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Market Update: Risk Surges Back As Confusion Reigns
Today's market action highlighted the perfect chaos that has engulfed the markets over the past several weeks, with most investors suddenly having no idea what to do with the mountain of cash on the "sidelines", and as a result putting most of it in Treasuries (remember the whole crash the markets hypothesis?), threatening to unwind the steepener trades that have become all the rage over the past several months. This is despite the just voted through $1.9 trillion debt ceiling increase, the ridiculous US budget deficit, looming state and municipal defaults, and the just cancelled MTA bond auction. Adding uncertainty to it all is tomorrow NFP report which as the BLS noted today, could probably see even greater revisions than the 824,000 presented before, coupled with rumblings of an incipient trade war between China and the US which could cause this major buyer of US heavy manufacturing to scale back its purchases. All of this is occurring on the backdrop of plunging markets everywhere, but especially in Europe where sovereign default risks are now spreading like wildfire, hitting stock and corporate levels without discrimination. And the cherry on top is that the contagion fears are spreading globally, with the Bovespa now closing 4.7% and the BZL plunging.
Yet sidelined investors, especially Insurance companies which allegedly are still in possession of a lot of dry powder, can not afford to wait. However, with structured product no longer deemed interesting due to the end of the TALF program imminently which would result in a spike in yields, the lesser of two evils is now between stocks and bonds, stocks which suddenly seem extremely risky, and bonds which are yielding nothing in light of the supply threat we are facing. Nonetheless, the winner was bonds. Yields on the 2 and 10 year Notes fell 8 and 9 bps, but neither breached the critical 0.80% and 3.60% levels. Supply on the corporate side is also surging courtesy of an $8 billion bond offering by a just-downgraded Berkshire in connection with its acquisition of Burlington Northern, as well as $9.5 billion from Kraft to finance its Cadbury purchase. We have yet to see if the massive corporate supply will be easily absorbed. Keep in mind BlueMountain just said the easy money in fixed income is over. From here on, any incremental profits will be much more difficult. And on the supply side there is a major supply coming on in the Treasury area as well, with $40, $25 and $16 billion 3s, 10s and 30s hitting the auction docket next week.
Yet the rush to dollar safety may be premature, as Hoenig announced that MBS purchases are likely to continue past March (suprise) and the Fed for now actively continuing its single-handed propping of the mortgage market, with another $12 billion in MBS purchases.
In sum, confusion prevails, and the best summary so far of the situation coming from Pimco's Tony Crescenzi:
In the past investors did not question actions taken by the fiscal authority to help the private sector. Even in recent times, investors have welcomed such actions worldwide," he said. But, "this view is evolving.
No longer are investors sitting ready with blank checks to underwrite any amount of debt that governments wish to issue.
In 2010, signs of discomfort are surfacing, with investors putting upward pressure on interest rates in developed nations in Europe, in particular the PIGS nations - Portugal, Ireland, Greece (especially), and Spain, all of which are part of the European Monetary Union.
For the U.S., its immense power means that any loss of hegemony will occur over many years.
This will help to sustain the U.S. dollar as the world's reserve currency. Moreover, with Europe under duress, there is no alternative to the dollar and there is no other bond market for the world to house its $8 trillion of reserve assets. Investors can't turn, for example, to China, whose balance sheet is unmatched, because China has no bond market. This all means that the U.S. probably can kick the can down the road before it has to worry about whether foreign investors will continue to invest in U.S. Treasuries,
Still, with the dollar now back to July levels, gold is still only back to where it was in November. That is because gold has shifted from a dollar safety play to a fiat-currency alternative. And thanks to fiat banking, there is a whole lot more to "alternate" from.
In summary, despite all the confusion, the one underlying theme is that risk is back. Welcome back to efficient markets.
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hahaha!
Harrisburg PA toying with bankruptcy...add that to the domestic mix.
Not to worry the PPT is riding to the rescue.
Hiho silver.......away.
No need to worry. CNBC has this headline...
Fast Money: Is Market About To Bounce?http://www.cnbc.com/id/35238118
It just did for 9 months.....albeit a huge dead cat one.
inevitability and math make histerical music.
Adding all the negatives, subtracting the positives leaves a lot of negatives on the table.
Full pantry, ammo garden and silver. One outa ten should survive this
reasonably well. The other nine may work for FEMA
I say the DOW ends the day at 10,000.000001, spoiling ZH's stupid hat party. Nyaah nyaah.
had intraday of 9999.99 (i kid u not)
I believe you.
10002. Stupid hats tomorrow at the opening.
Well at least volume has picked up a tad. That's good, right?
Dollar strenght? after its been a vehicle for crime?
I have no more confidence in the corrupt system than before.
Confidence and trust has been sacrificed for expediency and profit. 100 monkey rule applies to common awareness rising among the populace.
Bloated dollar is emblematic of bloated hopes and desires for more.
Cant hardly spell enuff, but i know when i have had it.
LOL did they let the market run a couple minutes extra so that they could juice the dow back over 10k?
Silver back to $12, gold to $900, oil in the 60s, S&P 500 below 1000, 10 year bond around 3.2%. Carnage in the emerging markets. But, it won't be a straght line down.
Welcome to P3!
it does appear that way
Time for the dollar to rise to its glorious heights after umpteen years of debt expansion and inflation!
wait - today was a "risk-off" day???
All week is "risk-off" so you still have time.
What money isn't a vehicle for crime?
Dollars are as strong as the paper they are printed on.
Unfortunately only 3% of our currency is in printed form.
S&P 666 here we come!!!!
S&P 450 here we come!!!!!
or may be S&P 322 ( this time the skull and bones number)
"Yet the rush to dollar safety may be premature, as Hoenig announced that MBS purchases are likely to continue past March (suprise) and the Fed for now actively continuing its single-handed propping of the mortgage market, with another $12 billion in MBS purchases."
In the not-too-distant future, the Fed will stop buying MBS, and any other garbage securities. They will discover, to their horror, they surrendered short- term treasuries for a poor grade of toilet paper. Given enough rope and time, people have a tendency to hang themselves.
DXY headed to 82. Heck, then even I might consider Au.
Ponzi is coming to an end, dow 5000 before you can blink. The market manipulators will try to keep it up until the summer then 2H watch out. Not good for the dem's running for re-election in November.
Tyler said : " (remember the whole crash the markets hypothesis?)"
yeah, I remember well but didn't understand how this could bring monney.
for each seller there's a buyer, no monney can go in or out from 2nd market.
could somebody explains ?
Sure, absolutely, all of this stuff is in play. I just don't understand how everybody can be so silently unconcerned about Iran's threat to do something profoundly wicked on February 11.
Re:JohnGoodbutter
Let me try to answer your question "where comes the money".
All the prime dealer banks can create money from thin air as long as they balance shit (oh no, sheet) within 10:1 leverage ratio. Now, as all of us know, the bank's balance sheet is good, at least under current accounting gimmick, and they have huge cash reserve. That means they can buy those Treasury as assets and put them on the balance sheet to earn, say 3%.
DOW/SP500 downtrend on the daily chart continues.
The recent equities counter trend rally has finished and the March 2009 bear market rally is over.
The dollar, crude oil and copper charts have been giving bearish warnings for stocks for months.
The DOW/SP500 downtrend commenced as forecast and the USD rally I forecast several months ago is just getting going.
My indicators can identify trend changes before they occur.
They warned me of an impending market crash back in early *2007*
The uptrend since March 2009 has been a bear market rally contained within a much larger bear cycle that started in 2000.
http://www.zerohedge.com/forum/market-outlook-0