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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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BK-
What do your "sources" tell you about the Behind-the-Door infighting of the various Power Groups?
You know and I know that M2 is falling off the charts now. Bernanke, "The Good Monetarist", knows this as well.
In a year and a few months, the M2 crash will be...ummm..."working its way through the Economy."
That's ELECTIONS time to the Proles!
There is no way in Bernanke's Summer Home that he doesn't know this Chapter and Verse!
What gives?
CW
"In a year and a few months, the M2 crash will be...ummm..."working its way through the Economy."
That's ELECTIONS time to the Proles! What Gives?"
All part of the plan. O'bama wants a week ecomony so he can blame it on the GOP lead sequester. With the GOP gone, there is nothing stopping O'bama's social paradise (/Sarc) from happening! O'bama's goal is to turn the US into a one party state.
"M2 is falling off the charts right now"
Nope. M2 is closing in on $11 trillion: http://research.stlouisfed.org/fred2/series/M2
Maybe you meant M2 Velocity: http://research.stlouisfed.org/fred2/series/M2V
Big difference. M2 stock soaring while velocity is in freefall=Bernanke FAIL.
To most of us "on the outside", that seems to be the current situation.
Different names, different "Political Colours", but in the final analysis - the same core agenda - "Looking after Number One"
"All fixed income investor have had their faces ripped off of late. I have not one tear of sympathy."
When bankers are killed by said "investors" with nothing to lose, Widowmaker has not one tear of sympathy.
Any bozo using the words markets and rationally in the same sentence is only spewing industry propaganda.
The cracks are beginning to show.
that you have no sympathy for fixed income investors befuddles everyones sense of decency.
please don't confuse the TIPs etf with holding the bonds long term. the yield on the TIP is fixed, and the CPI is doing exactly what? nothing... maybe you learned nothing from watching gold get monkey hammered, while the physical demand was at a premium. ben can destroy the stock market but he can't destroy gold or fixed priniciple notes with CPI adjusters (which he will fight to keep ahead of interest rates)
TIPs are dull dull dull, so its likes cursing hard cash in the mattress, which is not such a bad thing.
your clarity on the inverse textbook relation between rising rates and inflation is pristine. this is a deflationary gasp of several magnitudes. it wasnt supposed to happen, we keep accomodative policy in effect even when the economy showed signs, we learned from 37... we'll see
Deflation today.......hyperinflation tomorrow.
Precisely. Bruce is a useless tool, a former paper-pusher.
No society/currency has ever collapsed/died because their purchasing power was too strong.
There are no "markets" and inflation is theft.
roll the motherfucking guillotines...
Laws where you been man. We closed at 2.56% but hit 2.67% during the day. You believe this shit?
busy time of year for me. Yeah, I saw that. wake me when yeilds get back to their historical average. My bet is that WWIII happens first, we'll see.
It's not the interest rate that is all that important, whereas, the rate of change certainly is. The quick moves are eating a lot of folks alive. Okay by me.
Bernanke, Bullard and Krugman -
You fucked up!
How will you sleep at night knowing that retail investors bought into your bullshit and invested their savings, to educate their children and fund their retirement, in your manipulated make believe - too good to be true stock, bond and real estate market.
You Mother fucking scum bag motherfuckers.
You will get what you deserve.
How can you live with yourselves?
How can these people sleep at nite? Easy, they just pop an Ambien. Now that would make a great tv commercial.
Bruce used to jump in on the comments section, Has he mailed it in knowing it's all a bag of shit or have we become so jaded, and rightfully so, that he just has no angle anymore?
Flash: Treasury Secretary Lew states 2013 deficit to drop on increased capital losses in stocks and bonds
Flash: Treasury Seretary Lew states US government refi costs to drop on slowing Chinese economic demand
I'm sure that I know less about this than Bruce, but IIRC, TIPS got disproportionately shelacked in 2008 simply because the market was thinner and less liquid.
If TIPS are generally more volatile in the face of liquidity issues, couldn't that be a factor here?
Maybe when those GEN sheep wake up and see the zero balance of their retirement they will quit fighting wars for banksters and restore the rule of law.
As a 64 year old I can agree with your statement fully. I've taken a course in boat repair and one in scuba diving so maybe I'll have a useful career in my old age.
training a crew of pirate beavers
to chew thru hulls of ZHedgers boats
and rehypothicate all their gold ...
Hmmm...pirate beaver...interesting visual...
" I've taken a course in boat repair and one in scuba diving so maybe I'll have a useful career in my old age.'
MeThinks you will be very unsuccesful if your plan is to to recover all that gold reported lost in boating accidents.
I doubt boating repair will be in high demand. If the economy falls or the price of Petro soars, there will be millions of boats with for-sale signs and zero buyers. The demand for boating maintenance will be close to zero.
Petrol or diesel-guzzling motor boats / cruisers maybe; sailing craft maybe not.
Once things get "really interesting" in the USA I'm betting there'll be a significant increase in those wishing to take basic sailing lessons - along with astronavigation and global meteorology.
"Nothing quite like having an independent means of escape is there!"
Ha so the fed will cap the long end by upping QE. No one could have seen that coming.
TIPS may ultimately be a good investment, if deflation is followed by rampant inflation. Same with gold.
sorry franks and beans..bad bet..u r assuming you will get a 'fair" inflation rate....you aint...
An investment where the ones who run the Ponzi scheme self report the parameters that tell them how much they must pay out. Hmm, no oversight? I think I'll pass.
I tried to explain that to someone that was told to buy TIPS. I think I heard my own words reverberating around in their cranium. My final comment was "by the time TIPS really paid off your dollar would be worth so little they wouldn't care if you came to collect or not" or something like that.
The second biggest economy (China) is openly fighting with the third largest economy (Japan). The third largest economy is in absolute tatters with its population dusted with radioactive fallout and the worst ecological disaster to befall mankind. Perhaps all the brotherly love is finally spreading to the largest economy.
"Two years of gains were wiped out in a month."
Easy come, easy go.
But..but. THERE GOES MY TRIP TO DISNEYLAND!
Waa!
"he kills the chance that the economy will actually improve."
Bruce, I really hope you are not suggesting that you equate the stock market with the actual economy.
QE has pushed the stock market to new all time highs. Nobody will dispute this. It's obvious.
QE has not done diddly shit for the real economy other than drive up the cost of gas and food. So if it did anything at all for the real economy...it's that it has made life that much more difficult for the vast majority of the people in this country.
not to mention the price of housing. First time home buyers have been shut out of the market by the institutional investors.
Bernanke's moves have been textbook in terms of destroying anyone below the 1%. It's almost like it was planned...
Almost?????
So glad to see the Treasuries getting smashed. I was short them four years ago. Has anybody seen my face?
I remember Bernanke so pompously stating a year ago that he had "gotten" S&P back to 1,400 or so. This was a big achievement. I am anxious to see how he frames the big pension fund losses due to the collapse of their bond holdings. You know...the wealth effect. If those fund managers (e.g. CALPERS) were smart and sat on cash, then they could today invest in bonds and actually get some interest. Of course they weren't or couldn't stay in cash due to their charter. Oh. And then the stock portions are getting crushed as well. So much for the wealth effect. Oh. And then there is the housing wealth effect.
Is Bernanke so stooooooopid? Nah. He arranged not to be at Jackson Hole some four months ago - scheduling conflict. I hear that he is in contact with Ed Snowden's travel agent.
Quote of the last 12 months:
"Treasuries are return free risk." (the venerable) James Grant
Ben has jumped the shark. All this proves is he has no clue what he's doing, like a science fair project for a 7th grader. Fuck You Bernanke
"Ben has jumped the shark. All this proves is he has no clue what he's doing, like a science fair project for a 7th grader. Fuck You Bernanke"
Not if the Great Leader ordered Ben to tank the markets in a political move to force out the GOP from controlling Congress.
It would seem a bit too early in the election cycle for that.
Bernanke and the FED just keep doing one thing after another and hope that when a recovery happens they will get the credit.
Why can't Bruce understand his own logic?
Another development like say, trashing the financial world in order that QE be happily reimplemented?
I don't get why so many people fall for the line that Bernanke has failed when HE DOESN'T DO ANYTHING! He flaps his lips in order to create a facade of a manager while his bosses use the distraction to break everything to their liking (as it's ALL going to collapse anyway).
Is it really so hard for people to see that not only did QE "fail" it had to fail? And that unwinding it successfully is IMPOSSIBLE? So, given that, what do you do but to make things worse by pretending you might become more mature in the future. Then, once everyone screams "Uncle!" that's when they introduce Super-Duper QE+++++.
I guess most people cannot bear to think that the world is actually this criminal, so they suspend logic in order to stick to the only script they know. Fucking Stockholm Syndrome, I tell ya.
Here's an idea Bennie. If you want to inflate away the debt STOP MANIPULATING GOLD.