Why Contrary To The Chairman's Lies, A Record Steep Yield Curve May Be The Most Bearish Indicator Available

Tyler Durden's picture

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c-rev with a twist's picture

Dude, I can't figure you out.  On one hand you openly degregate technical patterns on anything longer than '5 minutes', but then use charts exactly like that to make investment decisions.  I understand your anger at JPM and tape painting and I feel it as you do, but why do you then make decisions like blowing out your calls?  It seems to me that you should forego charts altogether and commit to the metal and buy on weakness.  If you think about it, your desire to sell only feeds the beast.

Turd Ferguson's picture

No, Blythe reads the charts and I fear she sees a chance to paint a H&S on the silver chart.

I disparage TA in the metals because the markets are now totally driven by fundos only. This drives my personal opinions. What Blythe sees and does are a completely different matter.

Re my silver calls...I blew out a couple because they expire in two weeks so I can't really take a $1 down move right now.

razorthin's picture

Looks about as headandshouldery as the SPX did in August 2010.  We know how that turned out WITHOUT the fundies.

william the bastard's picture

turd is a small, insiginificant gold pimp.

turd hovers over the dial so that he can hit the first post on zh

 

NOTW777's picture

i took trading profits yesterday off the jan 25 near term low. its been a good run

kudos to Nic L for nailing the bottom

SDRII's picture

Rhythm method

jus_lite_reading's picture

History doesn't always repeat exactly, but it often rhymes...

Point Being's picture

Holy WIKI, Batboy:  I FORGOT THIS!  (BTW:BTFD)


Midi-chlorians (also spelled "midi-clorians" or "midichlorians") are a microorganism in the fictional Star Wars galaxy, first mentioned in The Phantom Menace. They are microscopic life-forms that reside within the cells of all living things and communicate with the Force.[6] They are symbionts with all other living things and without them life could not exist. The Jedi have learned how to listen to and coordinate the midi-chlorians. While every living being thus has a connection to the Force, one must have a high enough concentration of midi-chlorians in one's cells in order to be a Jedi or a Sith.[7][8]

Creator George Lucas says that the midi-chlorians are based on the endosymbiotic theory.[9]

An ancient prophecy foretold the appearance of a chosen one imbued with a high concentration of midi-chlorians, strong with the Force, and destined to alter it forever. Anakin Skywalker was believed by many to be the chosen one. He had the highest concentration of midi-chlorians the Jedi Council had ever seen. He was possibly conceived by the midi-chlorians (parthenogenesis).[8] Lucas has said in interviews that Luke Skywalker had the same total midi-chlorian count that Anakin did at birth, though this does not necessarily make him the chosen one because Anakin did exactly what the prophecy foretold by coming back from the Dark Side and destroying Emperor Palpatine.

In Revenge of the Sith, Palpatine tells Anakin that a Sith Lord, Darth Plagueis, had the ability to use the Dark Side to influence midi-chlorians to create life and to prevent people from dying.

 

Symbiont, out.

jus_lite_reading's picture

Bravo. I remember this from long ago- when yields rise as a result of increased demand and economic growth, then you're on the right path but a slowdown of the amount of growth is possible. When yields rise as a result of inflationary pressures but decreased economic growth, then you're screwed. Or round about what they taught in kindergarten.

alien-IQ's picture

why do I love ZH? : "Chaircreature".

nuf said.

Canucklehead's picture

Is the yield curve too steep because the long end is too high or is the short end too low?

It makes a difference...

TonyV's picture

Long end is not high by historical standards.

ivana's picture

here comes a genius silver bullet idea!!!
why not making current long end look like future short end?

http://www.reuters.com/article/2011/02/02/usa-debt-bond-idUSN02213476201...

IrishSamurai's picture

Must ... close ... green ...

[Brian Sack finishes on Benron's face ...]

 

papaswamp's picture

Dude you just poked my mind's eye out.

IrishSamurai's picture

Just giving the play-by-play at 3:55 PM, every day in 2011 at:

33 Liberty

100 F Street, NE

Well, at 100 F Street it is pretty much a finish every two hours or so (depending on the internet speed, nap schedule, and ham sandwich delivery ...)

jus_lite_reading's picture

Oh shit! The basturd got him right in the eye and pushes the "UP 6.71%" on the computer. What a mess. Even his yamaka is covered.

apberusdisvet's picture

Assange is said to have recently stated that the BAC dump is a big snore; he can't find anything incriminating from the 2006 info because he doesn't know enough about bankster policy.

NOTW777's picture

gee, where are all those guys who were worshipping him

jus_lite_reading's picture

Bullshit. Show me where he said that.

jus_lite_reading's picture

LESS THAN 1 MINUTES TO THE CLOSING BELL AND THE MARKETS ARE ABOUT TO GO GREEN! MUTHAFFERS!!!!!!!!! UNBELIEVABLE!

jus_lite_reading's picture

THEY DID IT!!!!!! THOSE BASTURDS DID IT! CLOSED IT GREEN TO MAKE THAT 8 STRAIGHT DAYS!!

alien-IQ's picture

that's eight in a row for the DOW (and 12 of the last 14)..

alright people...move along...nothing to see here....

jus_lite_reading's picture

There is a reason for this- Yahoo for the past few days has had the words "stock prices" as a top entry. Know why? The average dumbass thinks the stock prices are going up because the economy is really recovering. We know the drill.

NOTW777's picture

WFMI popping on earnings

AccreditedEYE's picture

Especially not when the ying has to be so well priced, that Bernanke's midichloriancount has to be off the charts to get his liquidity extraction timing perfectly and avoid either a hyperdeflationary or hyperinflationary collapse.

LMAO!!! Nice Darth Bernanke, everything is proceeding EXACTLY as you have foreseen...

 

6 String's picture

Everything is wrong and eery. The steep yield curve is just one more indication that something is seriously going to go nuts soon.....but what?

I think we'll know soon.

jus_lite_reading's picture

Those who have been in the markets longer than Ben has had a PhD know this is getting very worrisome. This means only one thing.

BurningFuld's picture

After the elections in Ireland things could get ugly fast.  Check the current article on Mish's blog:

http://globaleconomicanalysis.blogspot.com/

If Lenihan was pushing for haircuts then haircuts are a 100% guarantee with a new government. You might want to be out of Bonds...NOW!

RobotTrader's picture

Bears destroyed again.

The PigMen won't stop until all the bears throw in the towel and start buying stocks.

Especially Tom O'Brien, Larry Pesavento, and David White over at TFNN.com who are still clinging hard to the bear case.

AccreditedEYE's picture

I'd hardly call the Index performance today "destroyed" for the bears. YAWN!! Call me when Nazz breaks out of 2800.

RockyRacoon's picture

Just wondering, how will you save yourself from the stampede?   What entrepreneurial tricks do you have up your Robot sleeves?

SashaBelov's picture

WTF does it mean:

wti/brent spread today hit all time high at -15.4/bbl!

http://www.bloomberg.com/apps/quote?ticker=CLCO1:IND

 

 

buzzsaw99's picture

Cushing doesn't need the oil at the moment. usa demand has been down.

razorthin's picture

Don't plan on being fooled into shorting again.  But here is a trade trigger everyone should have on - a buy-stop on a major index inverse etf amply above the 200-DMA (as not to get a head-fake trigger by the MM criminals).  Don't bother with a short of a long index since the issue will be conveniently unavailable upon the trigger.

If, ahem, when this happens, you can be pretty confident that it's game over.  And, you will wake up smiling one day when the rest of the world is crying.

mynhair's picture

"a major index inverse etf"

Dope has an ETF now?

Monday1929's picture

Anyone know if Japan has seen similar yield curve profile at any point over past 20 years?

ella's picture

Uncle Ben exposed his genius again by claiming that the only problem with Congress' move to prioritize the debt payment would be a computer problem.  Does he not understand that once prioritization occurs for one class of US creditors it can happen to other classes at the will of Congress?  

Now why would anyone buy treasuries and risk being included in the class that is paid last or not paid at all?  Will this scheme also filter down to the states?  Which class is next?

Watch out China your treasuries could be next.  And then maybe the treasuries that Uncle Be holds.

barliman's picture

Interesting article with multiple charts that reinforce Tyler's post:

http://www.contraryinvestor.com/2011archives/mojan2011.htm

It also highlights why looking in the mirror at the last decade to predict the future is criminal incompetence:

"As bad as this may sound, and maybe we'll look like complete idiots before the current cycle is over, the prior decade in the clarity of hindsight was characterized as having witnessed two of the largest financial bubbles in US history - the equity related dotcom/NASDAQ bubble and the mortgage credit/housing price bubble. Both of these bubbles could not have existed without Fed complicity. Not a chance."

And it has an excellent chart following this explanation:

"In the chart below we're looking at the interest rate spread between 10 year UST yields and 2 year UST yields. Of course alongside is the S&P 500 to represent the movement of equities in the macro. Very quickly, when the red line that represents the yield spread between 10 and 2 year US Treasury rates is below zero, the Treasury yield curve is "inverted" (short term yields higher than longer term yields). This is exactly what we have seen historically prior to recessions. When the red line hits a peak (mid-1992, mid-2003 and now), the Treasury yield curve is what is called "steep". Ok, we've inserted the green colored areas to represent those periods in which the Treasury yield curve travels from the point of maximum "steepness" to inversion. These are the exact periods during which equities have put on their best price performance. They represent periods of official US economic expansion. The puzzle pieces all fit together quite nicely."

This time IS different. This TIME the correction will over compensate for a decade's worth of distortion.

barliman

snowball777's picture

Fractional reserve lending and securitization could blow these bubbles with or without the Fed.

TonyV's picture

People only see what they are prepared to see.”

And why does the author think that he is any different?