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Flight to Treasurys Has Little to Do With Quality
The news media will eventually figure out the truth — that stocks got pulped yesterday simply because they are in a bear market. The Mother of All Bears, quite possibly. The Dow finished the day down 419 points after trading more than a hundred points lower than that intraday. The selloff was attributed to the usual suspects: “fears” over Europe’s shaky financial condition, and America’s apparent relapse into recession. Although both concerns have been with us in spades for more than a little while, they seem, suddenly, to have become overwhelming and unmanageable now that the world’s stock markets are imploding. Of course, there will be equally spectacular rallies in the days, weeks and months ahead, and, as was the case during the 1930s, they will be interpreted as signaling a glimmer of hope for the economy. The press will do the interpreting, but most Americans will know better. The Great Recession has returned with a vengeance, and predictions of 2% GDP growth are about to be trimmed to sub-zero by the same morons who were so optimistic just a few weeks ago.
With Dow stocks down 500 points in the opening hour yesterday, Reuters and some other news sources initially theorized that “investors” – a euphemism these days for algorithm-driven machines — were despondent over a Philly Fed report that factory activity in the Middle Atlantic region had “unexpectedly” fallen to its lowest level since March 2009. Reuters tactfully refrained from identifying by name the experts who had been looking for better numbers, but they would have to have emerged from a sarcophagus to have been surprised by the bad news. Meanwhile, although the eggheads who compile economic statistics may be deaf, dumb and blind to the real world, Joe Sixpack, unemployed for the last 36 months and no longer looking for work, could tell them a thing or two about it – could tell them that there are no jobs: not for experienced workers who have been laid off; not for spouses desperate to create second household incomes; not for their sons and daughters who have recently graduated from college with worthless degrees and $100k of student loans to pay off.
Don't Ask Grandpa
A seeming anomaly in yesterday’s rout was the spectacular rally in Treasury paper that pushed yields on the 10-Year Note below 2% for the first time since the early 1960s. Not to be outdone, futures contracts for the 30-Year Bond rocketed toward a Hidden Pivot target of ours at 143 that we had expected would take months to reach. At the rate prices were climbing yesterday, however, the target could be hit before September. Corresponding yields for the long-term bond would be under 2.5% at that point — and won’t it be great that Uncle Sam can still borrow so cheaply! Better not ask Grandma and Grandpa about this, though, since they are on the other side of the Federal Government’s good fortune, unable to generate a livable retirement income on a million-dollar nest egg.
So why were bond prices in a vertical parabola? Although we are usually scornful toward the flight-to-safety argument, there may be something to it this time, although not for any reason that the news media appear to have discerned so far. Our take is that Big Money is growing increasingly panicky about the prospect of all-out war in the Middle East. Terrorists have begun to step up attacks on Israel in advance of a U.N. vote on statehood for the Palestinians. One might think the Palestinians would be on their best behavior. Instead, a squadron of jihadists attacked an Israeli passenger bus and some other vehicles near the Egyptian border yesterday with enough firepower to take on the IDF, at least for a short while.
The world hasn’t seemed this “interesting” since the summer of 1914. The prospect of war in the Mideast aside, there is one other reason money has been flowing into Treasurys: Where else (besides bullion) can one put it? It’s not as though the money managers regard Treasury Bonds, Notes and Bills as the ultimate safe haven, though. To the contrary, they can see just as easily as you and I that the U.S. is headed for financial disaster. Even so, Treasury debt still looks like a good bet to be the last major asset class to collapse. Perhaps. But by how many days?
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Tyler, you busted Leo for this zombie
The bond market is not a free market. There are too many players investing there with considerations different from pure P&L: the FED, foreign Cenral Banks, government agencies. The FED has been successful in getting to negative real yields (financial repression). The financial repression is even worse if you (as I do) believe that official statistics underestimate the actual CPI.
The investors are between a rock and a hard place - put money in stocks and suffer huge volatility or keep it in bonds and lose some of the principal every year due to inflation. The only place to hide has been gold - not a trade for everybody perhaps as few people understand the yellow metal.
My opinion on bonds is that this is a bubble beyond anything the world has ever seen. It is likely to burst eventually but the timing is uncertain. I give it 2-4 years at most. The only thing that can change this is a restructuring in Washington and this is unlikely. Also, I happen to believe that an outright default is a lot more likely than a AA+ rating would suggest. The rational that we can always print money to pay is incorrect as many times governments choose not to print to avoid hyperinflation and prefer not to pay (especially to foreigners). This type of behaviour will be familiar to the people with knowledge of the history of the world bond/loan markets. Of course, such a default would mean the end of the $ as a reserve currency but by then this would be the least of the problems.
with a million bucks poor grandpa .. could have had a income stream of 25 to 30% over the last 14 years just invested in gold and silver ... lived good and had his stash increase
may be poor gramps should understand the lies and propaganda in his life .
and even 9-11 would be a good start
house paid for car paid for .. getting social security and after ten years probably now working on house money ,with health insurance thrown in.
poor gramps
The way to look at this is that we are in the middle of a war economy, a civil war over the collapse of the welfare state. During wartime, there will be fast swings as rumors spread of doom and instability and some region being 'taken'. The entire system is now corrupt from head to tail, it is just waiting for a Black Swan event. My guess is that as we get into the next leg of the Depression, it will take another year for unemployment to rise to the point whee people hit the streets in volume. None of this will stop until spending is massively cut, and that won't happen as long as the Fed is trying to print its way to Shangrila. http://www.futurnamics.com/civilwar.php
Momentum trade with a hint of quality.
hey, hula-hips!
got silver?
Flight to quantity.
Very nice.... subtlety is not usually a hallmark of the Hedge
"unable to generate a livable retirement income on a million-dollar nest egg."
Pity the poor sheep who haven't figured out why or what to do about it.
Yeah, it's not that Zooropa is imploding...it was the false flag from/to Israel. LOL
Don't quit your dayjob.
+1. It may well have been a false flag. God knows they specialize in such.
When will the US electorate insist its "representatives" place first loyalty to the US and not to the trouble maker of the Middle East?
I'll probably post this on another thread because I like it so much, but my grandma grew up in the depression. She said Hoover said 'a car in every garage and 2 chickens in every pot'. She said next thing she knew they were walking and eating turnups.
Yep, no jobs for exp. workers?? Let's see.......I spent 15 years in hvac installation, ran a job a few years ago with 1million worth of sheetmetal. I've been out of work for over 3 years, I drink like a fish, some days I don't even get up till noon. So yes, that actually isn't a joke.
I enrolled in some service classes but im already thinking about dropping out. That's like studying for something that doesn't exist, so many guys out of work doing the samething. Fuck it. Liquor store opens in 2 hours.
Alcohol worsens depression. Make the switch:
http://www.benefitsofmarijuana.com/benefits.php
In fact just grow it.
A plant can produce 3-5 oz 3 times a year and takes up about 1sq ft per plant
Thats 9 oz / yr / 100 sq ft. = 900oz x $250/ oz(wholesale) = $225k tax free or about 115 oz of gold
until the feds get ya
As a forrmer ARMY AMEDD officier who worked construction as a youth, I have many friends in a similar situation. Drinking has always been the curse of the working class. My stills have never been busier. One of my hobbies will be to try and turn some of this sorghum into a decent mash.
Moral of the story...sell vice. Make some money off of other peoples deperation. Same old same old...it's been going on forever. Why should EVERYONE suffer? I'm with you Physics...he needs to make some lemonade.
what a bunch of hogwash
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Our take is that Big Money is growing increasingly panicky about the prospect of all-out war in the Middle East. Terrorists have begun to step up attacks on Israel in advance of a U.N. vote on statehood for the Palestinians. One might think the Palestinians would be on their best behavior. Instead, a squadron of jihadists attacked an Israeli passenger bus and some other vehicles near the Egyptian border yesterday with enough firepower to take on the IDF, at least for a short while.
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usual scary news.. something is burning /shooting in middle east.. its been happening since like forever..
10yy is under 2% cause recession is here.. HEY IDIOT , LOOK AT DAX.. ITs DOWN TO 2009 LEVELS..
WE WILL SEE SPX UNDER 900 IN 1,2 MONTHS... GERMANY IS PROBABLY BEST RUN COUNTRY IN WORLD NOW..
ALX
This could mean further volatility in markets.
sarc
Equities. There! I said it! HA!
#news media will eventually figure out the truth
why would anybody in right mind to care whether 'news media ' will or will not figure out?
sucker expect from media to announce bear/bull market, ressesion or not..
do your own research and only information you must care is you 're in black or red?
its called confirmation bias .. sucker dont trust his own judgment so expects approval from media/vodoo/fancy eliot waves /etc confirmation
alx
The mainstream media is too busy systematically eliminating any reasonable Republican candidates to get their dream matchup of Obama vs Bachman to have time for anything else.
Obamageddon bitchez.