Financial topics

[vincecate]

The monthly report on foreign holdings of Treasuries should come out today. The last 2 months foreign holdings have gone down. In spite of this many people like Pettis and Mish keep insisting that as long as the USA runs a trade deficit that the rest of the world has to buy Treasuries. I expect it to go down again in today's report. At some point I think people will find this scary but maybe that will take another month or two.

http://www.treasury.gov/resource-center ... ts/mfh.txt

Hyperinflation usually starts when there is debt over 100% of GNP and deficits over 40% of spending and then people stop buying bonds and cash them in as they come due. In this situation governments print lots of money because taxes don't come close to covering current spending plus bonds coming due. The government probably officially borrows from the central bank but with no ability to repay it is as if they just printed the money. Typically bond holders have moved to short term bonds as the market starts to worry about the long term financial health of the government, so lots of bonds come due fast. The US has trillions in short term debt coming due over the next year.

The usual counter-argument to something like the above paragraph is "sure that has happened to 100 other governments but it won't happen to the USA because it has the world reserve currency". However, if there is solid evidence that the world is no longer buying Treasuries then this counter-argument kind of falls flat. In particular if the other central banks are unloading Treasuries then they are making the dollar less and less of a reserve currency.

Update: The data will be released Tuesday morning at 9 am.
http://www.treasury.gov/resource-center ... ess.aspx#1

[vincecate]

I expect it to go down again in today's report. At some point I think people will find this scary but maybe that will take another month or two.

It is up. So things may not be totally falling apart yet.

[Higgenbotham]

My next trade will be to try and short the top of whatever stock rally we end up getting, provided the rally continues and takes out this morning's high.

Above was posted October 7.
http://generationaldynamics.com/forum/v ... 200#p10278
Short 15% this morning from about S&P 1210. If the S&P continues to rise over the next couple weeks, I plan to short more aggressively with a goal of being 100% short.

[Higgenbotham]

Added another 15% short at 1215.

[Higgenbotham]

100% short on this afternoon's runup. Average short is from about S&P 1225.

[Higgenbotham]

The market has been very volatile since my last post. I covered a couple times and went back in higher, then finally covered half in the after hours when the Apple news apparently drove the market down. I'm now 50% short and my average (or break even) point on today's trades is up to about S&P 1235.

To me, this looks like a top in the moment but it's not common to see the stock market behaving this erratically. If today's high isn't exceeded, my plan is to sit with this 50% short position for a long time. If today's high is exceeded, I will probably sit tight for awhile as it seems possible the market could go quite a bit higher. Then I will look for a place to get 100% short if that happens.

Today's trades. The DEC 11 EMINI S&P 500 currently trades about 4 points under the S&P index. S = SELL, B = BUY. Trades are listed in chronological order from the start of today. The last trade is Wednesday because it was done in the after hours and gets settled after tomorrow's session.

Trade USD 3 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1207.00
Trade USD 3 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1209.00
Trade USD 3 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1217.00
Trade USD 3 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1220.25
Trade USD 8 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1227.00
Trade USD 12 Tuesday, October 18, 2011 B DEC 11 EMINI S&P 500 1218.75
Trade USD 3 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1221.50
Trade USD 9 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1221.50
Trade USD 1 Tuesday, October 18, 2011 B DEC 11 EMINI S&P 500 1217.25
Trade USD 5 Tuesday, October 18, 2011 B DEC 11 EMINI S&P 500 1217.25
Trade USD 5 Tuesday, October 18, 2011 B DEC 11 EMINI S&P 500 1217.25
Trade USD 5 Tuesday, October 18, 2011 B DEC 11 EMINI S&P 500 1217.25
Trade USD 4 Tuesday, October 18, 2011 B DEC 11 EMINI S&P 500 1217.25
Trade USD 3 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.50
Trade USD 8 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.50
Trade USD 1 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.50
Trade USD 8 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.50
Trade USD 2 Tuesday, October 18, 2011 B DEC 11 EMINI S&P 500 1217.50
Trade USD 18 Tuesday, October 18, 2011 B DEC 11 EMINI S&P 500 1217.50
Trade USD 2 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.75
Trade USD 2 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.75
Trade USD 12 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.75
Trade USD 1 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.75
Trade USD 3 Tuesday, October 18, 2011 S DEC 11 EMINI S&P 500 1219.75
Trade USD 10 Wednesday, October 19, 2011 B DEC 11 EMINI S&P 500 1216.75
Contract Total: Buys: 62 Sells: 72

[vincecate]

To me, this looks like a top in the moment but it's not common to see the stock market behaving this erratically.

I don't think you see this much volatility in a healthy market. My guess is things will be going down unless the Fed prints money even faster. Anyway, I am happy I have some S&P puts again. Bought some more silver calls too.

Volatility index hit a record high in Nov 2008.

[shoshin]

This is one scary book, describing the cyber threats that Americas faces, and how China could easily intimidate us...the chapter on a brief "war" with China is especially sobering...

http://www.amazon.com/America-Vulnerabl ... 453&sr=8-1

[richard5za]

This is one scary book

Its estimated that China holds about $ 2.2 trillion of US Treasuries, and that this is increasing by $ 200 billion per quarter. China needs multiple strategies to protect its investment. I haven't read the book but yes, I think that this is scary for the US

[Higgenbotham]

100% short again on this morning's runup. S&P currently at 1232.