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Many Questions - No Answers
Another absolute pasting in the bond market today. I have been
anticipating something along these lines, but this is happening much
faster than I expected. I suspect we are near a tipping point . Either
the run on the long end abates and we find a new trading range or the
30-year is going non-stop to 5%.
There is an interesting little sideshow developing. QE-Lite is getting
smaller by the day. This program is the balance sheet top off of the
original QE where the Fed bought MBS. Mortgages prepay when interest
rates fall. But the rate of prepays declines sharply when rates go back
up. In addition, the mortgage gate problem has gummed up the process and
we are now in the holiday period where, by recent tradition, the
bankers prove they are nice guys and suspend all foreclosures.
How much are prepays declining? How much does it knock off the estimates for QE-Lite related Treasury POMO buys? Good
questions. You can be sure that there are a bunch of deep thinkers in
the bond market who are trying to figure this out. There were estimates
that this would total as much as $300b through 6/30/11. Whatever your
estimates were, you have to cut them today, by a third to a half. Does
it matter if the sum of QE-2 and QE-Lite is reduced by 100/150b
(10-15%)? I’m not sure. But it’s a new wrinkle in the puzzle.
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I keep
an eye on the relationship of the 10-year bond and the S&P. From
time to time this pair shouts out about stress. That the lines crossed
today may not be significant. But it is an interesting milestone.
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Last summer there was a period of time where the bond’s performance lined up perfectly with the S&P. Strong bonds = Weak stocks. Then the correlation went away. But now it has come back. It is the exact opposite today than when it was warm. Now we have Weak bonds = Strong stocks.
Does this mirror image repeat performances mean anything? We shall
see. In the past, the correlation breaks (hard). The question is, which
leg moves where?
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So, what did you think of today's action in gold Mr Hendrix? Classic play - rising overnight market, sold down hard starting at 8:30 eastern. Looks like Asia is properly chastened now, so maybe tomorrow will be a better day.
I liked today. So Blythe still has a little ammo, we know JPM is done with their long shorts. With the wide range of trading finishing to the upside I am most certain there will be multiple days during the next few weeks where gold trades up dozens of dollars. I think $1500 by the 21st is a lock and I would not be surprised if we broke out to $1600 this month.
30 year decline is the signal given by buckler about 2 1/2 years ago. my guess is that when it does happen the only money game left will be physical gold and silver. rice and beans will be worth their weight in gold.
"rice and beans will be worth their weight in gold."
Obviously someone who has never bought gold, rice, or beans.
Most recent buy: Kagayaki brand high-end Japonica rice, 20lb bag $24.99 (cheap!).
rough rice has not enjoyed the commodities bull run this year. if inflation in China is a huge issue then rough rice might be a buy. i will admit that i know very little about rice fundamentals though. anyone have any info?
http://finviz.com/futures_performance.ashx?v=16
upon further inspection, the rough rice folks have been pretty happy in the last 6 months.
http://www.finviz.com/futures_charts.ashx?t=ZR&p=w1
I wish I had the foresight to stay with the hui or similar index over the last decade. But volatility shook a lot of people out. The biggest mistake in my career was selling my gold index low out of fear in 2008. I can't believe I timed the bottom perfectly with my sell. That's when I learned the hard way to sell my speculative positions on the first sign of weakness and not to slide down the slope of hope.
define 'speculative' please Jr., 'cuz if a ten year bull has passed you by I for one would be fascinated to know what you think it is a decent risk to hang onto for more than 8 seconds.
You sure are a chip off the ol' blockhead; say, is your dad still making egregiously erroneous top calls on the Precious Metals these days?
Regards
its all about the "dollar cost averaging" baby
The "bottom" can be zero. There is no shame bailing out of a falling investment. In hindsight, C was a steal during the dark days at 76 cents. But back then it could have also run to zero. I wasn't going to take that risk.
Deep thinking, BK.
Nice divergence on the daily RSI and price........SP, Dow, NAS100, DAX and FTSE.
Irish vote Wednesday, right?
announcing an early end of qe2 because fiscal policy is now aligned "properly" would not be backtracking and would probably cause strengthening in bonds.
"announcing an early end of qe2 because fiscal policy is now aligned "properly" would not be backtracking and would probably cause strengthening in bonds." /SARCASM OFF ??
It IS possible...QE2 COULD BE ENDED, soon
No matter HOW many 30 year LONG BONDS PURCHASED AT PAR .
1)....it isn't working....hence the REAL DEMAND by industry for refinancing, and calling-in old higher interest bonds...EXISTS...causing the New issue Bond market to DEMAND more interest coupon PAR RATES..
2)...'deflationary forces' = the"lack of industrial supply side expansion",
no longer exists...finally INDUSTRY sees a definite conconcept of EXPANSION and also, AFTER TWO YEARS...EXPANSION IN A SPECIFIC KNOWABLE FASHION...the NEW NORMALis becoming clear, the FOG OF WAR is clearing...
3)...this growth of 'green shoots' is NOT simply a restart of pre-existing industries, nor fresh price discovery in housing..
INDEED MUCH CONTINUING UNEMPLOYMENT WILL CONTINUE, MANY FACTORIES SHUTTERED PERMANENTLY, MANY CITIES and their empty housing will REMAIN EMPTY, houses rotting in-place.. wrong places...LOCATION LOCATION newchanged locations...Ghost Industrial areas and Ghost Towns...
4)...meaning, TOO, that the CREATIVE part of the NEW NORMAL is beginning...MUCH SOONER than expected...and that the NORMAL 30 YEAR RATE for AAA+ treasuries, of about 5-6% will be achieved SOON, and then STAY THERE...
the continueing HIGH UNEMPLOYMENT...no 'bottlenecks' in the economic metabolism...no abnormal inflation, but rather a NATURAL return to the desired 3-4% / year that has been the average devaluation/year since about 1913 = 20X ( a nickel THEN = a dollar NOW )...
GOOD NEWS....not for the unemployables, not for city/state/federal employees, not for those whose 'nestegg' was their house inflated in price...underwater...
but there ARE other citizens, STILL WORKING, who stand to do well regards their final retirement funding...(self-funded, obviously).
... CREATIVE part of the NEW NORMAL is beginning...MUCH SOONER than expected ...
You may be correct (if I read your post right), that we are at the beginning of a new cycle based upon this idea of a "new normal." It is also possible that we are experiencing the short term euphoria of free money dispersed by Bennies helicopter.
The problem is our government will not allow the creative destruction that is required to clean out these "ghost towns" and make them productive again. Also, those "unemployables" are truly that, they lack the skills and education and are overpriced versus the world's near unlimited supply of unskilled labor. What is their lot?
I hope you are correct, but fear you are wrong.
sschu
Nice graffiti
Graffiti says "RISK", cool.
I thought it said "Bitches" for a minute there.
+1
Why did this get junked?
So as an artist, Bernanke multi talents! Economics and graffiti.
defacing and debasing.
HA!