Visualizing The Past Of The Treasury Yield Curve, And Deconstructing The Great Confusion Surrounding Its Future

Tyler Durden's picture

The chart below shows the UST yield curve over the past 20 years: as is more than obvious, every single point left of the 10 Year is at record tights. The only question on everyone's lips is where do we go from here. And that is where the confusion really hits.

The confusion is further intensified by the sudden collapse in the 2s10s and the 2s10s30s butterfly. The odd thing here is that a flattening move as violent as recently seen in these two curves, has historically preceded a rise in the Federal Funds rate as can be seen in the chart to the right, before the Fed began tightening in 1999 and in 2004. In other words a flattening has traditionally been a leading indicator to an economic improvement (as liquidity extraction tends to go side by side with a pick up in inflation and thus economic growth). Alas, this time around, a tight monetary policy is the last thing on the Fed's mind, and the economy is only starting to demonstrate it is rolling over into a second and more violent recessionary round. In essence, the Fed's interventionist intention of purchasing the entire curve (including the long-end), as recently announced by the FRBNY, has completely dislocated all leading signaling by the curve itself. As a result, speculation is now rampant as to what may or may not happen. A case in point are the divergent opinions of Bank of America and Morgan Stanley. While the former Merrill Lynch is advocating an outright 10s30s flattener, Morgan Stanley is sticking to its guns and continues to push for a steeper curve: this in spite of the collapse in the 2s10s from a records steepeness of almost 290 bps in May, to under 220 bps as of Friday's close: the over 25% collapse is enough to blow up most of the funds who had positioned themselves for further steepness. At least Morgan Stanley is consistent. Yet both banks urge clients to hedge their trades and provide creative ways to do so, as both realize the likelihood of being wrong, now that the Fed is openly the biggest market participant, is probably higher than the inverse.

Of course, it is now obvious what the Fed wants to achieve, as it gets ever close to using the last available nuclear option: outright monetization of every single asset class. The graphic representation of what Bernanke would like more than anything to be the economic reality is presented on the chart below.

We hope that when looking back in 2012 at this post we are proven wrong, as a completely flat yield curve coupled with an economy that is collapsing ever faster, is the surest way to an outright stock market supernova, that will take obliterate all asset levels in a bout of hyperdeflation (for leveraged items), followed by hyperinflation (for items purchasable by banks with discount window access).

But back to the confusion. First, we present BofA's investment recommendation for 10s30s flattening. To BofA's credit, the recommendation which came out on the 11th before the FRBNY's surprise announcement it would also purchase 30 Years, despite previous indications it would only focus in the 2-10 Year belly of the curve, did anticipate that the Fed would go hog wild in buying the very end of the curve as well.

10s-30s Treasury Curve flattener; long 2m30y Receiver

We recommend two trades to position for an outperformance of the long end of the Treasury curve – 1) 10s-30s curve flattener and 2) long 2m30y ATM receiver

Our main rationale for the outperformance of the long end is an asymmetric response to Fed buying of Treasuries in the 10year+ sector. We believe that the market has significantly underpriced the likelihood of Fed buying of longer dated Treasuries. As Figure 9 highlights, most of the decline in rates has been led by the 10year. Thus we believe that a 10s-30s flattener position offers a 3 to 1 payoff ratio. The market is not looking for the Fed to purchase securities in the 30yr sector, but we think that this is a misinterpretation of the NY Fed operational statement. In 2009, even though the Fed concentrated purchases in the 2-10 year sector, it bought about 15% in the long end.

If the Fed does buy 30s, which occurred in the first week of purchases after the Fed announced the program in March 2009, we believe that the long end will outperform significantly, flattening 10s-30s. If the Fed does not buy the long end in the near term, we believe that the curve will not steepen on disappointment since the curve has not flattened on the back of the announcement yesterday.

We like putting on the trade today right before the Fed is expected to announce the schedule of purchases for the next month. Further, we believe that position unwinds in 10y-30y flatteners have pushed the curve to unprecedented levels (Figure 8).

One risk to an outright 10s30s flattener trade is that the curve may steepen sharply due to any further capitulation of flatteners. Thus, we also suggest a
2m30y receiver position. We expect the 30-year treasury rate to decline in case the Fed announces purchases in the 30y sector, which should also result in the decline of the 30y swap rate. This trade is protected from a further steepening of the curve by the size of the receiver premium.


Flattener: We recommend shorting the 3.125% of 5/19s versus owning the onthe- run 30 year. The 5/19s is cheap to borrow in the repo market and the SOMA holds 7% of this issue. Further the 2018-19 sector is rich on our spline. The on the run 30year is marginally rich on the curve, but we own that sector for liquidity premium and the Fed barely owns this issue in the SOMA. Specifically, we recommend buying $44mn of the on-the run 30 year Treasury and selling $100mn of the 3.125% of the 5/19s at a spread of 144bp

Receiver: We buy $5mn notional of ATM 2m30y receivers at 260bp per notional. The break-even rate for this trade is 14bp below the forward rate.


The biggest risk to this trade is positioning led. Since 10s-30s has been steepening for the last few months, the flattener trade has been crowded. However the aggressive flattening over the last week suggests some capitulation on these positions. Thus positioning might be a little cleaner today.

Yet no investment recommendation on rates can be complete without the opinion of Morgan Stanley: the firm which has been calling for dramatic steepening on the heels of a second American golden age. Over the past year, MS' Jim Caron has expected that courtesy of the Fed's prior actions, the US economy would skyrocket, and the result would be a curve steeper than ever. While Caron was correct through May (for all the wrong reasons as it now turns out; his call for 5.5% in the 10 Year at year end is now dead and buried), the past 4 months have shown just how horribly wrong a thesis that appeared correct on the surface may be, when the actual drivers are completely disproven to have been in any way relevant. Yet despite the increasing bear flattening of the curve, Caron continues to push the steepener trade (presumably not to those who have lost a unlevered 25% from the 2s10s' peak some months ago). And with the Fed now the purchaser of first and last resort of every point in the curve, it is obvious that the flattener is the Fed frontrunning trade. Which in itself is a paradox, as further flatness will increasingly slow down the economy and reduce profit margins for banks and mortgage originators (not to mention once again bring about a spike in NPL levels).

Regardless, for a combination of a weak mea culpa from Caron, together with an intransigent and resolute decision to stick with the "Steepener or Bust" theory, here is Jim Caron's thesis (as well as the natural hedge, in the off chance that just like before, Jim is completely wrong on both the shape of the curve and the shift in the economy), which he now affectionately (and falsely) calls the Fed's "New Regime."

A regime change is underway for the Fed. It is that they are becoming reactive instead of proactive in their use of tools to stimulate the economy. Repeatedly they have mentioned their policies will be data dependent. Supporting this thesis was the announcement from the Fed to purchase USTs. We think it was premature and reactive to weak data from May and June and ignores the strengthening in equities and positive sentiment that goes along with it. The consequence is higher term premiums. Not only do Fed actions ignore the possibility for data to improve in Q3, they also foster a risk of debt monetization. Thus, we argue that although the UST 2s10s curve may flatten, it will remain steeper than ordinary – the steepening of the forward curve supports this view and risk for further record-breaking steepening of the UST 10s30s curve persists.

What's in the price. The market is priced for a slow move to higher Fed Funds rates. Based on the Fed Funds futures market, the Fed is priced to hike only once by the end of 4Q11 to a level of 50bps. Where we differ is that we believe the Fed Funds rate will be at 1.0% at that time (Exhibit 1). This is not in the price. As one can see, a 1.0% call for the Fed Funds rate by the end of 4Q11 is pushing the envelope of a market implied confidence levels as derived by the Fed Funds options market.

Regime change. A key take-away about our rate call, which should not be lost on anyone, is that we expect the yield curve to remain near its cyclically steep levels despite our expectations for the Fed to hike rates in late 4Q11. This is more than just nuance. It is the source of why our forecast for UST 10y yields tends to be higher than consensus (Exhibit 2).

The reason is that we argue that the Fed is taking a reactive stance instead of proactive in terms of inflation risks. The result is that inflation risk premiums, and subsequently term premiums on the yield curve, will be higher going forward. Said differently, the curve is likely to remain stubbornly steeper for longer even in the face of lower inflation. This is the regime change we are referring to.

Record breaking curve steepness. The record breaking steepness of the UST 10s30s curve supports our thesis for a regime change toward steeper curves. Investors have turned toward buying the belly of the UST curve, the 5yr and 10yr sectors, in an attempt to buy yield as they expect the Fed to be on hold for an extended period. This will only be accentuated with the Fed’s recently announced plan to purchase USTs. But there are limits to this strategy and it seems to end at the 10y point on the curve. Beyond the UST 10y point we note that the term premium continues to rise, as measured by the all-time steep levels of the UST 10s30s curve, and the same is true for the UST 5s30s curve. Both curves highlight the relative richness of the belly to the 30y point (Exhibit 3).


But that’s not the whole story. Even the 2-yr forward 2s10s curve forward curve is steepening. It’s near the peak set back in 1992 despite the fact that the spot curve is flattening. Usually major turning points for spot and forward curves are in sync within weeks of each other. However, today the spot curve is out of sync as it peaked 6 months ago while the forward curve keeps steepening (Exhibit 4). This reluctance of the forward curve to flatten supports our view for higher term premiums as Fed policy is more reactive and risks of debt monetization.


Diminishing returns to investing in longer maturities. Investors see diminishing returns to investing in longer maturities because inflation risk premiums are higher. This defines why we think the curve will remain steeper for longer despite the fact that core CPI will likely be lower than average. The irony is inflation risk premiums will be higher despite lower absolute levels of inflation because the Fed is at risk of falling behind the inflation curve. This is the critical linkage we want you to make because it explains why our call for back-end rates tends to be higher than consensus. Simply, it's why our call is differentiated.

While this is all great in theory, those who wish to bet that Caron will be as wrong now as he has been in the past, are advised to read that below section very carefully.

The Risk Case: Slower Growth and a Deflation Scare

The short-term dynamics may trump the long-term. Economic data over the next 4-6 weeks are critical because if they show softening, then it will be unlikely that we get above 3% growth in 3Q, and for that matter in 2H10. 3% 2H10 growth plus 1% inflation is at the core of our assumptions for 10y yields to rise to 3.5% by year-end. If this does not develop, then the risk is we get 2% growth; a threshold for a deflation scare as we see it. This is the risk scenario that could bring the UST 10y down to 2.00% - 2.25% and the UST 2y to 0.25%, flattening the spot UST 2s10s curve substantially.

In other words, everyone has an opinion, but more importantly, everyone is now fully aware that that opinion is very likely patently incorrect, and driven exclusively by one's position as a sell-side pitchman for a bullish economy, which has at its core the requirement to keep the ponzi going and to extract capital from clients on the sidelines, as they shift from realist to kool-aid optimist.

The bottom line is now that the Fed is once again actively involved in controlling the curve, and thus risky assets, the result is utter confusion. If two of the biggest investment banks can not agree on something as simple as the shape of the yield curve, how is it that they or anyone else, can have an informed opinion on where assets that return more than 4% (in 30 years) will head in the future. Essentially, uninformed coin flipping is now the best paid occupation in the world.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
VK's picture

Essentially, uninformed coin flipping is now the best paid occupation in the world.

Paid for by the dear taxpayers of course.

BlackBeard's picture

10 bucks says that BOA will be wrong.

MichiganMilitiaMan's picture

Correct! Or, we lose our heads and our a*&$s

berlinjames02's picture

Tyler lied. The graph isn't the Treasury yield curve through time- it actually shows the time scale of the Tacoma narrows bridge. Boom, bust, boom, bust... BOOM!

Here's a better visual:

tj3's picture

All that 1st (which I wish had a longer time duration) chart makes me say and feel is;

jesus fuckin christ

Chartist's picture

I am sticking to my guns:  A ten year note with a 1.5% yield....and SPX 480.  We're not Japan because we have land to develop or farm, commodities to exploit, and an army to waste money on.....

redpill's picture

The Projected Treasury Curve chart looks rather like the ocean receding prior to a tsunami hit.  How appropriate.


Hang The Fed's picture

+1  LOL, and when that wave finally comes roaring in and breaks on the shore, just imagine how many of us will swept away with it?  Now is probably a good time to stock up on candles, canned food, and guns.  I hear that, in spite of the grunting, farting death of the RE market as a whole, there's been a recent uptick in interest in cave-dwellings, since the Fed is essentially looking to leave us all completely bereft of the ability to feed/clothe/house ourselves.

It'll probably be just after the Fed finishes the task of destroying the markets and any sense of personal wealth (except, of course, for themselves and their butt-buddies at the banks) that we will see the introduction of a massive govt. program to provide all of your basic necessities, as long as you're willing to subject yourself to some series of embarrassing, obscene, dehumanizing procedures.

"Give me control of a nation's money supply, and I care not who makes its laws." - Mayer Amschel Rothschild

jeff montanye's picture

the fourth mad max film is set to begin filming (charlize theron and tom hardy to star).

ZeroPower's picture

Great post. Shorting these will still be the trade of the century, just have to be patient..

For the FI people, how d'you reckon you'll know to put the trade on? Looking for a certain limit to be breached or there'll just be a sudden pop one day?

hellboy's picture

Listening to you guys on here and people like N.N.Taleb, doing my own research and tinkering about this it all sounds to easy to be true... nevertheless I would like to ask anyone how to trade this as a private human being with a normal spreadbetting/options account... What would you guys buy to short these longer term?

Yorick7's picture

Do your choice of spread in futures, but you need to get the amounts right and deep pockets for the margin, although if your broker uses SPAN they will offset a little.  Be careful, a lot of big guys are getting run over by this trade at the moment and thats why it's at such an exteme level, the timing will be difficult to call.

ZeroPower's picture

Indeed, this question has been brought up a lot and tons and most of the time i see posts referring back to the ETFs like TBT TBF etc. Basically, without going synthetic, there is no quick and simple '$5000 in my e-trade account' way. To legit short bonds you need deep pockets. For retail, futures offer the easiest access.

Also, maybe even more simply, you can invest in the RYJUX (Rydex Inverse Gov Long Bond Strategy Inv) but the downside is youre still trying to pick the top/bottom..

As the poster above said however, getting a futures account and trading the /ZN ZF and ZB would do pretty well. Theres no accrued interest to be paid (normally you would pay the coupon) and the margin is ~10% of the market value. Also, a pair trade would work well here if you prefer to hedge by being long some decent munis while shorting the gov bonds.

Finally, you could always buy some TIPS if youre betting on inflation.

hellboy's picture

Cheers for the heads up guys/girls!

hack3434's picture

If the treasury market collapsed, why would the dollar hold up in value? wouldn't the lack of confidence and capital outflows make the dollar crash right along with treasuries? 

New_Meat's picture

we're bad, but we suck worse than the others. dang - Ned

DavidC's picture

Don't forget that the currencies are all relative to one another, there's no 'absolute' (even if the dollar is still regarded as the de facto reserve currency).

If rates go up the dollar could rise if the interest rate differential goes up compared to other countries.

The race to the bottom!


Dingleberry Jones's picture

Great info. Thanks for shedding some light on this for those of us who aren't traders.

jm's picture


The shape of the yield curve is a parameterization of the inflation-deflation issue.  Thankfully at the core of this variation is observed data which avoids all the doctrines and bullshit theory that has become just one-note annoyance by zealots anymore.  The yield curve is also practical venue for consideration, because it limits the discussion to investing.  There is no place for mad max when talking about curve steepening or inversion.  It is bounded by the assumption that things will not fall apart, and the center will hold.  This assumption is not heroic.  History shows that societies take more stress than the great depression, total plague, even civil war to utterly collapse.  There is no point in investing if you believe otherwise: you are reduced to preparation for cave-life and canned rations.   

Even within the confines of these assumptions, everyone can be wrong and being strongly wedded to a world-view can make you blind to the real world as it changes. What I fear most is confirmation bias: thinking that you are right so strongly you can't see a 2x4 coming for your face.  Sometimes you are wedded to a position because the size of trade makes it difficult to liquidate.   

I've thought about Taleb and his short treasury stuff.  It's not non-sense, nor is it asinine as I have said before. I'm pretty sure it is not a "cash" short he's talking about.  He is probably talking about a tailored options position that manages the greeks.  There is a world of difference in this and it makes me wonder if he is just cultivating a “persona”.  No offense meant in that...he is literary minded.

I myself have a pretty decided view in bull flattening; given that 10s30s is at all-time freaking highs and news-flow is terrible, I think the risk reward on the 10s30s flattener discussed in the article is favorable.  But I think the most serious risk is the bull butterfly.  A bull butterfly uses swaptions to buy receiver on the short end of the curve, sell receiver on the body, and buy receiver on the long end of the curve.  If my Sherlock Holmes impressions are right, this position will be destroyed.

First, the Fed has no desire or intention to see money market mutual funds die, but ZIRP is going to cause it.  Shadow banking needs cheap short-term funding, but returns are so low that the the market is dying.  No one rational will accept an effectively negative return when inflation is 1% and rates are 0.1% when without a meltdown situation.  Simply stated short-term rates are going to have to rise barring another meltdown scenario.

Second, as the economy deteriorates, there is an organic case for longer duration, which we are seeing.  This feeds into those steepeners closing out, which makes the bull flattener case independent of news-flow and fundamentals… rather self-fulfilling. 

This thinking, if correct, implies a compression of the yield curve much more like a flatline, meaning yields across the curve are much more the same whatever the duration.  Precisely where on the body yields will converge is an open question: 5s (concensus view), 7s, 10s (extreme case)?  No one knows. 5s has had a great year, but I think moving out in term ahead of concensus will make money.

Taleb IS right about prediction failure.  Only a fool thinks he can know the future with equal precision two years, ten years, and thirty years out.  So taking a view on 2s30s is a serious thing.

If expectations continue the risk on and risk off mentality in an extreme way, expect volatility.  A straddle built with CME contracts (ZB or the ultra) or even options on TLT can be cheap hedge/sweetener on a long or short cash position in treasuries.  More aggressively, it could become a trade. This can be is tailored to take a very precise view, and you can do the same with the term structure of volatility.

Again, this very reasonably assumes that things will not fall apart and the center will hold.   


chinaguy's picture

Thanks for this nice analysis in an (otherwise) sea of fluff

jm's picture

Breakout in the long bond this morning.


4shzl's picture

Outstanding comment.  Taleb "cultivating a persona" -- LOL.  How about another academic who's been seduced by the MSM into believing he's celebrity?   Face time on the tube = book sales; ergo, no prediction is too extreme if it provokes a call from Bloomberg or CNBC.

SWRichmond's picture

The shape of the yield curve is a parameterization of the inflation-deflation issue. 

Not trying to be a smartass, but I never got past this sentence.  The shape of the yield curve, like every other once-valuable significant market parameter, is firmly in the hands of the central bank and therefore doesn't mean anything anymore.  Read it as a meaningful indicator of market conditions if you wish to, I will choose not to.  Chartology = meaningless, interest rates = meaningless, CPI statistics = meaningless; it's called "painting the tape", and if you had unlimited resources, total regulatory forgiveness and the blessing of elected officialdom, you could do it, too.  I am not asserting they will get away with it long term, so don't throw that canard at me.

Segestan's picture

Well thats what they get for incorporating the World in their yield curve. A chart that starts 20 years ago and doesn't refect national bankruptchy can't be very reliable.

johngaltfla's picture

The only certainty I take from all this is that we will not see a 2 year yield above 1% until long after 2012. At some point, if the 2 goes to 0.25 to 0.40% yield people are going to recognize that the Fed is going to do all that it takes to "manage" or control the bond markets, free market principles be damned.

At some point, when the JGB is a larger portion of the ChiCom portfolio along with their issues gaining more traction worldwide, the world will not need the Toilet Paper we are putting out on the markets.

THAT is when our lives get seriously interesting (as if they are not now).

New_Meat's picture

Who is?

"THAT is when our lives get seriously interesting (as if they are not now)."

I'd say, not that interesting, yet.  Takes time in a "long dead time process".  The feedback ain't there.

So not for years, but yes, as the Brits say "on the way."

- Ned

rubearish10's picture

Well, with deficit spending still on the loose and low to no growth in front of us, I think we'll have a Bond Vigilante raid "before" we see yields drop much further. This does not exempt the S&P from reaching 600 and DJIA5000. In other words, the deficit issue will supercede extreme rate deflation and we'll get our equity crash (but probably in "slo mo").

FranSix's picture

Hyperinflation would certainly make up for the inflation adjusted losses since 2000 in terms of share prices and become a bull market for stocks, but not really result in any gains because the value of your asset is priced in currency.

We are no longer in the boom of the bull market for stocks since 1982 - 2000.  That's gone.  Its over.

To calculate how much you would need to make in gains on an inflation-adjusted basis since 2000, you just use an inflation - calculator and use the 'shadow stats' option:


iPood's picture

The implicit consensus in both positions is that the Fed will have the luxury of keeping rates close to zero at the short end of the curve, which will migrate to the longest end (decreasing rates there) in the view of BoA and will evoke an inflation premium (increasing rates at the long end) in the view of MS.

Perhaps the "zero rate consensus" is what should be questioned. After all, look at what's happened to bill rates in some of the profligate EU nations over the past few weeks. Even Ireland, who was reportedly trying to behave, suffered a significant short-end spike last week. Solution - short the 03/11 (or more distant), 3-month ED or sell calls thereon? Just a thought...

TooBearish's picture

The Fed's tiptoeing into monetization with QE 1.9 announced last week.  The banks and Pimco will frontrun the shite out of Ben and drive Treasury yields to their 08 lows or lower.  Look what the FED did to the mortgage market- shite it is totally disfunctional.  SPX 1200! All assets rally after the fall puke as the USD is obiterated!

With no more capacity for fiscal bailouts Ben wants mortgage rates to plumment to forestall the next wave of RE defaults, it will be the mortgage refi opportunity of a lifetime.

Obama and his hinchmen coup the fall elections from the dazed and confused Republicrats.

October surprise anyone?

merehuman's picture

after all my reading on ZH i came to the conclusion that it is stupid to actually work anymore. Pointless. Stealing is the new wave as the market and government set such a great example.

Since stealing goes against the grain(my personal issue) i am out of the workplace all together.

Thank god i done need money.Selling the truck so as i dont have ins.payments, tags lic etc. Plus i am doing all i can to have 0 (zero) connection to the dishonesty that now prevails. I personally would rather starve than take one penny of gov. largesse.

All those of you who still conduct business with the criminal market ought to be ashamed. Profit over morality and principles rules the fools

BlackBeard's picture

Would a some skittles cheer you up?

Hansel's picture

I feel the same way merehuman.  Having a job makes me feel like a slave to the gov't, required to pay the vig for them to squander away.  This sucks.

NotApplicable's picture

Ashamed? Who was it that said, "If the people demand democracy, then they deserve to get it, good and hard!"?

I just consider it a form of tough love. Don't hate the player, hate the game, etc...

DarkMath's picture

The Treasury Yield Curve will flatten until it flat lines.

StychoKiller's picture

Once that happens, I believe the Fed will crank up the gain beyond "11", hoping to get some sort of signal back into the market -- as any Electronic Engineer can tell you, even a small step impulse fed into such a system will respond with either a ringing, underdamped response or outright oscillation, which can blow out your speakers (or whatever the oscillating output is connected to) -- fuses will pop, and the output signal will flatline at either the positive (hyperinflation) or negative (deflation) power supply rail.  Better to keep the Govt and the Fed from meddling in what they do NOT understand -- but we KNOW they just can't help themselves from doing so!

TraderTimm's picture

Tyler, that is a beautiful graph of the curve. Looks like a roiling ocean wave. Superb data visualization.

I bet the people on the wrong side of the trade had an equity curve like this:

Time to check the parachute, tighten the lines and prep yourself for some zero-g.



FranSix's picture

The chart clearly demonstrates that the discount rate was higher than the long term rate for a period leading up to the Nasdaq crash,(called an inverted yield curve) and once again prior to February, 2007, where the BKX peaked out. (along with a great number of stocks) Lehman went under that year.

What followed was the crash in 2008, and the rebound.

Lower rates across the yield curve is forecast.

StychoKiller's picture

From what I understand of the way the bond market works, this wave is not going to smash anything, rather, it's gonna suck the life (FRNs?) out of the market.

agrotera's picture

Jim Caron will be right EVENTUALLY, but not until everyone following his lead gets slaughtered and says "uncle"--

RoRoTrader's picture

Debt monetization - paying of bills by printing new currency. Gov'ts must instead pay with currency already in circulation, or else finance deficits by issuing new bonds, and selling them to the public or to their central bank so as to acquire the necessary money - Wikipedia



RoRoTrader's picture

Certainly, lend a dollar and the promise is to repay........80 Cents, but we'll call it a dollar.

TonyForesta's picture

The predatorclass destroyed America.  I'm long on gold (bullion, not paper or companies) guns, ammo, water, and canned food products.  Oh... and "Put your trays in the upright and fixed position, we're about to enter some turbulence!"

ZeroPower's picture

Ah yes, the good old guns and ammo post. Was waiting for it to show up here, thanks.

mauistroker's picture

That's good an' all....I'd add things like a piece of workable land, lots of tools, practical skills, fruit trees, nitrogen fixers, cover crops/green manures, a rain harvesting system, grey water distribution, year round mild climate, friends & neighbors with "mad skillz" and hobbies/interests that you can do cheaply and locally.

Excellent and important piece TD. Thanks. Especially love the 'stock market supervova' and 'hyperdeflation' concepts.

For the other posters struggling with staying in the market....I took my capital out of play entirely and it feels great now - definite withdrawal symptoms at first but had to do it. The entire 'market' is sick joke. None of our historically useful tools, techniques & benchmarks have efficacy any longer - that's what happens when TBTF institutions are 'saved' and cronyism is crass and rife. In the money business NOTHING can be trusted anymore.


SWRichmond's picture

Fed's interventionist intention of purchasing the entire curve (including the long-end), as recently announced by the FRBNY, has completely dislocated all leading signaling by the curve itself

The government's intervention in every other asset class has done the same thing: clearly communicated their panic.  The Fed has been astride the entire financial system for the past two and a half years.  The next idiot who confronts me with talk of an "exit strategy" is going to get puked upon.  There is no exit strategy, never has been an exit strategy.  Talk of an exit strategy is a strategy in itself, and talk is all it is.  They talk about it, for months, then the next actual action taken is more support.  The entire goddamned financial system is on life support based on lies; I'm fighting the urge to completely cash out.  Why am I fighting it?  Some foolish hope?  Capital in these markets isn't safe.