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Re-thinking the short long-bond trade
The most protected market in the world is the US treasury. Look at how hard US gov has fought to protect these sleazy banks from failing? Now imagine what they would do IF the treasury market started having weakness. Think 401 confiscations, transferring intragov holdings to public debt, accounting rule changes, phantom QE (unreported). Who knows, but you guys get the point.
there is a clear break of established correlations happening in the last week. Today the dollar is falling, and for weeks the equities are ralying, but gold is weakening too - even while oil rallies. Interesting developments. Not sure what it suggests, but previous decoulpling of these correlations have resulted in massive shifts.
For whatever that is worth!
Capital is as capital does.
At any moment in time, there is a finite and quantifiable amount of capital in the global economy is there not? And the distribution of that capital has no effect whatsoever on the total amount - how the capital is held has no bearing on the total amount of capital.
Most of this "capital" is held by central banks the world over. More specifically, if we are talking about the $ world reserve currency, all of that currency is held by foreign central banks either directly or indirectly or the US Fed. Directly means foreign central banks hold $ on behalf of their own host (a most apropriate word, since central banks, being parasites, need a host) government. Indirectly means private individuals or companies in a foreign country holding their dollars in private banks, all of whom have accounts with the respective country's central bank, which is really where all money is held, except for safety-deposit-box money.
Banks, be they central banks or private banks, invest the vast majority of their $ in US Treasuries. I know they do not invest ALL of it in US Treasuries, but to say they invest the VAST amount of it in US Treasuries is no exageration. Other options include their own government's bonds (if and when they auction $-based bonds, which is not very common), or loans to private individuals or businesses in their host countries. This is true both in foreign countries and in the U.S.
So, when we speak of foreign US Treasury investment being "down" or "up" there must be an offsetting effect somewhere else - everywhere and always - it's a zero-sum game. This is especially true given that other options where banks may put their dollars, namely their host-countries $-based bonds, or private individual or business lending, has collapsed and continues a downward path (and even if it weren't, when a business receives a loan, or when a government receives bond auction monies, it is quickly spent and redeposited in the same or another bank's account and we're back at square one). Simply put, where the heck else is that money going to go other than US Treasuries? And if it is not going into US Treasuries, there can only be one reason - US imports are down and therefore $ leaving US shores to overseas banks accounts are down as well. That means the capital is staying in the U.S., where guess what - it will also be invested in US Treasuries, either directly by customers and businesses or by default by the very bank that holds the accounts.
All in all, it's a fiat merry go round, courtesy of how the world's reserve currency works, and how debt-based money works in general. Bonds will not crash until the currency itself inflates or hyperinflates. Until then, enjoy the merry-go-round.
Gold production is going down and dollar production is going up... isn't there only one thing that can happen? Gold is money.
I absolutely agree farmer john. The fiat merry go round will continue until the currency hyperinflates.
Meanwhile the public anger rises. Slowly but surely people are beginning to catch on to the scam that is being perpetuated by the elite. In their folly, they think they can starve the nation while they reap the profits with no consquence. The 2008/2009 bailouts were made primarily for the elite.Sadly, i see a 10% chance for some type of french style bloody revolution whereas i see a 90% chance of a neofuedalistic society coming to age in the next few decades.
Personally, i cant bear to watch MSM such as CNN, FOX, MSN, CNBS anymore. I get more and more disgusted by their BS. I only get my news via the internet blogs now.
Capital is as capital does.
At any moment in time, there is a finite and quantifiable amount of capital in the global economy is there not? And the distribution of that capital has no effect whatsoever on the total amount - how the capital is held has no bearing on the total amount of capital.
Most of this "capital" is held by central banks the world over. More specifically, if we are talking about the $ world reserve currency, all of that currency is held by foreign central banks either directly or indirectly or the US Fed. Directly means foreign central banks hold $ on behalf of their own host (a most apropriate word, since central banks, being parasites, need a host) government. Indirectly means private individuals or companies in a foreign country holding their dollars in private banks, all of whom have accounts with the respective country's central bank, which is really where all money is held, except for safety-deposit-box money.
Banks, be they central banks or private banks, invest the vast majority of their $ in US Treasuries. I know they do not invest ALL of it in US Treasuries, but to say they invest the VAST amount of it in US Treasuries is no exageration. Other options include their own government's bonds (if and when they auction $-based bonds, which is not very common), or loans to private individuals or businesses in their host countries. This is true both in foreign countries and in the U.S.
So, when we speak of foreign US Treasury investment being "down" or "up" there must be an offsetting effect somewhere else - everywhere and always - it's a zero-sum game. This is especially true given that other options where banks may put their dollars, namely their host-countries $-based bonds, or private individual or business lending, has collapsed and continues a downward path (and even if it weren't, when a business receives a loan, or when a government receives bond auction monies, it is quickly spent and redeposited in the same or another bank's account and we're back at square one). Simply put, where the heck else is that money going to go other than US Treasuries? And if it is not going into US Treasuries, there can only be one reason - US imports are down and therefore $ leaving US shores to overseas banks accounts are down as well. That means the capital is staying in the U.S., where guess what - it will also be invested in US Treasuries, either directly by customers and businesses or by default by the very bank that holds the accounts.
All in all, it's a fiat merry go round, courtesy of how the world's reserve currency works, and how debt-based money works in general. Bonds will not crash until the currency itself inflates or hyperinflates. Until then, enjoy the merry-go-round.
Great perspective FB, +1
Captain Sheeple
there is a clear break of established correlations happening in the last week. Today the dollar is falling, and for weeks the equities are ralying, but gold is weakening too - even while oil rallies. Interesting developments. Not sure what it suggests, but previous decoulpling of these correlations have resulted in massive shifts.
For whatever that is worth!
rickets,
My first reaction is "Amen to that!", since my jaw just about dropped as I watched the DX and PMs fall in unison yesterday. It was as if the correlations jumped from -1 to +1 in an instant. Shocking.
My second reaction was "Amen to what?", as I for one am completely dumbfounded to make sense of this. I have a really, really strong gut feeling that something really big is about to happen in markets, but I have absolutely no idea what.
Erik
US 30-Year Treasury Bond Direct Bidders See Value, Step Up To The Plate And Buy
Account deactivated per user's request.