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Get some sleep, it will all be there tomorrow. A sad day for all who come to this site. Thanks CR
jo6pac
Tanta might say,"Neither of these graphs suggests..."
Very sad indeed. It will be hard to rekindle that sense of Schadefreude when reading about financial markets.
This is exactly what you would expect if the Fed starts (or threatens) to buy longer dated Treasuries. Thank goodness the private part of the economy doesn't need to borrow any money, because it will all be going to fund whatever cockamamie idea Hank and Ben cooked up over a couple of stiff drinks this afternoon.
Yep, we're screwed.
Link to a definition of A2/P2 for those who've forgotten?
Scary, that's all to it. This week will tank...
I have no idea what it means, but if you folks say this is bad than I'll be wearing my brown pants from here on out...
Link to a definition of A2/P2 for those who've forgotten?
Isn't that the little robot from Star Wars.
Link to a definition of A2/P2 for those who've forgotten?
Isn't that the little robot from Star Wars.
I thought it was that mountain in Peru...
ahh yes, the glorious yield curve.
the yield curve taketh and it giveth away
I was arguing with my dear colleagues about this today. We couldn't conclude anything positive, we assumed our clients would be in a similar situation if and when they called. My instructions to the offshore ops got a little curt as the afternoon bore on. Go value, lock it up.
I got resistance, crazy stuff..
C
Perhaps this thread is safe to get back to theories...
mp, if you're around (or anyone else who has been watching conjure's clock), is this story making me closer to the tree to bark up or not? Larry Langford | Breaking News from The Birmingham News - al.com
Curious confluences there.
<a href="http://paper-money.blogspot.com/2008/12/bernankes-nightmare-commercial-paper.html>Concise Summary From Here
A key in reading these rates is to recognize that the AA non-financial is more highly rated than A2/P2 non-financial and that, in general, the AA non-financial tends to track the Federal Reserves target rate while the others typically track slightly higher.
Normally, the spread between the weakest quality paper (A2/P2 non-financial) and the highest (AA non-financial) is 15-20 basis points but as of the latest Fed posting, the spread has remained dramatically elevated at 586 basis points truly a worrying sign.
The first chart shows the spread between the A2/P2 and AA non-financial while the lower two charts show the how all the short term commercial paper rates have tracked since 1998 and mid-2007 respectively.
Notice that prior to mid-2007, the Federal Reserve had been able to keep these rates fairly tight and in-line with the target rate but now we are seeing significant trouble.
In as sense, the current crisis has effectively erased all the rate cuts Bernanke has made this cycle and even added another 90 basis points.
Not my blog; but just something I found from Google (restricted search to Blogspot.com domain). This makes sense?
Follow the 8.5 Trillion here :
Government bailout hits $8.5 trillion
sorry, but this current issue is AFU!
I simply cant understand the spreads given the condition. It just dont make sense to me
CR, I don't think anyone who matters would mind if you took a couple days off, hiking or otherwise.
Just sayi
Thanks Y. The Fed's linked chart is here:
FRB: About Commercial Paper
"you would expect if the Fed starts (or threatens) to buy longer dated"
Buy? Buy? Buy with what? This is artificial leverage.
But the United States government has a technology, called a printing press, or today, its electronic equivalent, that allows it to produce as many U.S. dollars as it wishes at essentially no cost.
You got a problem with that?
So the Fed relies on Moody's and S&P 's ratings for calculations.
I've seen enough. Dismissed.
My guess would be that the FED is cherry picking some of the paper and what is left is blowing out the spreads on the non-fin side.
But, since we don't get a report on the assets from the FED (to protect "confidence") we'll probably never know as the rollover will cover up the deed.
Anyway, the secrecy is having an adverse effect (if I'm correct) due to the nature of the spread on the indices becoming corrupted by the makeup of the indices.
OaPN: Kinda feels inappropriate to talk about finance stuff right now. I realize Tanta would want the "show to go on", but...still.
Neither of these graphs suggest anything positive for the credit markets or the economy.
I'm still waiting for the real holiday sales figures to not suggest anything positive for the credit markets or the economy. Any day now... oh, and auto sales figures tomorrow - those will definitely not suggest anything positive.
Let's think about what could things we could anticipate leading to global depression:
- More countries go Iceland (some chatter on here regarding Eastern European countries)
- California defaults on debt
- Interest rate goes ZIRP (I guess wouldn't that essentially be NIRP?)
- China and Saudi Arabia stop buying American debt
- Credit Derivatives start to come into the light and actually unwind; counterparties going bankrupt (JP Morgan?)
I'm sure there are more subtle events that might occur that advance the conjure clock as well, but these are some of the things that I'm guessing will drive us closer to KABOOM!
But wait, our esteemed nobel laureate economist says deficits don't matter and that national debt is "basically money we owe to ourselves":
OP-ED COLUMNIST; Deficits And The Future - NY Times
I was unfamiliar with the use of the term "ourselves" for what I have always called "the Chinese."
Bond crisis? Not possible. Just ask Krugman.
Cheers,
prat
YLSP -
Dude, we're in the middle of kaboom, don't kid yourself. The only question is just how gigantic the explosion will turn out to be in hindsight.
Check out Maurice "Mr. Hanky" Greenberg's piece in the WSJ:
AIG Needs a New Deal - WSJ.com
It made me vomit in my mouth:
http://hobochili.org/chili/?p=159#more-159
if i might be so bold as to submit a little thread music?
Thievery Corpration/Astrud Gilberto
None of this is any good for my handle either
stuff
Let's go shopping!
Like I tell everyone.
Look at the facts of what has occurred over the past yr, and is still occurring.
Do you really think that this can end well?
From Greenberg's Wsj cited above:
"The Citi board should be congratulated for insisting on a deal that both preserves jobs and benefits taxpayers."
Let's all go comment appropriately on the forum.
Greenberg should be in jail, not writing op-eds...begging for more from the trough...sickening
prat-
Yeah, we owe it to ourselves. Until the obligees demand payment. Ooops
That speech from ben suggesting we can print at virtually no cost always cracks me up. Perhaps he discounts a state of severe civil discontent as a "trifle"?
YLSP-
I took Ben's speech today to say, "ZIRP, hell! The quiver won't be dry until the CURVE "flat lines"."
Good night now.
Perhaps the rich have been fattened sufficiently and it's time to pick which one to eat first?
Wait until Bernanke fixes everything by reclassifying dollar printing as "manufacturing."
It's the new growth industry, like plastics in the '60s.
All the kids are doing it.
Just imagine what the credit markets will do if 8.5 Tril isn't enough. Say 12 or 15.
NOC-
You have a future in politics.
Wait until Bernanke fixes everything by reclassifying dollar printing as "manufacturing."
Huh, so does that mean that each dollar printed (because it's an end good) could be counted directly towards GDP?
Don't knock Krugman. He explained what seemed to me a clear explanation of what 'liquity trap' meant. Basically, too many of us are hording our money in savings accounts and thus depriving the economy of needed spending. I took that as a warning. If you continue to horde, then the feds will have to make that painful for you. How can they do that. Inflation of course.
"I'm haven't changed my mind. Not at all! It's merely a re-statement of my previous position."
Here's my comment, which needs to be approved by the "WSJ opinion journal editors" :
Mr. Greenberg says, "The Citi board should be congratulated for insisting on a deal that both preserves jobs and benefits taxpayers."
And you actually printed it.
It's an all callable bond weekend party...
This game is out of control!
Falling rates across the yield curve do NOT guarantee reflation of the economy or markets, and may do just the opposite as people and institutions stampede into the only remaining non-callable, guaranteed, long term interest-bearing instrument. Thus in fighting deflation, the FED and Treasury may be hastening it.
Vacation From Inflation
Lost in the shuffle is the not insignificant fact that the Wall Street Journal has squandered credibility as a conservative news source.
Time for rest all. The economic implosion will continue without us all watching and commenting on it.
Besides I get to rest up to look for seeds for gardening and to do some hunting.
This rally is beyond my expectations, said Takashi Yamamoto, chief trader in Singapore at Mitsubishi UFJ Trust & Banking Corp., part of Japans largest bank. The U.S. economy has collapsed. Treasuries may fall in December because rates are becoming unattractive, Yamamoto said.
The yield on the three-year note declined five basis points to 1.08 percent as of 1:30 p.m. in Tokyo, according to BGCantor Market Data. The price of the 1.75 percent security maturing in November 2011 rose 4/32, or $1.25 per $1,000 face amount, to 101 30/32.
The yield is the lowest since 1962, based on weekly records of the figure that the Fed started that year.
Bond crisis? Not possible. Just ask Krugman.
Prat - his point [if I'm not mistaken] is there IS NO crisis in treasury bonds as long as the rates are all continuing to go ZIRP... it's when the reverse happens (or as A2/P2 shows) the OTHER debt instruments are orphaned and the spreads blow out.
But as long as the world is happy to give the treasury all the money they want interest free - he's right.
yogi, I didn't read the Greenberg article, but why can't a newspaper run an opinion piece by someone without necessarily endorsing it? You found it interesting enough to read, isn't that the idea?
"as long as the world is happy to give the treasury all the money they want interest free"
and is there any doubt that this bubble will pop.
there are things worse than deflation...just ask the citizens of zimbabwe.
Divs will be cut, bonds will be called and deflation will work against cost of living inflation; not good!
I am becoming extremely concerned about this talk of the Fed buying longer-dated treasuries.
They're obviously running out of options and this one is extremely dangerous.
Don't knock Krugman.
Oh, I think I'll keep knocking him, thanks. He doesn't harbor a shred of doubt that this is a "Keynesian Moment." We've had 30 years of Keynesian consensus. Not a chance that this is a Misian Moment, eh?
Whatever. Sic semper fiatus.
Cheers,
prat
mp,
Why is that?
Predictable. Each new wave of the credit crisis increases in size and disturbance, going on 24 months now.
The Feds can't fix this with more debt. Probably can't fix it at all.
I'm still waiting for the real holiday sales figures to not suggest anything positive
It looks like BestBuy's web traffic is down about 30% (assuming the spike is variable spending for Black Friday).
http://widgets.alexa.com/traffic/graph/?r=max&y=p&z=1&h=300&w=470&c=1&u%5B%5D=bestbuy.com&x=2008-12-02T06%3A14%3A36.000Z&check=www.alexa.com&signature=T7jG5mAIq8v9coQfImT589zzkZg%3D
Target is down about 10% -
http://widgets.alexa.com/traffic/graph/?r=max&y=p&z=1&h=300&w=470&c=1&u%5B%5D=target.com&x=2008-12-02T06%3A14%3A33.000Z&check=www.alexa.com&signature=FowjO45zGP1P%2Bb6bkBZnZDvEbdo%3D
I think the peak value is showing up now but I could be off by a day.
I think of it as being like grabbing a cat by the tail, or the children's game of crack the whip.
I'm more interested in what Bernie Sanders has to say about Citigroup. Why don't they print him?
I did not find it interesting but disgusting. In fact, I'm pretty fed up with the lying bullshit of the Wall Street Journal.
mp,
Got it..(I think...
)
This is a matter of maturity, in regard to the children playing with kitty
dryfly, isn't that a bit like saying there's no housing bubble as long as the prices go up?
And continuing NOCs line of thought...We should remember that the quality of a dollar bill has increased substantially over the past decade. Think about it: Security threads. Off-center portraits. New colors even!
With some hedonic adjustments, I think we are all quite a bit richer than we realize. Quit whining!
dryfly,
I respect your opinion immensely, but my assertion is that The Free Lunch is going to end. And soon. Crazy talk, I know, but I've just got this hunch.
Cheers,
prat
I wonder if the FED cash in the CP markets are being sent to Ts?
Crack the whip or circle of doom, mp?
I'm pretty fed up with the lying bullshit of the Wall Street Journal
That's one reason I run my own data graphs from multiple sources and balance personal experience and anecdotes with official numbers.
Alexa bastards. They timed the graphs out. Last year they cut the "max" to show only the past 123 months.
Just for that, I'll paste and annotate them onto to my own site.
Tomorrow.
Is Nikkei closed early or on lunch break?
Yes, this is indeed the end of Keynesian economics. Bernanke sounded frightened and confused today.
The man is completely out of his depth, and even the slowest-witted Americans are waking up to the fact that just as the ideology of the Soviet Union led to its inevitable end, so do the excesses of our Xerocrats mean that the Pax Americana is over.
The heterodyned divergence synergy accelerates.
The time has come that Paul & Ben feared. It is time for them to decide whether to either throw their friends the banks under the bus or trash the world economy.
dryfly, isn't that a bit like saying there's no housing bubble as long as the prices go up?
No - it's like saying there is no housing BUST as long as prices go up. The question was always when would they stop going up? Krugman is saying exactly the same thing wrt treasuries... as long as these rates stay super low & people continue to buy them at ridiculously low yields... let them & 'use' the proceeds to juice the economy.
Like mp - I see it as VERY dangerous & potentially highly inflationary... but as long as 'deflation' is the trend they can get away with it... until someday they can't anymore. So when will that day come?
Rob Dawg,
They are dumb enough to accomplish both. Going for greatness!
I talked to a zero coupon trader who actually saw buyers of zero coupon bonds at these levels. Another trader of the long end did see some profit taking on some longer dated whole bonds.
[hat tip]
the real canucklehead
i have only posted a few times
Tanta..thank you
YLSP... I can't decide if your 1:27 comment is hilarious or horrifying.
We're going to find out either way, it looks like.
It could backfire. Let's say that I'm a trader for a large hedge fund and I've got a gazillion dollars to place.
I'm watching Bloomberg and I hear Ben say he's thinking about buying longer-dated treasuries. So, what happens? Everybody piles into longer-dated treasuries. Does the money go into commercial paper? No. Equities? Hell, no. Commodities? Absolutely, not. It goes into long treasuries, thereby reducing more money that could have gone into the commercial markets.
IMO, Bernanke thinks that he can force money out of treasuries by buying, twisting the tail, but it could go the other way as well.
Let's say it does backfire, that everyone piles in. Then, it becomes the gunfight at the OK Corral. Interest rates start to blip up and everyone is giving the other the evil eye. Someone blinks. Everyone piles out of treasuries, thereby causing the long end to crash. Where does the money--what's left, that is--go now?
Gold?
"Huh, so does that mean that each dollar printed (because it's an end good) could be counted directly towards GDP?"
In a sense, isn't that what has been going on since Greenspan opened the taps on credit (including by arguing against derivative regulation) starting in 1995 or thereabouts? I would argue that it is. We are now reaping the rewards of the resultant extreme levels of indebtedness and misallocation of capital.
.
YLSP writes:
Let's think about what could things we could anticipate leading to global depression:
...
- China and Saudi Arabia stop buying American debt
Wouldn't that be worse than a depression? Wouldn't that be "game over" for the U.S. gov't?
I respect your opinion immensely, but my assertion is that The Free Lunch is going to end. And soon. Crazy talk, I know, but I've just got this hunch.
Prat - I'm a Keynesian type & pretty much agree with you. This intervention stuff is powerful medicine - should only be used lightly and prescriptively - NEVER as a prophylactic as has been the case for a long time especially by Dr Alan G. Overdose & 'resistance' are both serious risks... We are overdue for a negative outcome.
The above is my tactical view of Ben's long bond statement.
I don't like it. It's grasping at straws and, in my view, could send long rates skyrocketing.
kona, I don't get your comment about zero coupons being more stable than short term bills. For one, T-bills are zero coupon instruments themselves if I'm not mistaken, and secondly, zero coupon notes or bonds have longer duration relative to a standard note or bond of the same maturity, and so should have greater interest rate sensitivity, not less.
What's gonna happen at the long end is gonna dwarf the A2/P2 spike. There is no dampening mechanism to stop it. Billions will trade before Ben gets the text message. By then, too late.
We are overdue for a negative outcome.
dryfly | 12.02.08 - 1:32 am | #
Dryfly speak for a shitstorm coming.
In the after$life, who will work with me on the global digital monster index of relative value, replacing national currencies de facto?
1 part Forex, 1 part commodities/metals, discount for slosh report... I need much help.
Wouldn't that be worse than a depression? Wouldn't that be "game over" for the U.S. gov't?
bobn | Homepage | 12.02.08 - 1:32 am | #
It would mean 'pay go' - either we cut services drastically or we increase taxes drastically or we sell a lot more bonds & treasuries to ourselves (maybe even 'compulsory' sales).
For those interested, some Marc Faber:
YouTube - Marc Faber interview on 12.01.08 P1
YouTube - Marc Faber interview on 12.01.08 P2
bgates
What happens after the "thesis" of the collapse of the USSR is completed with the transpiring of the "antithesis", the collapse of the US/Keynesian capitalism?
Unlike 1989... there's nothing and no one waiting in the wings to take over with significantly different ideas. Hell, Obama's people are practically the high priests of status quo orthodoxy.
Paging Dr Marx...
We are overdue for a negative outcome.
Yup. I'd be more sympathetic to our friends The Economists if they had recognized the problems building up in the 90's (yeah, that's right, in the 90's kids) and early 00's.
We keep looking at the 30's in the US and 90's in Japan. That's not where shit went wrong. It went wrong in the 20's and in the 80's respectively. Maybe we should look at those time periods.
shrug
But what do I know? I'm just a computer programmer.
Cheers,
prat
It makes zero sense that The Fed would be buying Treasuries at the top of a bubble, it's like a sure fire way to destroy tax payer money and then, compound that retarded action with the resulting lower yield -- is this sane? Can we review, just for me... Bernanke wants to buy units of financial instruments for the most expensive possible (bubble valuation) price and then drive down the yield in the (inverse) process.
Apparently, this is a method to help decrease the supply of money and find a new clever way to burn up TARP funds, or is this Bernanke Plan a new vehicle, funded by some new magic trick ... come to think of it, I still have no idea where the money comes from for this process of destruction -- I assume tax payers will provide the funding and then stand back and watch The Treasury burn to the ground ... I can't take this any more...
IMO, Bernanke thinks that he can force money out of treasuries by buying, twisting the tail, but it could go the other way as well.
Let's say it does backfire, that everyone piles in. Then, it becomes the gunfight at the OK Corral. Interest rates start to blip up and everyone is giving the other the evil eye. Someone blinks. Everyone piles out of treasuries, thereby causing the long end to crash. Where does the money--what's left, that is--go now?
Gold?
That train of thought has been running around inside the tunnel in my head. If the move into Treasuries is extreme enough, and Bernanke seems to be encouraging it in his dim-witted academic way, we could have a gen-u-ine crash in the USD and Treasuries when the music stops. So, I'm watching the dollar very closely. Should see it there first ... currency traders tend to be pretty sharp.
Not sure about gold, however. Mebbe.
theyre gonna need more than an additional 20,000 soldiers
93 yen cracked, even as we speak. Will it be that 80's show?
Long Treasuries will be Greenspan/Bernanke's last bubble.
Paging Dr Marx...
NevskyProspekt
If more people read Marx this wouldn't have happened. Our benevolent oligarchy should have taken his critiques to heart. But alas, the collapse of the USSR 'proved' he was wrong.
China and Saudi Arabia stop buying American debt
Unless I'm mistaken, if they're not buying our debt, it means that they're either siting on dollars or there's no CAD to recycle.
The former is stupid; the latter unlikely, given the two countries' currency manipulations.
I would hasten to add that I'm not a bond expert, so take me with a grain of salt.
But, I don't like what I'm seeing. This is looking more and more like "Ben Bernanke, Day Trader."
Marx never said or believed, "To each according to his needs, from each according to his abilities."
I believe that's more of a Judeo-Christian thing.
My friends and I (not an economist amoung them) were sitting in the office today wondering who in their right mind would tie up their money for ten years at 2.75% interest.
Thats not even inflation converage...or am I missing something? Wow those numbers from the 70s...16% interest!! Give me those dammit!
right now mccain and hillary are on the phone to each other
Hillary: "ya know john, at first the loss was just devastating...but now i just get down on my knees and thank God that come jan 20 it aint my head on the block"
John: "hey that palin thing worked like a charm, but it was close, i had to do somethin to get the undecided and swing voters to move away"
I'm watching Bloomberg and I hear Ben say he's thinking about buying longer-dated treasuries. So, what happens? Everybody piles into longer-dated treasuries. Does the money go into commercial paper? No. Equities? Hell, no. Commodities? Absolutely, not. It goes into long treasuries, thereby reducing more money that could have gone into the commercial markets.
I see no new issues. Who are they buying these treasuries from? Where does the money go? It's not being eaten by herman the german. Remember that there's another side to every transaction before predicting a vaporization of money.
Brock,
I need to find an example and a price
Purple writes:
Paging Dr Marx...
NevskyProspekt
If more people read Marx this wouldn't have happened. Our benevolent oligarchy should have taken his critiques to heart. But alas, the collapse of the USSR 'proved' he was wrong.
A few decades from now, scholars will look back at the period post-collapse of the USSR and say that the whole neo-liberal fantasy that history had ended and we reached the land of milk and honey with free trade and free markets and democracy everywhere on earth as one of the biggest follies of leadership in the history of the world.
The US has not just squandered the past eight years, I think we've squandered the past twenty. And if things get bad enough around the world, Marx may yet be vindicated.
I am dead serious.
It's grasping at straws and, in my view, could send long rates skyrocketing.
mp - that's exactly what will happen. Treasury rates will stay low or go lower, but all the other long bonds will blow out as they begin to be starved. Grasping at straws has it exactly right -- it's mindless.
Anonymous(Very Highly Rated) writes:
Long Treasuries will be Greenspan/Bernanke's last bubble.
Yup, more and more it seems so, although the path there may not be as direct as it seems at the moment.
I hope there is something remaining of the financial landscape when that bubble pops.
I had a vision of financial collapse yesterday. It took the form of a 250-mile-long traffic jam from Las Vegas to the L.A. basin that took 11 hours to navigate. Just reverse the flow and let your imagination take it from there.
Neo-liberals called the end of history?
I differ.
Short-term Treasury bills hit new low
Interest rates on short-term Treasury bills fell in Monday's auction to the lowest levels on record.
The Treasury Department auctioned $28 billion in three-month bills at a discount rate of 0.050 percent, down from 0.150 percent last week. Another $28 billion in six-month bills was auctioned at a discount rate of 0.430 percent, down from 0.490 percent last week.
Both the three-month rate and the six-month rate were at all-time lows.
The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,998.74 while a six-month bill sold for $9,978.26. That would equal an annualized rate of 0.051 percent for the three-month bills and 0.437 percent for the six-month bills.
MLM, the Fed isn't restricted to buying Treasuries only as I understand it. They could push down long yields across the quality spectrum if they have the stomach for it. The credit risk could make it harder to soak up the liquidity afterwards, though (if there is an "afterwards"), since they need to sell all that stuff to bring the dollars back in and if the bonds have defaulted there's nothing to sell.
Apparently, this is a method to help decrease the supply of money
No the exact opposite INCREASE the supply & velocity of money IN THE ECONOMY by buying treasuries in the open market. Walk through the transaction in your head... I have a bunch of treasuries... Fed has money... Fed gives me money and buys treasuries... I take money and buy stuff [like a new car]. Happy days are here again!
Goosing the economy pure & simple.
Now if the treasury is doing the same thing BUT in reverse [selling treasuries to fund gov't]... then it comes out pretty close to a wash UNTIL those treasury proceeds are sold or debt retired. Then cash is liberated again.
Its about increasing money supply & velocity not a smart investment. They could just as easily have bought gold, corn, houses in Cali - all would have been perfectly good vehicles to pump money out into the economy.
So this may be a stupid question, but why buy treasuries if the return is so bad?
Is it just that parking your money there is safer than in a bank?
mp-
Hmmm. At these prices, it might be particularly tempting for the japanese and chinese to start unloading.
Krugman seems like a decent enough guy. But, and this is what taints economics as a profession, he is trying to prescribe an outcome rather than simply explaining what is occurring.
To ben, this behavior doesn't seem rational. His nonsense about long buyers determing a future yield based on some formula for Bills and Notes plus a premium is silly. Cash buyers want liquidity, period. Insurers aren't moving this market. And, everyone is afraid some CDS blowup or divvy cuts will keep driving down equities a/o the commercial bonds are gonna get called/tied up in BKs, etc.
So, an entire cash market is running for printing press assured return.
That speech about the printing press has virtually insured that the world will run toward the only instruments that are guaranteed to get first dibs on the new money.
Then, they'll bolt and someone will have to pick up the pieces. Probably by printing more.
Note to ben: It's rational given the incentives.
The US has not just squandered the past eight years, I think we've squandered the past twenty. And if things get bad enough around the world, Marx may yet be vindicated.
Vindicated is a stronger word than I would choose - how about Marx makes a comeback... Marx 2.0 or New and Improved Marx.
lurker, long treasuries are a bet that interest rates are going to go even lower (deflation). A bond with a 10-year duration (for example) will go up in price 10% for each percentage drop in rate. I doubt if anyone is buying them for the income right now, especially when you can get 5% FDIC-insured CDs instead.
They might buy job training, energy research, prostitutes. That velocity of money trick don't fly no more.
Come play poker at my house. The money flies around the table.
where's that hot chic bondgirl when you need her...
I just don't believe they've thought this long bond thing through and further believe it could produce exactly the opposite result Bernanke is seeking.
So this may be a stupid question, but why buy treasuries if the return is so bad?
Why buy a house if rent is cheap? Same answer - belief that the asset will appreciate. That there is a greater fool who will pay more.
The key as with housing is - be the first out the door when the first whiff of smoke is detected. If you are slow you'll get trampled then burned.
Ben will be fanning those flames if he telegraphs that he will be buying treasuries.
Yield to maturity - Wikipedia, the free encyclopedia
Consider a 30-year zero coupon bond with a face value of $100. If the bond is priced at a yield-to-maturity of 10%, it will cost $5.73 today (the present value of this cash flow, 100/(1.1)30 = 5.73). Over the coming 30 years, the price will advance to $100, and the annualized return will be 10%.
But what happens in the meantime? Suppose that over the first 10 years of the holding period, interest rates decline, and the yield-to-maturity on the bond falls to 7%. With 20 years remaining to maturity, the price of the bond will be $25.84. Even though the yield-to-maturity for the remaining life of the bond is just 7%, and the yield-to-maturity bargained for when the bond was purchased was only 10%, the return earned over the first 10 years is 16.26%. This can be found by evaluating (1+i) = (25.84/5.73)0.1 = 1.1626.
Over the remaining 20 years of the bond, the annual rate earned is not 16.26%, but 7%. This can be found by evaluating (1+i) = (100/25.84)0.05 = 1.07. Over the entire 30 year holding period, the original $5.73 invested matured to $100, so 10% annually was made, irrespective of interest rate changes in between.
mp,
They are desperate. This is a Hail Mary pass.
mp(Unrated) writes:
I just don't believe they've thought this long bond thing through and further believe it could produce exactly the opposite result Bernanke is seeking.
mp | 12.02.08 - 1:57 am | #
Yup.
I've always thought if they need to monetize buy something less likely to screw up the regular economy - something like gold. Treasuries actually have a function - gold doesn't.
This is amazingly low... but there is more :
What is the inflation-corrected Treasury yield ??
I suspect much much lower, as the curve shown contains inflation expectation as well.
So the real curve is even lower.
Brock - Just tried to google the amount of long corp bonds outstanding vs. long Treasuries. I know there is a fairly limited amount of long Treasuries out there, and have been assuming that corporates would be much larger. I'm struggling to believe that they can move the yields of corporates down much without killing the dollar.
I didn't even understand his rationale:
"This approach might influence the yields on these securities, thus helping to spur aggregate demand."
Is he saying that by the Fed's buying treasuries the price will be bid down so that other uses for money will be more attractive? Demand for what, exactly, more houses?
hmm... sorry I guess this is just in line with deflationary expectations.
Still, it would be good to see the real curve, and not the nominal one.
Sorry, yield bid down...
Also, and as Hong Konger pointed out, don't forget the foreign holders, like the Japanese and Chinese.
They might see a Bernanke move like this as a chance to bail.
Then, more problems.
Same answer - belief that the asset will appreciate.
Bingo, everyone keeps focusing on the yield, but the price is the key. IMO, by bidding the long bond (the short-duration was near zero already), the Fed is also silently bailing out the banks and insurance companies, who M2M Treasuries for capitalization purposes, with the process that Kona described. In a way, it's a treasury melt-up in price.
Hey things are finally getting serious, right? A spot of trouble ahead?
A spot of trouble ahead?
What are you, a comedian?
One last post from me, and I'm outta yer hair. This was from nakedcapitalism about a week ago:
doc holiday said...
One final comment on that Empirical Assessment: That old paper looks to me, to be The Fed/Bernanke Blueprint for future policy actions. Even though it is long and seemingly boring, it offers some great hints as to where things may drift.
Operation Twist is a nice structure to ponder in general, because it is symbolic of a challenge by Treasury to telegraph a message, i.e, that it intends to punish short term investors with zero returns. Your short term cash is currently worth nothing and has zero future value (for three months). The message in reality is, that too much money is being hoarded in this panic, by banks and investors -- and this is very similar to The Great Depression in that respect.
Hence, Treasury is helping investors flood this short-end section of The Titanic with massive excess inventory -- but why? We are at extreme bubble valuations here with short term Treasury prices on the moon, yielding zip. Ipso facto, Is there a new policy in the wings related to a structural floor, where Treasury will simply move the bar higher, as it distorts short term investments? If you know that 3 months equal zero, isn't that a proxy for an annual discount rate, which will pull down other rates and act like a black hole? Instead of having investments looking at future yield, we seem to be headed the opposite direction, being sucked backward in time with deflationary gravity that is destroying the value of money.
Will investors that have zero confidence remain frozen in fear accepting a reward of zero, while Citi and Ford and GM, AIG and thousands of corporations beg for Treasury to offer them tax payer revenues?
The freaky part for me, is to think that if money is being destroyed and if deflation is like cancer, Treasury is burning up money it can't replace, just like people that bet on stocks, who jump in on a great deal on a share of Ford or Citi, only to find a week later, they just burned up money which they may never get back!
Roubini needs to start thinking in terms of hyper-deflation, because what if, the money you or The Treasury have today, is all you will have for the next ten years? What if there is no future value and no way to re-inflate the global economy ... huh, huh, what about that, punk?
NOVEMBER 24, 2008 4:18 AM
Wow thanks for the responses guys, learned something there!
Is gold liquid enough for something like this? I'm not sure there's enough of it out there to buy up.
kona, it's the same for regular bonds, you always get the same coupon and the par value at maturity, regardless of interest rate moves. Here is a quick example of what I mean by zero coupons having greater volatility. Compare TLT and EDV, which both hold 20+ year Treasuries, but EDV holds only stripped versions while TLT are the conventional kind. You can see that EDV has greater price volatility due to its longer duration.
by bidding the long bond (the short-duration was near zero already), the Fed is also silently bailing out the banks and insurance companies, who M2M Treasuries for capitalization purposes
Silently? The problem is that this recapitalization is so obvious that they don't have any leverage to force the banks to start lending. What's the lever? "If you don't start lending we are going tell everyone you needed recapitalization." Yeah, right.
If more people read Marx this wouldn't have happened.
LOL. Well, they would not only have have to read him, but understand him and live by his precepts.
The younger philosophical Marx, more so than the older political Marx, actually had it right except for one thing: human nature.
Unfortunately, that one thing is a big thing.
"...the Fed is also silently bailing out the banks and insurance companies, who M2M Treasuries for capitalization purposes, with the process that Kona described. In a way, it's a treasury melt-up in price."
Basel, I don't have a problem with that, and it's fine if the tail doesn't "crack," but what happens if it does?
Long rates go through the roof AND bank capital vaporizes.
Am I missing something here?
We've had 30 years of Keynesian consensus.
Not really. Remember, Keynes said that policy should be counter-cyclical. Tax cuts and huge budget deficits during the growth phase of the business cycle are not counter-cyclical. I doubt you'll find a "Keynesian" economist who would advocate constant growth of the debt to GDP ratio.
Anyway, the real debt blowout was in the private sector. Some graphs of my current dataset:
http://2.bp.blogspot.com/_xO1f68tBRQc/STNHRbp3ZOI/AAAAAAAAAAs/8h0dLaztHnc/s1600-h/domestic_debt_gdp.PNG
http://4.bp.blogspot.com/_xO1f68tBRQc/STNHo-Q7IsI/AAAAAAAAAA0/lxJw2x60IxA/s1600-h/domestic_non-financial_debt_gdp.PNG
Silently? The problem is that this recapitalization is so obvious that they don't have any leverage to force the banks to start lending.
While obvious to us, it's silent compared to taxpayer funded injections.
ite all
Brock,
I'm not sure there is any where that is safe!
Re: EDV follows an index of passively selected zero-coupon U.S. Treasury securities (Treasury STRIPS) with maturities ranging from 20 to 30 years
MLM, that's a good point about the market size of corporate bonds, I don't know the relative sizes either. I've always heard that corporates are much less liquid than treasuries, though, as people are more likely to hold them to maturity. So, maybe just a little buying on the margin would be enough to move the price around, since most bondholders ignore it anyway? If nothing else it would get the money out into circulation.
The whole thing is starting to give me the heebie-jeebies too. Isn't the big story than Bernanke is just talking about starting to do it? There was a lot of speculation recently that the Fed was already actively engaged in this.
hong konger, have a good day, night, whatever it is there.
"1 part Forex, 1 part commodities/metals, discount for slosh report... I need much help."
Gasoline scrip is the obvious answer IMO (basically plastic $10 gas station gift cards). It should emerge if serious dislocation happens. Silver may return as well, and gold might reemerge as 'super silver' in a parallel monetary system.
But these things will only happen when the fiat system has lost all credibility.
Kona, is there an inverse EDV fund?
"What happens after the "thesis" of the collapse of the USSR is completed with the transpiring of the "antithesis", the collapse of the US/Keynesian capitalism? "
Geez, Hegel just refuses to die. The Soviet system is not and never was the antithesis of American capitalism. But I suppose that a valid point is there, insofar as we may well have a period much like Russia's 1990s, which is a terrifying thought.
Long rates go through the roof AND bank capital vaporizes.
move the minute hand on the global depression clock a couple of minutes?
All, it has been a long day and I'm worn out. I'm hoping that Basel, or someone in the bond market, will address the question I put to Basel.
Thanks but no scrip must be digital, backed up by recordkeeping in thousands of locations around world.
Energy credits good, memory storage, protein. All existing paper is tied to the new relative valuation index by creditors demanding it in for all deals.
Whips inflation, don't it now?
The market will answer that one.
Currently it says "over 130" on long stuff.
One thing to watch out for with EDV is that it is pretty thinly traded. I think it has picked up some recently but when I was looking into it a few weeks ago entire days would go by without a single trade. I think it is mostly targeted at insurance companies who need to offset far in the future liabilities.
One more here:
Crisis Upends Muni-Treasury Relationship - Bond Buyer Article
he disparity on longer-dated maturities was starker. A 30-year triple-A rated muni on Wednesday yielded 154.6% of a 30-year Treasury, according to MMD. In 2007, that ratio topped 100% only three times. The ratio spent most of the 1980s and 1990s at less than 95%. "The traditional relationship between Treasuries and munis is breaking down somewhat," said Guy LeBas, fixed-income strategist at Janney Montgomery Scott. "That relationship will likely remain squirrelly for some time to come." Many market participants say they expect the ratio eventually to revert or at least retreat; that is, for munis to recoup some of their value relative to Treasuries. "It's not normal for a tax-free yield to be higher than a taxable yield," said Joseph Mowrer, a portfolio manager at Karpus Investment Management. "I would expect that at some point it would go back closer to its historic average. ... Anyone's guess is as good as mine as to how long it will last.
"Energy credits good"
meant five gallons, not "dollars", which would be meaningless.
basically, plastic cards that get you said gallons of gas, in the same role as 1-20-50-100 $ bills. silver coinage could also be used with this system, though this is a bit trickier, and some natural arbitrage between the two might set in.
back in the real world, i recommend looking at chile's unidad de fomento if you haven't already.
Nikkei, Topix and Mr. Yen say tomorrow like today.
hello nice blog!Keep it up.It's contain is very informatic and unique.
Rob,
Climbing when stocks slide???
Inverse funds can keep the bear at bay for mutual-fund investors Mutual Understanding - MarketWatch
"The traditional relationship between Treasuries and munis is breaking down somewhat," said Guy LeBas, fixed-income strategist at Janney Montgomery Scott. "That relationship will likely remain squirrelly for some time to come."
Okay, that signals the end of the technical discussion. Break out the recipes.
Seriously, there are few Cali munis yielding 12% taxable equivalents. And remember as the rich pile in they pay fewer taxes.
Futures say Paulson will reload bazooka and tax payers have cut a fat hog...
Stock Futures on Bloomberg
Goodnight,
It was a long day and Tanta passing has been an emotional experience; I'm drained!
RIP
I'm busy scanning my archives for "The complete conjure".
Found these nuggets:
mp writes:
Conjure Bag says Recession Q1-08, and he wants to know if there's a prize.
mp | 08.16.07 - 7:33 pm |
Chuck Prince says that, as long as the music is still playing, you've got to get up and dance.
FT.com / Registration / Sign-up 5cefc794...00779fd2ac.html [Bullish Citigroup is 'still dancing' to the beat of the buy-out boom]
I showed this to my conjure bag and it started to tremble with fear.
mp | 07.10.07 - 9:48 pm |
mp writes:
The conjure bag is becoming increasingly unsettled. It smelled blood on the street today. It's whispering, "sell-off, mp, sell-off." It's still insisting that BSC will test 130 and says the financials will be bitch-slapped tomorrow.
mp | 07.10.07 - 8:05 pm |
Some weeks ago, my toad bones and ground-up dog balls predicted in this noble forum that Cerberus, after pillaging Chrysler, would sell it to the Chinese.
Since that prediction, as you may or may not be aware, China's Chery has entered into a strategic partnership with Chrysler:
Bad Request 7D
The conjure bag insists that this partnership is the first step in the eventual Chinese takeover of Chrysler.
mp | 07.09.07 - 2:11 am |
mp writes:
The toad bones and ground-up dog balls in my conjure bag are whispering to me. It almost sounds like "IndyMac."
A nice Sunday afternoon research project.
mp | 07.29.07 - 2:14 pm |
We need bond guy or somebody else who deals with this stuff all day to clear this up, assuming bond guy's still employed and can afford electricity for his computer. FWIW, I think the answer to how this affects America, Inc. leads to the answers to all the other economic questions worth asking. I posted the question over at Across the Curve.
As an aside, it's a gift to be able to have a reasonable conversation here tonight. Good night all.
Did someone mention JPM's $90,000,000,000,000 you know what?
Sleep tight.
Kona, those futures had a reflex pop at open and have lost most since.
mp writes:
Also, and as Hong Konger pointed out, don't forget the foreign holders, like the Japanese and Chinese.
They might see a Bernanke move like this as a chance to bail.
Then, more problems.
mp | 12.02.08 - 2:04 am | # [kill][hide comment]
mp, I'm inclined to think Bernanke might be covering a bail that's in progress.
Maybe this is like the scene in "Blazing Saddles" where the black sheriff points a gun at his own head and says "next man makes a move, the nigger gets it..."
Mel Brooks wrote that part for Richard Pryor, but uptight studio wouldn't do it.
130.95 or thereabouts was hit by the march long bond.
That should equate to something like 3.1%.
I'm calling the bottom dammit! For at least the next fifteen minutes.
yogi, I don't know what you mean when you say the uptight studio wouldn't do it. EEngineer's quote "next man makes a move, the nigger gets it..." is accurate. I actually had to look it up to confirm it.
It's at about 2:45 in:
YouTube - the new sheriff scene from blazing saddles
" . . . and they are so dumb."
Studio wouldn't allow him to use Richard Pryor in the film. He was considered too "racy".
Would have made a great movie legendary.
California can't decide if it's the most vital economic engine in the US, or bankrupt.
I guess it could be both.
The engine of bankruptcy.
California is in emergency session and is in danger of running out of cash. That's why the TARP whining. Sure as heck CA loses its ratings. Maybe 3 notches.
"I guess it could be both."
I knew CA was in trouble when Arnie was elected - he had heavily sponsored a school bond on the ballot in the previous year. How did the sons of Goldwater become the twisted offspring of LBJ?
?
Goldwater's son became liberal but I'm not hearing you.
Another conjure classic:
Conjure Bag remembers eleven occasions in human history where the use of the "f" word was completely justifiable:
11. "What the @#$% do you mean, we are sinking?"
-- Capt. E. J. Smith of RMS Titanic, 1912
10 . "What the @#$% was that?"
-- Mayor Of Hiroshima, 1945
-- Custer, 1877
-- Einstein, 1938
-- Picasso, 1926
-- Pythagoras, 126 BC
-- Michelangelo, 1566
-- Amelia Earhart, 1937
-- Noah, 4314 BC
-- Bill Clinton, 1998
-- Saddam Hussein, 2003
Conjure Bag now believes there's now a new addition to the list:
-- Robert Rubin, 2008
mp | 11.04.07 - 11:11 pm |
Damn conjure has been pretty spot on. Does December '07 count as Q1-2008?
Hooo mama. Like I said to my Hong Kong folks earlier today/tonight, it's going to get ugly, the only question really is how ugly and who gets burned. I think we have our answer.
Re US getting squashy on the long bond yield, which is what BB wants, but there's a >1% saddle at 2yr which needs some working over.
Source here, but copied below:
Bloomberg.com:
Government Bonds
U.S. Treasuries
\tCOUPON\tMATURITY
DATE\tCURRENT
PRICE/YIELD\tPRICE/YIELD
CHANGE\tTIME
3-MONTH\t0.000\t03/05/2009\t0.04 / .04\t-0.02 / -.020\t02:00
6-MONTH\t0.000\t06/04/2009\t0.43 / .44\t0 / -.000\t02:00
12-MONTH\t0.000\t11/19/2009\t0.79 / .81\t0 / -.000\t02:00
2-YEAR\t1.250\t11/30/2010\t101-10+ / .89\t0-01 / -.016\t02:43
3-YEAR\t1.750\t11/15/2011\t101-28 / 1.10\t0-02 / -.022\t02:43
5-YEAR\t2.000\t11/30/2013\t101-15 / 1.69\t0-03½ / -.023\t02:45
10-YEAR\t3.750\t11/15/2018\t108-30 / 2.72\t0-03 / -.012\t02:53
30-YEAR\t4.500\t05/15/2038\t124-09½ / 3.22\t-0-02+ / .003\t02:50
Looks like a fabulous store of value vis a vis core inflation.
Oh, wait...
C
More craziness. Who is buying the long bond at these levels? Not much inflation or debasement premium. Gold heading down again...765
yogi, I put Blazing Saddles in the legendary category anyway. Racial issues were tough in the early 70s. Also, I think Cleavon Little did fine in the role.
Meanwhile, the economic world, as we've known it, continues to disintegrate.
Will be checking back for the macro picture here even though I know it won't be pretty.
Later,
"Goldwater's son became liberal but I'm not hearing you."
Just mentioning the obvious in terms of the orgy of spending in the past decade under "conservative" executives. Arnie has more of an excuse, what with Sacto's heavily democratic majority, but he loves being Santa Claus as much as W.
Even though Goldwater was a creation of the mob, at least he was intellectually consistent.
Does December '07 count as Q1-2008?
No, it's a month off and we should never let him hear the end of it. You go poke him with a stick and I'll stand here and watch your back.
The Great Recession?
U.S. May Be in for ‘Great Recession,’ Longest Postwar (Update1) - Bloomberg.com
Weelllll, perhaps I'm revising. Can't all be that bad surely? Asia's still growing, plenty of jobs, production strong, no? Stocks should be great!
Let's have a look:
INDEX\tVALUE\tCHANGE\t%CHANGE\tTIME
TOPIX INDEX (TOKYO)\t787.12\t-40.35\t-4.88%\t01:00
TOPIX CORE 30 IDX (TSE)\t460.48\t-23.85\t-4.92%\t01:00
TOPIX LARGE 70 IDX (TSE)\t696.13\t-41.49\t-5.62%\t01:00
TOPIX 500 INDEX (TSE)\t621.26\t-32.83\t-5.02%\t01:00
TOPIX SMALL INDEX (TSE)\t807.21\t-28.90\t-3.46%\t01:00
TOPIX MID 400 INDX (TSE)\t811.55\t-39.49\t-4.64%\t01:00
TOPIX 100 INDEX (TSE)\t543.49\t-29.90\t-5.21%\t01:00
TSE2 TOPIX 2ND SECT INDX\t1,917.37\t-23.83\t-1.23%\t01:00
NIKKEI 225\t7,863.69\t-533.53\t-6.35%\t02:00
NIKKEI 300 INDEX\t160.04\t-8.29\t-4.92%\t02:00
NIKKEI 500\t694.78\t-35.83\t-4.90%\t02:00
JASDAQ: STOCK INDEX\t44.16\t-0.28\t-0.63%\t01:00
NIKKEI JASDAQ\t1,079.65\t-8.32\t-0.76%\t01:30
TSE REIT INDEX\t793.92\t-12.76\t-1.58%\t01:00
TSE MOTHERS INDEX\t309.96\t-4.39\t-1.40%\t01:00
OSAKA SE HERCULES INDEX\t494.48\t-4.45\t-0.89%\t01:11
Oh, ok, so tanking there too and HK, and Taipei, and Seoul, and Sydney, and Wellington all in the shttr.
Sheesh, Mr Market is so grumpy these days.
C
sdtfs,
Nah... I'm not ready for YLSP's entrails (digital or not) to become a part of the bag...
mp certainly held to his recession call however and I don't remember if he piped up earlier... except to say his call on equities was correct (and that's probably more profitable).
I have got good news for you
Im a gdi 10$ business man are you interested in internet marketing business?
Whether you think you can, or you think you cant you are right.
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@RobDawg:
"Seriously, there are few Cali munis yielding 12% taxable equivalents."
Two questions:
For you early risers --
Anyone know if the ELX, Electronic Liquidity Exchange ever got off the ground?
New Electronic Futures Exchange Could Take On Chicago Mercantile Exchange by Advanced Trading
You go poke him with a stick and I'll stand here and watch your back.
--sdtfs
Ohhh, that one made me laugh!
Why all this hemming and hawing re: the yield on the ten year?
Haven't people been lending money to the Japanese gov't for less for almost a generation?
Why all this hemming and hawing about the yield on the ten year? Isn't it a lot higher than what lenders have been getting from the Japanese gov't for almost a generation?
OK. The last man to resist the call to spend may have been Grover Cleveland, universally detested for gold buggery during the panic of 1893.
"500 banks and 16,000 business firms were forced into bankruptcy. Two and a half million men were pushed out of work." (W.Karp)1894 would see a record 1394 strikes.
Revolution seemed imminent, but the Constitution held as the Democrats lost 113 seats in Congress to Populists and Republicans.
Cleveland further infuriated the public by buying gold at extortion prices in a private deal from J.P. Morgan and others. The Supreme Court invalidated income tax on landed property.
Detested by the populace and without an effective party, Cleveland abandoned his long-held neutrality and found a glorious war of distraction in Cuba.
A friend later called him "the father of the spirit of imperialism".
Obama pays lip service to austerity, but I'd be more likely to believe a word if he had said something in October.
UB a trader told me last week that Minnesota's wheat exchange was going electronic next month.
More Stupidity In The Markets - The Market Ticker
Denninger is pretty funny...
"The idea that the government can "manage" the way out of this mess is fanciful thinking, equivalent to belief in Santa Claus or The Easter Bunny"
Or belief in US Treasury bonds.
The only way to keep the credit bubble intact is ever-decreasing rates. But we're already overdue for a reversal of the 20-year cycle.
Irresistable Force, meet Immovable Object.
Joshua Tree meme -
Google Trends: joshua tree
Declining, although coicindence is more likely in November than July.
Trend Search
Missed 2 more times when the "f" word is appropriate, from conjure:
"Can't they #$%&ing shred it faster?"
--Kenneth Lay, 2002
"#$%^, you first."
--Donner Party, 1846
As an anecdote I'm in the process of buying a new car... what's funny in this day and age is that all the recent prices are shared by others on the Internet, and you can get a real-time view of what's in stock. For 2008 models you'd have to think dealers would be trying to get those off their lots. I'm interested in seeing how aggressive some of them are with the pricing... especially the ones in more sparse areas.
bgates writes:The Soviet system is not and never was the antithesis of American capitalism.
bgates | 12.02.08 - 2:21 am | #
I believed without question that the Cold War was an epic moral struggle. But in hindsight, they (their governments) just look like two rival gangs, like, say, Castro or Chavez, just bigger and richer. Being rich is very popular, and can buy you a lot of positive marketing.
It makes the poor gangsters look bad.
"I believed without question that the Cold War was an epic moral struggle."
I thought it was first of all a struggle to prevent us from destroying ourselves. Dust has no morals.
It's true, though, that the Soviet system was in many ways indifferent to human values, and irrational in its practical economic applications.
It was non-adaptive, and the non-adaptive don't survive.
"But I suppose that a valid point is there, insofar as we may well have a period much like Russia's 1990s, which is a terrifying thought."
Two very different cases.
blueblls writes:
Check out Maurice "Mr. Hanky" Greenberg's piece in the WSJ:
And Mr. Greenberg writes:
The Citi deal makes sense in many respects.
You certainly need Mr. Greenberg's eyes for this deal to look like anything other than a bailout of the privileged at the expense of taxpayers. What a clown!
Curious confluences there.
Lothar the Rottweiler | 12.02.08 - 12:34 am
Am I remembering this as the county that threatened bankruptcy (Ch 9) instead of making bond payments? I followed this story at another site, I think. Perhaps here too. Personally, glad to see some perps do the two step. These are the small new potatoes swept up with a broom after a hard Memorial Day rain. The real spuds are yet to see the light of day. They will, and we can't shut up about the outrage until enough of them do.
Stopped for gas. Stepped in back and asked Mr Woody if it was harder filling up his tanks when prices go down versus when they go up. He made it clear that he was losing his margins faster than he could pump it out. The price goes down so fast, he has to drop his price to compete. He asked my how low will it go? I wouldn't say, but he asked me will gas be a dollar?
It might. It won't stay there long ifn it does.
He said, "At the rate we're going, the whole system will collapse." He buys from a jobber who has about three dozen retail locations. The jobber's margins are being squeezed too. Jobber receives product via pipeline access, and truck primarily. Folk, when the retailers collapse along with the jobbers, whatever shall we do?
That was a quick read...
A couple of counterpoints regarding this conversation. (thinking primarily of the next 12 months) China needs USD, they want us as strong as possible to buy their goods. They have nothing to gain as far as I can see with adding to the problems of this deep recession. This isn't because they are noble, but because their manufacturing base requires demand outside of their own country.
The available options for sovereign nations to dump USD don't look very appealing in the near term. Most of the world is behind our situation in the midst of their own economic fallout, so we can leverage that to a strong degree. The key is not crossing the line into destruction, which is what many of you are arguing is already happening.
BB has stated and is obviously very aware of the difference in 1) stating a possible strategy 2) and the actual tactics employed that may be different than the implied public conversation. I'm not giving him excess credit here, but I am saying he knows that he can change investment demand in certain circumstances. By indicating future action by Fed, investors will change their expectations and in most cases behavior as long as they believe him (whether or not he intends to follow through).
JP makes another $1b profit shorting the banks. Theres more to come, he warns. Paulson doesnt smile as he says this, even though with each new calamity his bottom line grows.
What shorts here do not wish they had taken their entire position and handed it over to him to manage, especially given his ABX BBB- track record. Sure would be interesting to known when he covered those positions, in light of the fact that these CDOs have fallen another 50% since late October -- worthy of a cliff diving post.
FYI...check out comments made recently by Tanta's sister on the previous thread.
"It was non-adaptive, and the non-adaptive don't survive"
Neither do the easily-adaptive.
Looks like there's enough Alexa data now to guesstimate Black Friday sales from change in traffic.
http://www.realmeme.com/roller/page/realmeme?entry=black_friday_web_traffic
For those afraid to click the link -
Target - no change
Sears - 5% drop
Best Buy - 28% drop
I expect that the ranking of change in retail sales to follow the ranking of change in web traffic.
I expect sales at Target to be the same, Sears to be slightly lower and Best Buy to be substantially lower.
Sure looks to me like overall sales should be down. I like having a second check on the official numbers.
Note that this is an experiment, though.
Broward, I can't help but wonder if we should introduce you to some girls.
Finally, a perfect Xflation hedge
Broward, thanks for the post. The sales could out pace 2007 if dramatic cutting continues as consumers have not felt the full impact of the credit crunch that is to come. But, whether sales are slightly better or decently worse than 2007, will still end in the same result...greatly reduced profits. The wave of job losses, reduced wages and reduced consumer credit is still in the early stages. Regardless, this shopping season is baked in.
As the economic situation and expectations extend, it makes the 2008 Holiday season less relevant imo. The wave of job losses, reduced wages and reduced consumer credit is still in the early stages. Equity and economic expectations are well into 2009 to figure out the next steps in this crisis. Question is, will we have time to see any year over year improvements by this time next year. I hope so (hope is my new strategy).
"By indicating future action by Fed, investors will change their expectations"
Sure, one particular investor - in the background - just started devaluing its currency - some more; so BHB might just have managed to change this particular investors expectation all right.
Oops, I mislabelled the graphs as "2009", the traffic data really is for 2008.
I also checked Walmart, Nordstroms and Kmart. Here's the relative changes, ranked from best to worst -
Walmart: Up about 20%
Kmart: Up about 10%
Macys: Up about 10%
Nordstrom: No change
Target: No change
Sears: Down about 5%
Best Buy: Down 28%
I thought Target, Sears & Best Buy would be broadly representative but apparently not.
So schoen koennte es sein:
Video - SPIEGEL ONLINE - Nachrichten
Is this a version of "crowding out"? The private sector's interest rate is going to the moon, because the federal government is soaking up all the money.
GE not bringing good things to life this morning.
GE is deleveraging....The Great Unwinding continues...
When GE purchased mortgage company WMC in 2006 for a billion dollars and then shut it down a year later, I knew these guys were idiots and they would be in trouble on all of their other idiot Welch acquistions
Cash Is Replacing Gold As Safe Haven for Investors
Cash Is Replacing Gold As Safe Haven for Investors - CNBC
Question, I put all my 401k in Treasuries last year b/c I dont trust bonds or stocks. If I move out of Treasuries where can I go? Money markets? I do not feel compelled to move into stocks at the bottom having missed most of the bust.
Baltic Dry Index (BDI)
-16
684
Which hits zero first - BDI, NAHB, or 30YR UST?
GE not bringing good things to life this morning.
They didn't announce a chapter 7 reorg. Therefore, it was good news.
Take the market on that!!!
And the world's smallest violin begins to play: Hedge Fund Assets Fall $170 Billion in Third Quarter - Companies * US * News * Story - CNBC.com
Global hedge fund assets fell to $1.63 trillion at end-September from $1.80 trillion at end-June as the industry also generally failed to post positive returns amid the volatility that many were designed to exploit.
Global hedge fund assets fell to $1.63 trillion at end-September from $1.80 trillion
Well, at least Paul Tudor Jones was able to build a new basketball arean at my alma mater (UVa) before he went tits up.
This will be a +8 day on the SPY. What with all the good news.
Check this out, mostly idiots, but Andy Xie asks the right question and the Macquarie guy shows why they deserve to go under. Property is the epicenter? Not in China, mate. Misallocation of capital is the epicenter. The rest is periphery.
China Property Slump Threatens Global Economy as Growth Slows - Bloomberg.com
C
Will, as long as a time horizon is better than 2 years...for me, stocks are a fine place to be(I'm assuming you're not a trader). Value entry points (below Dow 8,000)will continue to be provided over the next few months imo.
Will, try Short ETF's. Start with 5% of your money and see how it goes. Take profits once in a while and then break. See if you get a hang of it.
It is a bear market. Trend is down. But the easy money has maybe been made.
These spreads are overrated. It matters a lot whether the spread went up b/c the private rate went up or treasury went down. So the spread itself is interesting but not definitive.
Will, the difference between GiezCubed and myself is that I think USA and UK are finished because they are nationalizing business. Corporatism and vested interests. No more productivity.
Take your pick.
CNBC Plans Big Cuts Despite Huge Ratings
Have the reports from CNBC been especially glum lately? The network, once known as Bubble-Vision for its alleged touting of bull market views, has more recently been criticized for airing rumors and the analysis of short sellers. Whats turned the smiles into frowns?
Maybe its the fact that despite record viewership numbers, the network is preparing to slash ten percent of its budget, cutting everything from perks to personnel.
Despite the yuks and the huge numbers, the network is now in the process of slashing as much as 10% from its budget. People at the network, says one staffer, are scared s---less, the big coverstory in the latest issue of B&C says.
OH PLEASE LET IT BE LARRY KUDLOW AND MARK HAINES
the network is now in the process of slashing as much as 10% from its budget
Remember how they cheer when reporting job cuts because its a free market thing. I wonder how they are cheering this move. I say make it 50% so that we can cheer even more.
Give me a C.. Give me a N
I see this as an AP headline:
"Britney Spears tops Yahoo searches"
Speaks for itself.
Expired
ruh roh
Is this Phil Lebau on GM's payroll? He is not a reporter...he is a shill for this bankrupt company
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Jon like Penis.
"Comrade Peronista writes:
Will, the difference between GiezCubed and myself is that I think USA and UK are finished because they are nationalizing business. Corporatism and vested interests. No more productivity."
He thinks they're finished and I think they're in decline/rehab after approaching their deathbed(the Nicole Richie on again off again type).
I believe you can make money on either side since I don't believe the markets drop straight line down or that we'll "V" line back up.
However, if you're not trading consistently, then I wouldn't approach the short route.
My friends and I (not an economist amoung them) were sitting in the office today wondering who in their right mind would tie up their money for ten years at 2.75% interest
Well for one, insurance companies do have to match whether fundamentals are good or bad.
"Britney Spears tops Yahoo searches"
Speaks for itself.
Pavel Chichikov | 12.02.08 - 9:24 am | #
Very sad and indicative of the depth we have to go before the masses wake up. Or perhaps the masses can't take anymore bad/horrifying news.
I am almost in that state. I have done what I can to protect myself. My voice is not heard by my government representatives, what can I do but withdraw from the conversation? I know I should fight it, but I am sickened by the corruption and feel as though I cannot change it.
Crewman,
I'm not sure why they're cutting staff if the ratings are high. I am surprised their ratings are so high because it's human nature for people to eschew bad news that affects them personally. Maybe they're preparing for lower ratings?
GiezCubed, we are very close in our diagnosis.
Damn
The FED
I am surprised their ratings are so high because it's human nature for people to eschew bad news that affects them personally.
I think people tell pollsters that they're not looking at 4019k) statements, and not worried about the market.
At home, when no pollsters are around, they're reading statements, and watching BubbleVision.
max flatow writes:
@RobDawg:
"Seriously, there are few Cali munis yielding 12% taxable equivalents."
Two questions:
1. any particular suggestions?
2. are these safe if Cali goes bk?
Without advice here's an example:
CA\t9/1/2016\t65\tMORENO VALLEY CALIF UNI SCH DI\tN.A.\tN.A.\t\t4.550\t9.000\t75.55\t3/1/2009\t102.00\t616874GM9
Moreno Valley is bubbletown poster child for the Inland Empire. The bond is unrated but 9% double tax free and a $75.55 price with the possibility of a $102 redemption in March you could score big.
"I thought it was first of all a struggle to prevent us from destroying ourselves. Dust has no morals."
And the reason we aren't dust is not American strength, but Russian wisdom, at least from one perspective.
It has always been a personal theory of mine that the only reason that the Cold War never turned hot is that those in charge of the Soviet Union had no difficulty in imagining what a destroyed city and starving people looked like.
And that they were not able to justify to themselves doing the same as a matter of belief. Whereas many in the U.S., without any familiarity with what millions of dead in destroyed cities actually meant, were saying 'better dead than red,' and meaning exactly that - especially since they were confident of killing the reds too.
You can see much of that same attitude in some of the posters here, casually talking about using their weapons when the going gets rougher. There is something frightening in such casual acceptance of violence as the solution, and not a problem.
lama writes:
Crewman,
I'm not sure why they're cutting staff if the ratings are high.
Why do people stare at a burning building?
Eric,
I think people file away their 401k statements when the market is bad. I don't think they want to hear it on TV either. The only action people ever seem take during a down market is to liquidate at the bottom.
During the bull market, Yahoo's homepage had the market index numbers at the top. During the bear market, they placed it lower on the page, out of sight for most. I guess it was a case of 'out of sight or out of site'.
I loved the name of Ben in this bloomberg arty: Bernake-San
too funny
Domo arigatoo gozaimasu Bernake-san
‘Bernanke-san’ Signals Policy Shift, Evoking Japan Comparison - Bloomberg.com
rent-to-own,
I was perhaps a bit closer in to what was going on. Both sides knew what war would have meant and were determined not to engage.
I'm talking here about the US defense establishment as well as the Soviet side.
The antagonism persisted, but both sides hoped to avoid a catastrophe, and they did.
That doesn't mean that war was an excluded possibility, but it would not have begun as part of a deliberate move.
The stand down of intermediate range forces in Europe was probably a decisive step away from the abyss.
Bernanke has it backwards. He needs the rate on the long bond to go up, not down, to draw money from short-term Treasuries into effective investments. Normally that would be accomplished by buying long-term bonds in open market operations, which paradoxically will increase the rate on the long bond by causing inflation (at least if its done enough).
However, with the monster spreads between Treasuries and almost all other investments right now it make more sense to take a Bank of the Fed approach and issue currency to buy other kinds of bonds. There is of course credit risk, but current spreads excuse a lot of credit risk (like the 5.86% A2/P2 spread, for example). In addition some bonds are effectively guaranteed by the government; since it's bearing the credit risk anyway there's no additional harming in buying up such bonds. That's why buying Agencies was a good move.
What disturbs me is that while we are clearly in a monetarist situation, with a deflationary liquidity trap strangling the economy, Bernanke and the rest of the Fed remain completely stuck in the Central Bank Keynesian approach - lower interest rates. Don't they remember Macroecon 101? Interest rate manipulations don't work in a liquidity trap - first you have to get out of the trap via printing money. Does anybody in the Fed remember basic economics?
An acquaintance asked me yesterday how he could figure out what was happening with the economy.I told him to have a large bowl of clam chowder and 5 pounds of prunes for dinner.
Fair Economist. BB is following Milton Friedman's playbook of what went wrong in the 1930's. Again based on Irving Fisher who went bankrupt.
They all got it wrong. Marx, Chicago, Keynes, Supply-sdier's.
AIG Needs a New Deal - WSJ.com
proves that bailout money is going straight to paying off CDS at 100 cents on the dollar.
lama(Unrated) writes:
Crewman,
I'm not sure why they're cutting staff if the ratings are high. I am surprised their ratings are so high because it's human nature for people to eschew bad news that affects them personally. Maybe they're preparing for lower ratings?
lama | 12.02.08 - 9:48 am | #
If you can find reports on revenue - that would explain a lot (or the parent company - cut everywhere if bleeding).
Understand just because ratings are high doesn't mean advertisers are happy if the wrong demographics are over-represented in those ratings numbers... I mean if you are trying to reach bullish day traders for a brokerage house client are you going to pay a premium to reach a huge pool of 'pucker faced short sellers'? I mean it's like airing Victoria Secrets adds on Lawrence Welk reruns... who cares how many people watch - they are the wrong people, they aren't buying!
That by the way is the problem everywhere in media today - if they aren't buying regardless of the pitch why pay to pitch to them?
One question I have here:
If Ben starts buying long treasuries, why wouldn't the Chinese see this as a chance to maximize their investment, and maybe sell, if indeed they are concerned about how much US debt they own...they could put the proceeds in Euros, and when rates go back up, as they must, repurchase IF they wanted to?
That make any sense?
"Bruce in Tennessee writes:...If Ben starts buying long treasuries, why wouldn't the Chinese see this as a chance to maximize their investment, and maybe sell, if indeed they are concerned about how much US debt they own...they could put the proceeds in Euros, and when rates go back up, as they must, repurchase IF they wanted to?"
Yes, China's Yuan devaluation, the dollar rally, and the US bond bubble combine to give China an opportunity to dump Treasuries.
Fed buying treasuries should push down the dollar. But with the dollar so high right now, it surely is an opportunity for China to diversify somewhat out of the dollar.
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