at these historical comparisons because they do not account for the ZIRP. simply put, history is great to learn from but you have to ensure that the comparison is being made between situations of similar bases. i do not believe this to be the case with fixed income today...
beyond this, i believe it is unclear what type of inflection point or critical mass was reached with the current debt/GDP & new-debt/tax-revenue ratios and how this new horizon may also alter our functional understanding of debt markets.
but thank you for the post nonetheless!
+1, new system, might I say a "new normal", except it won't be normal. will suck.
- Ned
Very lucid observation. (love the lively repartee, peppered with logic now and then.)
"A man's gotta know his limitations." (Harry Callahan.)
Completely in the crash camp, but speculative timing is rather unknowable. We can only watch and see....
One day there will be a rush out of Treasuries and into the Yellow Heavy Metal Currency.
Actually started about tComming soon to an auction near you!!
"Treasuries- The Final Bubble."
Starring Richard Dreyfus as Ben Shalom Benanke, Larry Flynt as Larry Summers, Tom Cruise as Tim Geithner, Larry David as Rahm Israel Emanuel, and Eddie Murphy as Barrack Hussein Obama.
Produced by Joel David Coen and Ethan Jesse Coen
I sorry did you say something?...I was distracted by bootay
One thing people aught to be aware of is that a top in the bond market is not like a top in the stock market and can take years to roll over due to aggregate demand.
Don't expect a sudden collapse, its not going to happen. Instead, certain tax implications with hoarding large amounts of taxpayer funded cash becomes a liability.
Because there is so much emphasis on the short term market for funds, banks will be obliged to seek a tax loophole in negative repo rates and short term treasury rates will drop below zero at that end of the curve and put downward pressure on the long end as cash emerges to be placed at the long end.
A lot of now-moribund derivatives sitting on the Fed's book are based on interest rates, so I presume that they will start to clear and trade again with negative interest rates.
There have been changes to the tax regime and to financial regulations, I am almost certain that they will reflect a conscious anticipation of this outcome, but I don't want to swim through the gobbledy-gook.
Let me get this straight; FRNs (debt) are used to buy bonds (debt) and as long as the FRN debt holds up, this vicious circle will perpetuate? What if the FRNs fail/collapse? I see the two as one in the same and will tell you-bonds are only as safe as the currency.
Yes, I know what you're saying.
There's far less risk in an FRN collapse than people realize. I think its overstated. There is far more risk in say, a Yuan collapse, which may reflect in a declining USD.
If any currency should be collapsing according to 'Austrian' economic vernacular, its the Yen. Probably the strongest currency in the world. It got there because of an excess of aggregate demand, which is related to its bond market.
And I wouldn't be surprised if the banks have some sort of negative repo agreement they aren't allowed to talk about, because it keeps them in a tax loophole, while everybody else is taxed up the YingYang.
What fascinates me is the prospect of long bonds going to zero yield. I never thought it would be possible, and it would just make a lot of people's heads (and CPUs) explode, but when you consider the amount of toxic debt not written off, and the potential tsunami of financial devastation that 'losing it' on rates would entail, it just seems like the big money has no choice but to keep a fat finger on the scale, continuing to buy buy buy the long end no matter what the yield. Over time, say a couple more years, why shouldn't the long bond plumb some freaky yield depths? Indeed, it must according to this kind of yield curve analysis.
Just a broken system. No haircuts, no peace.
I like the formula 1¥ = 1$.
dumb
If any currency should be collapsing according to 'Austrian' economic vernacular, its the Yen.
Its strength has amazed me, given my perception of their intermediate to longer-term fiscal situation. However, from a demographic age standpoint, age ratios are projected or are turning up again which favor growth. http://www.financialsense.com/Market/cpuplava/2008/1217.html However the ratios in the relevant charts don't show how their age cohorts shown compare in size to the more elderly population. Rising ratios in middle-aged worker categories might not count for much economically if they are increasingly being dwarfed in number by the geriatric set.
Wonder if that is why China has been investing in Japan by buying their bonds more recently as one of it's $ diversification plays. Seemingly favorable demographics change vs. horrendous debt load - no idea how it is going to play out.
Most people don't follow the Asia Pacific rim at all, and focus on domestic issues. But I think the Japanese banking system may be exposed to the Chinese real estate bubble, and dollars to doughnuts, provides high interest savings accounts.
Could be another Iceland in the making.
The Chinese are merely casting about for assets in a currency other than their own in all things.
So, short bonds?
Or short the 10 year, long the 2 year?
The Fed has all the fiat money in the world for now so I WOULD NOT SHORT anything right now as this will be do or die for the regime. I would buy the VXX as they can't control volatility..
there you go...
You might see a very steep yield curve between the short and long end and a flattening of longer treasuries with the long bond.
you got it backwards... the 2s to 10s is near alltime highs. if you predict reversion to "the normal" (whatever the fck that is anyway), you would short the 2yr and buy the 10yr notes or short the 10yr yield and buy the 2yr yield.
rosenberg has discussed the FDTR to 10s and FDTR to 30s a few times, suggesting a 30s of 250bps and 10s of 100bps (assuming FDTR=0).
following my earlier comment, though, those long run "normals" are not in the context of zero-interest-rate policy.... much less having the longer dated debt (e.g. >5 yr) issued/stand in the context of ridiculously unpalatable debt levels.
we'll see. i'm long bonds (playing the longer dated, for the time being) in 30yr treas and "investment grade" corporates, trying to pair stock trades and also to try to capture short/mid-term equity vol when i can. fck my 30-day holding period.
Guys with flatteners (2s10s and 2s30s) have been using 10s30s steep to ease the pain. A common steepener is 2s30s.
A 10s30s flattener will clean up if there's a rush for the exits.
That will kill you. 10Y yields going down down down. Dollar going up up up.
Until it doesn't.
Very nice charts and post Kletus - thanks!
What could overpower the Fed and force the reversion?
What is long in the tooth is wound up so tight - to the snapping point. When it happens it will be violent.
Everything is fine. The UK will buy unlimited debt from us. They are obviously the wealthiest, well-off country in history right now. 30-year yields to go negative in 2011.
If they won't buy it, then I am sure the 2nd most wealthy, well-off country in history will buy up the rest. Obviously, I am referring to the massive economy that is the Cayman Islands.
The Cayman Islands? Are you going to trust your money to some monkey down in the Caribbean?
Those must be some extremely wealthy monkeys down there then. They seem to have an unlimited amount of cash and assets. It's almost as if there wealth just appears out of thin air, as needed.
Tyler,
i follow bob chapman at the international forecaster. in his latest peice he has copy + pasted from zero hedge and not giving credit or a link.
original piece: http://www.zerohedge.com/article/ron-paul-goes-after-secs-foia-exclusivity-introduces-sec-transparency-act
link to chapmans piece (scroll down to find the copy + paste): http://theinternationalforecaster.com/International_Forecaster_Weekly/Gold_Alternative_To_Debt_and_Market_Manipulation
Abuse at zerohedge[ dot ]com
What if?...Countries who are unwilling to currently issue bonds are having them all issued by the US instead, in return for underwriting indexed debt instruments of a shorter variety via their private banks. ..it's the buying pressure on FRNs' which puzzles me.. have we missed QElite and is it a bailout of the Sovereign Bond market?
interesting. great thread too. i think ignoring treasuries and looking at muni's is key since issuance is absolutely tremendous for treasuries while the muni market is being threatened by the Federal Government. This causes a very unvirtuous cycle whereby the states and localities don't know what to do without the federal government and the federal government issues more treasuries while outlawing tax free muni's since that would allow your local government to function without the feds which of course these totalatarian wannabees are trying to prevent. in other words the value of treasuries is whatever the value of treasuries is since they cannot be hoarded. municipal debt at the tax free level on the other hand appears to be on its way to extincition...
DOW and SP500 weekly charts update :
http://stockmarket618.wordpress.com