A Run On The US Treasuries Is Underway
Monday, 21. April 2008, 16:59:36
A Run On The US Treasuries Is Underway
As stocks rallied the week ending April 18, 2007, a run on the US Treasuries picked up steam, as seen the ongoing fall of the ETF, TLT.
An investment sea change is well underway: the US bond market place interest rates have decoupled from the Fed Fund Rate of 2.25%: the chart of the 10 year US Treasury Interest Rate, $UST10Y, shows a rise from a spiked bottom. And the LIBOR is rising both charts courtesy of Mick P.
The Dynamic Yield Curve courtesy of Stockcharts.com is rising; as is seen it it's current chart here. Mick P writes in The Weekly Report 20th April 2008 that as Doug Noland said, if markets are set up for an anticipated scenario, in this case a recession and slowdown and have priced accordingly, then intervention will have a destabilising effect. For bonds that means a sell off, and the possibility of the long end (30 year) yield climbing significantly.
Bond investors are now turning bearish, as commodity price inflate: Bloomberg's Daniel Kruger reports that a reader survey expects government bonds will decline in the Americas, Asia and Europe over the next six months as record prices for everything from oil to rice spark faster inflation; the Resource Bear Blogger, Richard say's: "inflation is a bond killer, and a commodity thriller".
Reuters reported that for the week ending April 18, 2008, U.S. high-grade corporate bond issuance hit a record: U.S. investment-grade corporate bond volume totaled $50.7 billion through April 18, according to research firm Dealogic. The previous record for this month was in April 2001, when companies sold $47.35 billion of high-quality debt. This week's issuance alone included a few marquee deals from a finance subsidiary of General Electric Co, JPMorgan Chase &, XTO Energy and Lehman Brothers. General Electric Capital Corp's $8.5 billion transaction was the fifth-largest U.S. corporate bond sale since 1995. The tidal wave of debt flowing into the market sent the high grade corporate debt, LQD, falling to its weekly 50 day moving average of 104.91 -- to the middle of a 'broadening top pattern' going back to late November 2006.
Insight for the deteriorating bond market also comes from Elaine Meinel Supkis in her article Everyone Wants More Free Loans, More Free Money which provides the Federal Reserve Balance Sheet. Ms. Supkes relates that: "Our total assets are about one quarter of China's assets. Isn't that pathetic? And less than half of Japan's assets. And our LIABILITIES eat up nearly the entire total? HAHAHA. Aren't we rich? Note that Federal Reserve Notes held by our bankers is LIABILITIES not PROFITS. Not CAPITAL. Liabilities is negative, not positive. But the lending they do is based on these liabilities. The more they have them, the more they can lend."
And Ms. Supkis provides the chart of TAF provided to the banks and bankers, and the chart of theFed Funds Rate and relates that: "The lending by the central bank is rising. More and more red ink creation. And voila! The interest rates drop! What a miracle. If we go deeper into debt on our credit cards, they RAISE the interest rates, not lower them! But these same bankers, when they go to daddy in DC, get the exact opposite!"
So the banks fresh with recent liquidity aren't going to preserve it, and lend it out for business growth purposes; no way; recently they have been lending it out on margin, or going long stocks, and that is one of two reasons why we have had a strong stock rally since the JP Morgan, Federal Reserve assisted buyout of Bear Stearns, BSC of March 18, 2008, as is seen in numerous chart such as that of the Russell 2000, IWM, compared to investment bankers, KBE, or industrial stocks, IYJ.
It's A Cross Roads For The Investor
I subscribe to the Big Bang Thesis which holds that a 'Systemic Risk Event', a Financial Emergency, that is a 'global systems wide financial failure', similar to the failure of the $330 Billion auction rate municipal bonds, remains, due to any one of the following:
1) issues surrounding the Libor, Ted Spread, and Credit Default Swaps,
2) the Level Three Assets at the investment bankers and banks,
3) more write downs of mortgage backed bonds by the rating agencies,
4) Treasury-repo-fails,
5) homeowners walking away from mortgages in large number.
6) Downgrades by rating agencies of mortgage insurers PMI or MGIC, or ongoing losses of these corporations.
I also subsribe to the Liquidation Thesis which holds that government services and payments are going to be liquidated -- done away with.
Despite a terriric stock rally, we could be in for higher prices with a major short squeeze hitting those who are short or going short.
A rise in stocks, and a rise in the EUR/JPY, FXE:FXY, is not going to be good for gold; nevertheless, I believe it's timely and priced right to protect one's wealth, by 'dollar cost average' investing in Bullionvault.com.
Here's the double edged sword: stocks, the EUR/JPY, and oil, may "continue to rally" on "liquidity" as indicated in Doug Noland's article Setting The Backdrop For Stage Two; thus spoiling short selling; and gold could easily fall to $875 or as low as $850 on an intraday basis.
The risk to defering purchasing of gold, is that one may not have full access to one's money market accounts or brokerage accounts, when the soon coming Financial Emergency -- Financial System Breakdown comes; that is why I recommend a stepped, that is laddered purchase of gold at this time.
Finally, one thing for sure: the price of oil is going to sky rocket, continuing it's breakout that coincided with the Citigroup CDO Bust of October 8, 2007 as seen in Dr. Joe's chart of West Texas Intermediate Crude, $WTIC.
Suggested Reading
Adrian Ash provides Why choose gold when the Fed lowers the central bank interest rates.
Ambrose Evans Pretchard writes that Goldman Sachs has advised clients to take out "short" positions on British 30-year Gilts before a rash of new issues by the Government floods the bond market
As stocks rallied the week ending April 18, 2007, a run on the US Treasuries picked up steam, as seen the ongoing fall of the ETF, TLT.
An investment sea change is well underway: the US bond market place interest rates have decoupled from the Fed Fund Rate of 2.25%: the chart of the 10 year US Treasury Interest Rate, $UST10Y, shows a rise from a spiked bottom. And the LIBOR is rising both charts courtesy of Mick P.
The Dynamic Yield Curve courtesy of Stockcharts.com is rising; as is seen it it's current chart here. Mick P writes in The Weekly Report 20th April 2008 that as Doug Noland said, if markets are set up for an anticipated scenario, in this case a recession and slowdown and have priced accordingly, then intervention will have a destabilising effect. For bonds that means a sell off, and the possibility of the long end (30 year) yield climbing significantly.
Bond investors are now turning bearish, as commodity price inflate: Bloomberg's Daniel Kruger reports that a reader survey expects government bonds will decline in the Americas, Asia and Europe over the next six months as record prices for everything from oil to rice spark faster inflation; the Resource Bear Blogger, Richard say's: "inflation is a bond killer, and a commodity thriller".
Reuters reported that for the week ending April 18, 2008, U.S. high-grade corporate bond issuance hit a record: U.S. investment-grade corporate bond volume totaled $50.7 billion through April 18, according to research firm Dealogic. The previous record for this month was in April 2001, when companies sold $47.35 billion of high-quality debt. This week's issuance alone included a few marquee deals from a finance subsidiary of General Electric Co, JPMorgan Chase &, XTO Energy and Lehman Brothers. General Electric Capital Corp's $8.5 billion transaction was the fifth-largest U.S. corporate bond sale since 1995. The tidal wave of debt flowing into the market sent the high grade corporate debt, LQD, falling to its weekly 50 day moving average of 104.91 -- to the middle of a 'broadening top pattern' going back to late November 2006.
Insight for the deteriorating bond market also comes from Elaine Meinel Supkis in her article Everyone Wants More Free Loans, More Free Money which provides the Federal Reserve Balance Sheet. Ms. Supkes relates that: "Our total assets are about one quarter of China's assets. Isn't that pathetic? And less than half of Japan's assets. And our LIABILITIES eat up nearly the entire total? HAHAHA. Aren't we rich? Note that Federal Reserve Notes held by our bankers is LIABILITIES not PROFITS. Not CAPITAL. Liabilities is negative, not positive. But the lending they do is based on these liabilities. The more they have them, the more they can lend."
And Ms. Supkis provides the chart of TAF provided to the banks and bankers, and the chart of theFed Funds Rate and relates that: "The lending by the central bank is rising. More and more red ink creation. And voila! The interest rates drop! What a miracle. If we go deeper into debt on our credit cards, they RAISE the interest rates, not lower them! But these same bankers, when they go to daddy in DC, get the exact opposite!"
So the banks fresh with recent liquidity aren't going to preserve it, and lend it out for business growth purposes; no way; recently they have been lending it out on margin, or going long stocks, and that is one of two reasons why we have had a strong stock rally since the JP Morgan, Federal Reserve assisted buyout of Bear Stearns, BSC of March 18, 2008, as is seen in numerous chart such as that of the Russell 2000, IWM, compared to investment bankers, KBE, or industrial stocks, IYJ.
It's A Cross Roads For The Investor
I subscribe to the Big Bang Thesis which holds that a 'Systemic Risk Event', a Financial Emergency, that is a 'global systems wide financial failure', similar to the failure of the $330 Billion auction rate municipal bonds, remains, due to any one of the following:
1) issues surrounding the Libor, Ted Spread, and Credit Default Swaps,
2) the Level Three Assets at the investment bankers and banks,
3) more write downs of mortgage backed bonds by the rating agencies,
4) Treasury-repo-fails,
5) homeowners walking away from mortgages in large number.
6) Downgrades by rating agencies of mortgage insurers PMI or MGIC, or ongoing losses of these corporations.
I also subsribe to the Liquidation Thesis which holds that government services and payments are going to be liquidated -- done away with.
Despite a terriric stock rally, we could be in for higher prices with a major short squeeze hitting those who are short or going short.
A rise in stocks, and a rise in the EUR/JPY, FXE:FXY, is not going to be good for gold; nevertheless, I believe it's timely and priced right to protect one's wealth, by 'dollar cost average' investing in Bullionvault.com.
Here's the double edged sword: stocks, the EUR/JPY, and oil, may "continue to rally" on "liquidity" as indicated in Doug Noland's article Setting The Backdrop For Stage Two; thus spoiling short selling; and gold could easily fall to $875 or as low as $850 on an intraday basis.
The risk to defering purchasing of gold, is that one may not have full access to one's money market accounts or brokerage accounts, when the soon coming Financial Emergency -- Financial System Breakdown comes; that is why I recommend a stepped, that is laddered purchase of gold at this time.
Finally, one thing for sure: the price of oil is going to sky rocket, continuing it's breakout that coincided with the Citigroup CDO Bust of October 8, 2007 as seen in Dr. Joe's chart of West Texas Intermediate Crude, $WTIC.
Suggested Reading
Adrian Ash provides Why choose gold when the Fed lowers the central bank interest rates.
Ambrose Evans Pretchard writes that Goldman Sachs has advised clients to take out "short" positions on British 30-year Gilts before a rash of new issues by the Government floods the bond market
WIDGETIZE