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The Last Ponzi Game
The Last Ponzi Game
Courtesy Lee Adler of the Wall Street Examiner
This is an extended excerpt from the WSE’s Professional Edition.
A heavy Treasury auction schedule with a big settlement on Thursday was enough to contribute to keeping stock prices (SPX) in check this week, but not to knock down Treasuries. Demand for US Government paper is so great it simply engulfs even heavier than expected levels of new supply. The massive capital flight out of Europe is now confined to the only game in town, the US Treasury market, the last great Ponzi game still operating.
This won’t end well, but it won’t end until it ends, and the technical signals suggest that won't be in the short run. Yields appear to be still headed lower, and that’s bad news for stocks given the recent correlation between lower yields and lower stock prices. As I’ve illustrated in the accompanying Fed Reports, there isn’t enough liquidity to power both markets toward higher prices simultaneously. It’s either one or the other. Eventually I expect a shortage of liquidity to negatively impact both markets, but we’re not there yet.
Withholding tax collections remain weak, and the government continues to need to raise substantially more cash than the TBAC had estimated it would need. That means that the economy is significantly weaker than government forecasters had foreseen just 6 weeks ago when these estimates were issued. The clues were available in the data at that time and I correctly guessed that the auctions would begin to balloon in size. Normally this would be problematic for the markets, but not in the current environment.
At the same time, foreign central bank purchases of Treasures have fallen off a cliff. Again, that would normally be extremely problematic. But it just doesn’t matter because panicked institutions fleeing Europe are like the Coneheads consuming mass quantities of all available US Treasury paper. In fact, the demand is overwhelming the massive supply. Tidal waves of panic capital flight have been flooding into the Treasury market in never before seen amounts, both in terms of the indirect bid and the bid by Primary Dealers, of whom 1/3 are European banks.
The panic buying has been concentrated in the 4 week bill, but there was also a jump in the bid for longer term paper, particularly the 10 year note (TNX) this week. The 4 week bills are where the real panic is. This is short term cash looking for a safe place to park. At the same time, the increase in nervous buying is pushing out on the curve enough to continue to push yields down for a while longer. It’s also pushing the dollar higher. The dollar (DXY) faces a critical test at 82.
Get regular updates on the US housing market, and stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market…stay ahead of the herd. Click this link to try WSE’s Professional Edition risk free for 30 days!
Pic credit: Sox First
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Blah blah blah! Adler is a broken record and has been for over 2 1/2 years now.....
"I have tried so hard to do right."
Last words of the last great American president, Grover Cleveland.
I got some "money", or some "stuff". I'm gonna loan some of it out, cuz I got too much extra. I'll get paid back plus "interest". I've got it made. But, then I loan out all of my extra, and I've been kinda livin' large. This whole thing worked pretty good. I'll bet I can convince one of my associates to lend me some credit based upon my income streams.
Do you think it's just the little guys that have been inundated with offers of credit cards? The biggest banks offer it to the lessor banks, etc. etc. It all worked until there wasn't any stuff left
A hypothesis is a supposition. To hypothicate one's income (based upon other people's debt to you) is pledging your supposition without actual delivery of the goods (money/stuff). To re-hypthecate is to explain this over again to some other sucker, err... party/counterparty. And, wow, I am livin' even larger all because these suckers, err... parties/counterparties actually believe my hypothesis...
POTUS to FED: "So, you're telling me that all of this is just one big clusterfuck?"
FED: "Well, everyone was doing it."
POTUS: "If everyone jumped out the window, would you jump out too?"
FED: "Sir, we would be the last to jump out."
POTUS: "So, that's good, right?"
NPR radio reporting this morning British tourista are pulling out of Spain in large numbers because of inability to convert currency. Sounds like confidence unwinding has begun within Europe.
Don't invest in anything that you must feed, paint, or pay taxes on. If you don't have it in your hands, you have nothing at all.
If you don't have it in your hands, you have nothing at all.
that's what I told my ex boyfriend
I would only add that even if you have physical assets in hand, you better have the support network to defend them. The monster ponzi (corporate america, big banks, and their government agents) will be coming to collect soon.
Until then technicals don't matter, sorry ilene.
LofP,
I am afraid you are right.
Thanks for sharing.
If things ever get better then UST will be a hell of a short. Unfortionately, they won't go down till the mkt is going up.
this reminds me of the demand for tulips in 1637
Brando was sad and silent in LAst Tango. MAybe there is a lesson there. Will these Oligarchs go like him silently and sadly once their last ponzi dance is over?
Something tells me they won't.
History has your answer. So no, they won't.
Martin Armstrong just said that it won't be the fiat that makes shiny go up, it will be the gov., a la mf global clients, whose loss is now 2 billion.
So it's tyranny then.
and speaking of fiat...
http://upload.wikimedia.org/wikipedia/commons/c/c5/The_Mystical_Nativity.jpg
The Last Tango shortly with the Last Ponnzi game
Good luck to those folks who stuff themselves with currency notes and Treasuries thinking it is wealth.
Governments will take away your monopoly money wealth shortly
Fools rush in...
It's a pump and dump scheme not a Ponzi scheme and you're one of it's card carrying members. This massive amount of IPO's is the "tell" that funding crises abound in the financial sector. BUY AT YOUR OWN RISK! Stay close to Uncle Salami (the Federal Government)and who he's looking out to protect. There's no such thing as "too big to fail" when it comes to a bank.
In the spirit of Christmas, I have updated "You're a Mean One Mr. Grinch" to be more fitting for the times:
You're a Mean One Mr. Ben"
You're a mean one Mr. Ben, you really are a heel.
You're as cuddly as a cactus, and as charming as and eel, Mr. Ben!
You're a bad banana, with a greasy black peel! You're a monster, Mr. Ben! Your heart's an empty hole. Your brain is full of spiders, you've got garlic in your soul, Mr. Ben!
I wouldn't touch you with a thirty-nine-and-a-half foot pole!
You're a vile one, Mr. Ben! You have termites in your smile. You have all the tender sweetness of a seasick crocodile, Mr. Ben!
Given the choice between the two of you, I'd take the seasick crocodile! You're a foul one, Mr. Ben, You're a nasty, wasty skunk! Your heart is full of unwashed socks, your soul is full of gunk, Mr. Ben!
The three words that best describe you are as follows, and I quote, "Stink, stank, stunk!"
You're a rotter, Mr. Ben, you're the king of sinful sots. Your heart's a dead tomato, splotched with moldy, purple spots, Mr. Ben!
Your soul is an apalling dump-heap, overflowing wih the most disgraceful assortment of deplorable rubbish imaginable, mangled-up in tangled-up knots!
You nauseate me, Mr. Ben, with a nauseous super naus! You're a crooked jerky jockey, and you drive a crooked hoss, Mr. Ben!
You're a three-decker saurkraut and toadstool sandwich, with arsenic sauce!
THE MERRIEST OF CHRISTMASES TO YOU, MR. BERNANKE!
[Little Cindy Lou Who, who was no more than two] Why Santie, why? Why are you stealing our economy?
[Narrator] But do you know, that old Grinch was so smart and so slick, that he thought up a lie and he thought it up quick.
[Mr.Ben] Why, my sweet little tot. Theres a dollar sign in this economy that will not light on one side...
[Narrator]...the fake Santie Claus lied.
[Mr.Ben] ...so I'm taking it home to my work shop my dear. I'll fix it up there...and bring it back here...lol.
Nice! Thanks for the added scene script.....maybe WB7 can do some magic and come up with a photo of Mr. Ben all green-skinned and Santa suit wearing!
CALLING WILLIAM BONZAI 7!!!
It would be the perfect spice offering for the season ;-)
wow
Another observation.
Apparently investment is looking for return. (OK, Duhhh.) But why?
Now we have to look at who's investing and why. (Ditto Duhhh!)
If the upper class investors, the 1 to 10% of Europe and such, are afraid enough of their own system then they will invest in other sources that can sustain their investment. (Have they themselves rehypothocated too?)
If those investors are on such a margin that they have to re-pool for equity and earned income to stay solvent themselves, then how far from worth has their actual source really gone?
Have we asked these questions? Have we seen some statistics to verify that aspect of the wealth these people hold?
This all sounds like desperation to me. Like traders making their last commision assuring the investor that the status quo will be sustained.
Those people who made the money in the first place, before the traders influence, trying to save the last of what they have to at least maintain or break even.
Beyond me just wondering, (Hypothecationing), why don't you all turn your computers to that aspect and see what you come up with before you're the last to make the "buy".
What is property worth when there are too few to claim it?
IMHO
wake up fool!!!
there is nothing to invest in.
it has all been stolin!
paper for paper = ass wipe!!!
We can blame Ben, Hank, J.D., F.D.R., Jimie C., and the list can on and on. If your cursing them then you are cursing you ancesters and yourself because we lwt it happen. No one to blame but ourselves.
Stop blaming yourself and fuck the thieves and get some of it back/
But you didn't junk me. And think about CME. Is the farmland next? Do some DD. And fuck you!
Merry Christmas.
The farmland has been gone for quite some time.
"That the present acute economic emergency being in part the consequence of a severe and increasing disparity between the prices of agriculture and other commodities, which disparity has largely destroyed the purchasing power of farmers for industrial products, has broken down the orderly exchange of commodities, and has seriously impaired the agricultural assets supporting the national credit structure, it is hereby declared that these conditions in the basic industry of agriculture commodities with a national public interest, have burdened and obstructed the normal currents of commerce in such commodities and rendered immediate enactment of Title 1 of thisw Act." (Agricultural Act, May 12, 1933)
FDR was saying that the agricultural assets support the national credit structure. (there is that word credit again) Did he take titles of all land? Remember Contracts payable in gold? FDR needed the support, and agriculture was critical, because of all the millions of acres of farmland at that time, and the value of that farmland. The mortgage on that farmland was what supported the emergency credit. (remeber the great depression) So FDR had to do something to stabilize the price of land AND federal reserve bank notes to crete money, didn't he. So he impressed agriculture into the PUBLIC interest. The farming industry was nationalized!!!
*(Agricultural Adjustment Act, May 12, 1933)
Merry Christmas my friend
At the same time, foreign central bank purchases of Treasures have fallen off a cliff. Again, that would normally be extremely problematic. But it just doesn’t matter because panicked institutions fleeing Europe are like the Coneheads consuming mass quantities of all available US Treasury paper.
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It sounds to me like a lot of the treasury buying is the hot money that keeps flowing out of China-
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China's $3.2 trillion foreign reserves have been falling for three months despite the trade surplus. Hot money is flowing out of the country. "One-way capital inflow or one-way bets on a yuan rise have become history. Our foreign reserves are basically falling every day," said Li Yang, a former central bank rate-setter.
http://www.telegraph.co.uk/finance/china-business/8957289/Chinas-epic-ha...
Treasury paper is the "Only game in town." ???!!!
The majority of the traders for involvement in the EU finance and individual investors look to what may be the last bastian of investment that may have liquidity on the backs of their saviors, the remaining middle class of the United States. What are we selling?
I know, as do you, that something is going on. Bernanke is playing a game of chance that the players will buy, but for what I don't know of just yet. I have thoughts.
Think, though, about the MBS for a moment. Who really owns all this property in the end? To my thought, with all the paper trading on the deflated property liens, who wouldn't want to be involved in the biggest land grab that has ever occured.
Land was always the best investment. If this trepid economic situation continues for the next ten to twenty years, who will come out on top with the owned liens for the actual property? And by then, compared to a 3.75% mortgage, what will the property be worth as to appreciation?
I ultimately think we are in a property war in that the banks realized this from the get go. That's one of the reasons I believe the FED bailed out the banks. To hold onto the property. We should have never bundled mortgages for outside USA investment. Not only have we sold our jobs overseas, I think we've sold our property as well. Now there's a war on to save it as well as the economies that are tied to it. The bubble burst because some one sold out deliberately knowing they could wait for the result and reap the reward. Who could that have been?
IMHO
I have thought this from the beginning. It first came to me when Buffett put all that money into BoA. I couldnt figure why someone would invest in such a piss poor business plan..except one thing, they literally own 90 percent of the homes you see with signs in front of them. The government is lending all and anything the banks want knowing that they cant pay them back....with money, but they will just scoop up all those properties. Scary isnt it. China, Russia, Socialism, FUCK, i lost my country
I think you are correct. In Detroit average home price is $6,000 with many speculators and foriegn interest skooping up blocks of homes for $4,000 each. This represents a huge property transfer. America is up for sale .
learn mandarin
Hope and Change = destroying the American middle class.
But he promised the Change. We didn't know it is a change for worse. We need to read the fine print...
It wasn't in fine print, it was blasted all over in the superficial and thin veneer of his slogans, and anyone that took 30 seconds of Google time would have found a groomed from late childhood Manchurian empty suited construct devoid of any real substance.
Still waiting for the change promised in 2008. YES WE CAN!
Si se pueda!....... and other communist bullshit
With everyone in the US$ pool, it's your time to grab the gold ring:
Gold On The Verge Of Moving Into Bubble Phase Of The Bull MarketCV--from your link-
The public is already starting to become aware of the gold bull. All we need at this point to start the flood is for gold to recover quickly from this sell-off. If gold quickly shoots back up and tags or moves up through that big psychological $2,000 number, I expect it will be the siren call that draws the public into the bull market. And it is the public coming into a market that triggers the bubble phase.
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I really doubt that the public will ever be much of a factor on the price of gold although they likely will be for gold stocks eventually-
I think gold will get its lift from "forced" central bank buying-
Here's what price would be needed if they were forced to back the Fed balance sheet with gold-
http://www.acting-man.com/blog/media/2010/05/shadow-gold-price.png
Gold is long way away from a bubble at this point
http://www.acting-man.com/blog/media/2010/10/Gold-percentage-of-financia...
http://www.acting-man.com/blog/media/2010/05/gold-vs.-past-bulls.jpg
China and India account for over 50% of gold purchases. North America only 8%. What the American public does is largely irrelevant in regard to the price of gold.
SO the gooberment will be the borrower of last resort? Then its over?
Who would buy any asset the Fed holds?
I mean really, who's stupid enough to trade cash for those crappy Mortgage Backed Securities...and the other shitty paper the Fed holds?
For a variety of reasons, the Fed is not a holder in due course of said MBS. They won't have to sell the assets; they can simply "discover" that the requisite unbroken chains of assignments and endorsements on the respective mortgages and notes are dubious (at best) and the assets will be generously returned to the party unlucky enough to have acquired them in due course. (Hint: a non-TBTF will be the unlucky party to play the role of sacrificial lamb.)
The taxpayers, involuntarily.
That's a big part of the scam.
"... and there's hamburg all over the highway in Mystic Connecticut."
So what are all the greedy wall streeters & fat cat investors gambling for? Not stuff, because the real economy is producing less stuff. They're gambling for all that digital medium of exchange the fed & banks are creating out of thin air. But what are they going to do with all that medium of exchange if there's less stuff to exchange? Eat it? Shit it? Whatever. More assets?
So what are the banks & fed holding, assets? What are they going to exchange them for? Different assets? Digital medium of exchange. The banks are holding capital? Is that real stuff or just digital assets? Somebody is all fucked up.