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Buckle up campers, it's gonna get bumpy
Good afternoon.
The Federal Reserve has just announced that it's going to buy US$300B in treasury bills. This follows a Fed statement that eliminated any reference to a recovery this year, and which now openly talks about deflation. And that's just part of an expansion of US$1.15 Trillion (million million), "doubling in one pen stroke the amount of 'credit easing' it's already accomplished."
Stock markets are shooting up on this, showing that the equities traders really are just that clueless - somehow, they think this is a good thing. In fact, this is a really, really bad thing, and is probably in part a reaction to foreign capital flight in January of $148.9B, including $60.9B in "long" securities such as the 2-year to 10-year issues the Fed says it will mostly be buying.
The Bank of England executed a similar manoeuvre of buying its own government bonds recently, with results that should induce severe caution - once there was an overpaying market, a huge rush to sell appeared. Remember that bad scenario I've talked about, with selling pressure on Treasuries sending rates through the roof? Remember that. At the time of writing the linked commentary, Karl was betting Mr. Bernanke wasn't going to pull this trigger as a result, because Mr. Bernanke knew what would happen to, say, the US dollar. Karl was wrong.
The dollar index, by the way, has fallen off a cliff on the news, falling over 2% in a matter of minutes. It's in a bounce right now, but it's time to start looking at support layers. The Canadian dollar is up 3ยข against the US, the Euro is up 3.34% and climbing, the yen spiked 2.8% - it's a slaughter for dollar bulls.
Meanwhile, we have a transfer from Citigroup to the Treasury, as the incompetent Lewis Alexander becomes a "counselor" to Secretary Geithner. This is the kind of buffoon-like clownery this jerk was spouting as late as 2007:
More later, I'm doing some recording right now. Good luck.
The Federal Reserve has just announced that it's going to buy US$300B in treasury bills. This follows a Fed statement that eliminated any reference to a recovery this year, and which now openly talks about deflation. And that's just part of an expansion of US$1.15 Trillion (million million), "doubling in one pen stroke the amount of 'credit easing' it's already accomplished."
Stock markets are shooting up on this, showing that the equities traders really are just that clueless - somehow, they think this is a good thing. In fact, this is a really, really bad thing, and is probably in part a reaction to foreign capital flight in January of $148.9B, including $60.9B in "long" securities such as the 2-year to 10-year issues the Fed says it will mostly be buying.
The Bank of England executed a similar manoeuvre of buying its own government bonds recently, with results that should induce severe caution - once there was an overpaying market, a huge rush to sell appeared. Remember that bad scenario I've talked about, with selling pressure on Treasuries sending rates through the roof? Remember that. At the time of writing the linked commentary, Karl was betting Mr. Bernanke wasn't going to pull this trigger as a result, because Mr. Bernanke knew what would happen to, say, the US dollar. Karl was wrong.
The dollar index, by the way, has fallen off a cliff on the news, falling over 2% in a matter of minutes. It's in a bounce right now, but it's time to start looking at support layers. The Canadian dollar is up 3ยข against the US, the Euro is up 3.34% and climbing, the yen spiked 2.8% - it's a slaughter for dollar bulls.
Meanwhile, we have a transfer from Citigroup to the Treasury, as the incompetent Lewis Alexander becomes a "counselor" to Secretary Geithner. This is the kind of buffoon-like clownery this jerk was spouting as late as 2007:
"I think that's not going to spill over more broadly into the economy, and so I think we're going to have a normal kind of housing cycle that's going to last through the middle of this year," Mr. Alexander said in a 2007 interview on PBS.Nice call, jackass. And now you're in Treasury. This'll be fun.
More later, I'm doing some recording right now. Good luck.
no subject
The kook comment - Karl was Usenet Kook of the Month.
Y2K - Yes, the guy is a half-step from a foaming-at-the-mouth survivalist. He's predicting collapse of the US, blood in the streets, etc. My guess is this is not the first time he's done that.
Peter Schiff, how's his fund doing? Because people keep talking about how spot-on he is, and then I'm hearing his fund is down 50-70%. Doesn't sound to me like he's beating the market.
no subject
I don't typically talk about this, but I personally am up (very, very slightly) from December 2007, if that sort of thing matters to you. I'm worried about a Treasuries bubble and that this may not last, because that's where I've been hiding, and I don't really know where else to go from here.
Thank you for a source on the "kook" commentary. I see, 1998, yeah, when he was at MCS, frothing about in an infamously misdirected Usenet war about spam. I'd buy that.
See below for my comments on political instability. He's been freaking out about that, I agree. It's not without precedent in the US, as I mentioned below, but I think he's wrong. But if we get currency failure, things will get ugly. I just don't think the ugly will be so much where and how he thinks.
None of this has anything to do with bid/cover ratios on bond purchases, mind you. Which is what I linked to his post.