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TIP this
The TIPS market has told an interesting story the past month. The implied inflation rate has collapsed. As of this morning, the market is pricing inflation at 1.94%%. A few month ago it was 2.5%.
The market is saying that when QE is in full force, with no end in sight, inflation expectations are high. When there is even a scent of QE being cut back, inflation expectations fall. The markets are therefore acting 'rationally'.
That the market is repricing inflation lower must be killing Bernanke. It's the worst possible outcome for him. In a Zero Bound world the only thing that Ben can do is juice up inflation expectations. It's remarkable that Bernanke can whisper about ending QE (with absolutely no clarity on the timing and pace) and he kills the chance that the economy will actually improve.
This is a complete failure of Bernanke's communication policy. It's so significant that I think there has to be another development. Ben is going to try (again) to calm down market jitters. So far, his usual tricks to goose markets have not worked. Hilsenrath has tried and tried to send Bernanke's message that the Fed is not easing up on the short end to no avail. If Bernanke says something on the record, it will likely be met with more selling. So what could Ben hint at that that might get the Bears retreating? How about:
FLASH: Fed to Cap long-term interest rates.
FLASH: Fed will increase QE if rates rise to 2.75% in 10 year note.
FLASH: Fed prepared to conduct unlimited purchases to maintain Cap.
FLASH: Cap to be maintained as long as Fed Governors deem necessary.
FLASH: Fed sees Cap as short-term measure. Cap will be eliminated when markets stabilize.
Seat belts on....
Note:
All fixed income investor have had their faces ripped off of late. I have not one tear of sympathy. Of interest to me is that the worst hit investors are those who made a bet on long-term TIPS.
Two years of gains were wiped out in a month. The Ten-year TIP has tacked on 104bp in yield in 25 trading days, the Ten-year coupon bond added only 59bp. The red ink on TIPs is flowing freely at this point. A question to ask is:
What bond fund is loaded to the gills with TIPS?
The surprising answer to this question is that it's the US Military that is getting thumped. Follows is a pic of the Military Retirement Fund holdings. To me, the Generals bet the farm with this investment approach.
Fortunately, the "Brass" fight battles much better than they invest money.
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Painting A Picture, Or The Tape ? :
Since the FED is active in buying Mtg. backed and other bonds and fixed income investments, they may be very active in the TIPS market,
What better way to convince people than in-directly. They may be making the TIPS market look the way it does, to convince us that there is NO inflationary expectations and this action may be cheaper for them than buying other instruments directly to accomplish the same goal.
Just a thought. It like overhearing a rumor on a train, that is not intended for you, but sounds great, the people look affluent, well dressed and sound like professional higher-ups. It sounds better and has more influence, than if you were told the same information directly.
Bruce,
Again I apologize to you and everyone else here for saying stupid shit I really do not mean. anger at the general situation and a little wine are my piss poor excuse. It will not happen again. tard55.
Wot? Now military pensions at risk? Ruroh.
bernanke is/was a disaster for bernanke.
It looks like Bernanke burst his own bubble.
Velocity vaporlocked. Corps / financial institutions are battening down the hatches.
I wish this had been done in '09. We'd have saved ourselves a boatload of pain.
When velocity picks up there's going to be an EPIC inflationary event.
Call Guiness......this will definitely be one for the record books.
I recommend you panic (.png image file)
https://anonfiles.com/file/c3477f7d0a0a90da4062248b2304cef2
Hendry is the shit.
hmmm.....good for ss fund?
shhhhhhhhhh!!!!!!!!!!!!!!!!!
LOL I bought a lot of long term tips in the low 90's I sold 40% in about the 118 range. If it dropsback that low, I will buy again.
I'd be out of th eposition except, the I can't put but stops and losses on vanguard in this security.
I'd have stopped out about 119 (tips) don't get me wrong, I pitty the idiots who bought so highh. but it's no different that stocks. and if tips to down to los 90's high 80's I'll load up again.
i bought a semi-real tomato at Von's yesterday for 2$....
when will the system be set to have reasonable investing instead of the allowing wall street to crush everything before it. all the rules and fees benefit them...they hide all their gains....it is just criminal
I think people should fade the taper talk. With inflation low and the economy going nowhere and a more dovish Fed chairman on the way, I really doubt that the Fed will do much tapering. My guess is that QE will be expanded next year.
OK, what else would one expect of the generals, in the investment department?
another rout?
(just like witches at black masses....)
I'm prayin' for 6% - 8% interest rates.
Ha.
"What's that you say Lassie? Don't spend this months Social Security check all in one place 'cause that peanut sized retirement check is down at he bottom of the welll with the Pope and Xifuking?"
"Damn it if that dog can't speak clearly I wish she wouldn't say anything at all."
As usual the comments of Bruce Krasting are insightful, however there is no evidence of money market rates increasing vis a vis the effective fed funds. Meaning that there ARE NO CREDIT DEFLATION signs. There could be strained with Junk bonds, but as long as the money markets are functioning, it is ok.
The inflation expectations are manipulated down so that it is clear that the Fed is not ~exiting because inflation is picking up~. Remember that since Q4, the Fed say they would be active in TIPS market too. So there is no valuable reading in inflation expectations.
THE WORST OUTCOME WOULD BE FOR THE FED TO TAPER AT TEH SAME TIME THAT INFLATION EXPECTATIONS RISE, not the other way around.
As long as there are no signs of credit deflation (money market rates spread NOT spiking over effective fed funds) and if inflation expectation cool while the Fed is tapering, it is all good.
Inflation will come though, BECAUSE of the steeper curve. A steeper curve is the best way for people to rotate out of finanical assets and spend their base money backed deposits in the real economy.
So far, not too bad Bernanke, it looks like you will succeed in engineering a stagflation (the best outcome out of three choices, i.e. hyperinflation, credit deflation collapse or stagflation). The other option was humongous bankruptcies around, Bernanke made a choice of minimum bankruptcies which can be debated. The Chinese are right attempting large debt write-down (they have no choice because debasing the currency is not an option when 30% of consumption basket is food and energy.)
Benny B did it. Now enjoy stagflation because there is nothing better than a steep curve while money markets are quiet to flush base money out of idleness (toying with financial assets), i.e. the base money stopped playing with financial assets right now and will now play with something else (circulation of goods and services), i.e. real economy ==> moving to stagflation.
As long as the bull market continues in stocks and bonds, people love playing with financial assets with the newly printed base money. You need to kill both appetites and lift the base money out of its bed by lifting the bed (steepening the curve).
BTW GOLD BITCHEZ. BECAUSE THE BASE MONEY WHICH WAS TRAPPED IN FINANICIAL ASSETS IS MOVING, STARTING NOW!
Whitenight all I see is money going into cash. Where do you see that money going?
apparently there's a fine line between cash and fiat.
Yes you are correct there is a move from bonds to cash and from equity to cash waiting for a "collapse" to re-enter stocks or bonds, there is no collapse coming judging from money markets though so eventually the money instead of limiting itself to eithed bond equity or cash will go "fuck it" let us buy a nice suit instead of chasing those dead end options. Or the treasurer will get under pressure to spend instead of making nothing on cash and losing money on bonds.
never say never- human history is non-linear.
Defense contractor stocks pop based on the view that we are going to need way more helicopters for the Bernank.
Deflation Where?
Not my insurance premiums...
Not my plane tickets...
Not the loaves of bread I eat...
Not the gasoline I purchase...
Not my rent...
Not my utilities...
Only my wages are deflating... Frozen for the past 3 years...
Money markets indicate 0 debt deflation signs. none. Money markets are cool as a cucumber. We are just witnessing base money moving out of finanical assets and a bear market with bonds, with long term inflation rise gradually... The short term reading is useless on inflation measurement.
Bruce,
Consider this- Bernanke has given Yellin, or whichever schmuck ends up with his job, room to expand QE. I expect Bernanke will leave the Fed by the end of July- that is why he is not going to Jackass Hole- the newly chosen Fed Chairman will attend and save the market for another year.
Bruce said: "All fixed income investor{s} have had their faces ripped off of late. I have not one tear of sympathy."
Why Bruce? Because head of NSA General Alexander has his money there?
How about the rank and file and the hapless retirees and working people forced to put their money in a 401K? Should they be putting it into stocks? Municipal Bonds? (Detroit!), where?
I don't understand your lack of sympathy for regular people trapped in the FED jiggered Wall Street Casino.
> forced to put their money in a 401K
I hate the use of force.
Were they also forced to serve?
Krasting's a real whack job. He even tried to blame the US Navy for confistication of Cyprus depositors savings.
http://www.zerohedge.com/contributed/2013-03-27/cyprus-whos-blame-brusse...
i'll be looking forward to your next article.
i don't always agree with what BK writes, but I applaud him for putting it out there in this, sometimes lion's den, known as ZH....and, he writes well imho.
what about TWA 800?
I have a lot of sympathy for my core STRIP short position. I have a tear of sympathy for myself for covering a bit of the short just before the sell-off.. Sniff... I am crying a bit.... Just kidding, having a blast on that short position overall.
delete
They've got the prices on the five year, the thirty, and the ten back to within very small change of where they closed Friday; as a result of the follow-on jawboning today. Amazing. Completely unstable market; now we know how much actual tapering they will be able to do. Ha Ha.
I will have no sympathy for
Krasting when the flash mobs of feral black teenagers come and slice him up into a thousand pieces, and rape and murder his wife and daughters in front of him first.
thanks for "punching up" that 1st, very similar, comment H'tard...
Bruce,
I apologize for that stupid statement, it was totally uncalled for I do not really mean it. I also apologize to all readers who were offended. Sorry for acting the fool like that. I have no good excuse.
Meanwhile---
Gold STILL isn't money- it's a rock
over a Quadrillion dollars in globally derivated USD denominated debt, that will somehow be paid off by having the same 15Trillion USD currently in existence simply circulate over, and over, and over again, for the next 1000 years.
SWEET- The Fed would prefer us to be in a 1000 year debt deleveraging cycle instead of simply acknowledging that there is only one global form of payment, and it's NOT government issues currencies.
This whole "stocks versus flows" debate as it pertains to money is STOOOOOOO-PID.
and now, there is talk of Larry Summers as a possible Bernanke successor...
Fuck it all, Larry - Don't take the job until you read "Gibson's Paradox and the Gold Standard".
Oh, wait a minute... Christ, We are SOOOO screwed.
So, the planet's 2 trillion dollars (currently) in bullion is going to stabilize a Quadrillion and much more?
Interesting. Time to start melting the jewelry.
Must cap rates and do whatever it takes.. rates can't rise or US gov goes out of biz.. all the wars would stop, social spending... everthing. this way he doesn't have to give a dollar figure either like 85 billion...of course this is inflationary followed by price controls and capital controls.. followed by a 99% windfall profit tax on the gold investors causing the whole mess in the first place and not being patriotic. http://tinyurl.com/mem7o7x
Just need some time to get the news media and the masses to stare into the deflatioin abyss, like Wallenda looking on one side of the tight rope. Then they can herd the lemmings in a panic over the other side, the hyperinflation side.
They will get the people to say, "Thank you sir, may I have another!" It's just the way it is.
Cry for me Ben Bernanke!
Sung to the tune from Evita.
True dat Bruce. Worst of all worlds - TIPS yields increasing faster than nominal yields. Increasing real yields never bode well for risk assets.
http://www.zerohedge.com/news/2013-06-24/when-hilsen-ramp-fails#comment-...
Deeeeflation, come on baby!
Dr. Copper- heal thyself.
all those FLASH POINTS - Bernanke quote or your wild speculation? Links or bullshit.
"Fortunately, the "Brass" fight battles much better than they invest money."
where????? Granada. Our 'professional' military and its inept civilian leaders have FAILED TO PREVAIL in all 4 of America's wars since WW 2
specifically, Korea, VietNam, Iraq, Afghanistan
"Fortunately, the "Brass" fight battles much better than they invest money."
where????? Granada. Our 'professional' military and its inept civilian leaders have FAILED TO PREVAIL in all 4 of America's wars since WW 2
specifically, Korea, VietNam, Iraq, Afghanistan
I was going to comment on this myself... but then I noticed Bruce said 'fight battles', not 'fight wars'. This little vignette from the RP article sums it up:
US Army Col. Harry Summers told a story about a meeting he had with a North Vietnamese colonel named Tu while he visiting Hanoi in 1975. At the meeting, Col. Summers told Tu, "You know, you never defeated us on the battlefield." Tu paused for a moment, then replied, "That may be so. But it is also irrelevant."
As everyone points out elsewhere, our MIC wins all wars, whether our country does or not.
Define "prevail". The MIC has made a lot of money and many of those folks are stockholders in MIC companies. Of course they have not done as well as the owners, who also get taxpayer bailouts and "no-bid" contracts. See the fucking problem yet?
Hey!!!! We "won" GWI. You know...Operation Desert Shield/Storm.
Probably the only time between WWII and WWIII that you will see any US federal government agency undertake a task, set goals, reach them, and then stand down. Nothing open ended there. Just like QE...we will just keep printing until we have won the war, or inflation increases, or unemploymet drops, or Ben's girlfriend is a little bit pregnant, or 80% of the population over 75 lists Alpo as their favorite dinner entree.