Financial topics

[Higgenbotham]

The 5 year bond was at 0.5% and is now coming up on 2%.

Thanks for continuing to show this chart as most don't pay much attention to the 5 year. It's those out of the way observations that sometimes are the most important. To me, this means it is beginning to be recognized that the US financial system is not going to last 5 years. People are scurrying away from the 5 year as if it's junk debt, which it now is. Also, with the Fed not bothering to prop up the 5 year it is becoming quite telling as to what would be happening without Bernanke counterfeiting money to buy the 30 year and what is going to happen soon anyway.

I suspect that it's more a fear of the start of tapering, rather than a fear
that the United States won't exist five years from now.

If that were the case, people would be running away from the 30 year moreso than the 5 year.

[John]

I suspect that it's more a fear of the start of tapering, rather than a fear
that the United States won't exist five years from now.

If that were the case, people would be running away from the 30 year more so than the 5 year.

But that's also true in the case of your theory.

[Higgenbotham]

When the 5 year rate rises much faster than the 30 year rate, it can be for one of 3 reasons.

1. The Fed will be supporting the 30 year bond more than the 5 year.

Due to tapering, we know that's not the case. The Fed is now purchasing more in the long area of the curve and there will likely be less of that in the near future.

http://www.newyorkfed.org/markets/tot_o ... edule.html

2. Money is tight on the short end of the curve because the economy is overheating.

3. Default fears are moving down to the short end of the curve.

The only reason rates rise is a weak economy is due to fear of default.

[John]

OK, but fear of default is not the same as fear that
"the US financial system is not going to last 5 years. "

If bonds default, that doesn't end the US financial system.

[Higgenbotham]

OK, but fear of default is not the same as fear that
"the US financial system is not going to last 5 years. "

If bonds default, that doesn't end the US financial system.

If US bonds default, it does mean the end of the US financial system (and the world financial system). This isn't a 2nd or 3rd world country like Russia where you can just pick up where you left off.

[Higgenbotham]

The only other thing I can think of is the Fed has already decided they will taper say from $45 billion per month to $40 billion per month and they also decided that what little they were buying in the 5 year area is the place they will cut. Then that fact was whispered to Goldman et al so they could front run it. I would not consider that idea to be far fetched at all.

An interesting facet of this is the Fed could announce a $5-10 billion tapering of treasury purchases and do all of the tapering on the short end of the curve.

When the market hears the word "tapering", upon the announcement, the 30 year will likely tank. At that point, if all the tapering is going to be on the short end and the market doesn't know it yet, the 30 year may be a buy (short term) because in fact the Fed will be supporting the 30 year as much as it ever was.

[Higgenbotham]

The chart below is one way to portray how massive this stock market bubble really is. The chart is a weekly bar chart and shows the 2000, 2007 and the current bubble. The gold colored line is the 30 week moving average.

You can see that in the first 2 bubbles once the 30 week moving average turned lower, the bubble was over. In the current bubble, the 30 week moving average turned lower in late 2011, but the stock market was successfully manipulated back into an uptrend with the QE.

I've also drawn in the thick red lines to show the similarity in the evolving pattern of each bubble before the pattern of the current bubble diverged late in 2011. In the first 2 bubbles, once the 30 week moving average turned down, the market made 1 last gasp spike up through the 30 week moving average, then crashed. This time, the market made the same type of upward spike through the downtrending 30 week moving average, started to crash, then the crash was aborted. All of that is marked with the thick red vertical lines.

Since the upward divergence has been on the order of 400 S&P points, a drop to about 1300 could be the area from which to expect a crash to then take place that is similar to the post 2000 and 2007 bear markets.

My bias is that due to the massive 400 points of additional bubble the crash of the financial system won't be able to be contained as it was in 2002 and 2008.

week.jpg (85.83 KiB) Viewed 3259 times

[aedens]

financial system won't be able to be contained - parasites could could care less and thats not new -
Spending will go those who rule the numb and they voted this in so they do get what they deserve no matter what
demographic induced myopia.

tick tock - unable to afford a private alternative.

The current rate on treasurys is a Campaign for even the blind to see whats coming on the ongoing MENA narrative.
There are no accidents.

http://www.comparegoldandsilverprices.c ... in-sweden/

Sharpen your pencil here: http://www.washingtonsblog.com/2011/05/ ... ation.html

http://www.showrealhist.com/recDJIAtoRD.html swirl into the paper tiger function. Will it drop over night?
Who cares on the actual nominal data and ROC to date. To be blunt its liars poker so get over it.

Anyway, what mix do YOU have on a Technology curve? http://www.finance-lib.com/financial-te ... rding.html

In the brain box: The FRBNY DSGE model is a medium-scale, one-sector, dynamic stochastic general equilibrium
model. It builds on the neoclassical growth model by adding nominal wage and price
rigidities, variable capital utilization, costs of adjusting investment, and habit formation in
consumption. Staff Report No. 574
October 2012

http://deflationland.blogspot.com/

Fact Or Fiction: Poll Says Majority Of Americans Approve Of Sending Congress To Syria

more than 90 percent of the public is convinced that putting all 535 representatives of the United States Congress on the ground in Syria—including Senate pro tempore Patrick Leahy, House Speaker John Boehner, House Majority Leader Eric Cantor, and House Minority Leader Nancy Pelosi, and, in fact, all current members of the House and Senate—is the best course of action at this time.

Take Dick with you also. http://genie.com/media/genie-energy-in-the-media/

[aedens]

They know exactly who, and what went to Syria and South America after WW2 and paperclip.

http://tundratabloids.com/2013/01/5000- ... egime.html

As John noted: There may be NO architect for this rotten situation, the trouble is that it was build by a full generation,...
This will get your blood boiling John http://opinionator.blogs.nytimes.com/20 ... d/?hp&_r=1&

With that guy wishing you well for the job is like kissing poison ivy for poor janet. Goes back to who blew it up in the first place and how
to make the copious amount of fiat as we noted along the way.

And on that cornerstone of design here we are seeing another level of it . Choice to be stupid as Mr. Kerry noted in his context
of proverbial reality. What came first, the product or the induced motive of so called economic utility. All all about expectations and avarice
of many facets. In the scope of details the aptly named script is truly a fact to the cost in a republic of educated members in it over due process
called time and the ability as the preface of morals with fabian idiots and cargo cult mimics. Many times over we see actual economic value of ethics
over and over again. I think when this unravels to the core we will see just what it is. Infidels and jizyah from the grain colony. Mr. Obama played it
correctly, but overall I will take Mr. Madison purview of the letter on affairs formost than these dip sticks today. Defund these meat sacks.

[Higgenbotham]

My guess is things fall apart by the time it gets to 3.5%.

I believe when this crisis hits it will exhibit a worldwide loss of confidence in everything: the rule of law, the judicial system, all politicians, all education systems, all government bureacracies, all currencies, all bond markets, all stock markets, all retirement systems, all entitlement systems...in other words, political, economic and social systems. What will be considered to be the tipping point or the area attributed I don't know. Maybe none of the above. Maybe a big earthquake will hit and it will be blamed on that.

I can imagine that at 3.5% things will be falling apart and at higher interest rates things will be falling apart more. What would be your definition of that? What comes to my mind is things are falling apart when the government checks get cut. They still arrive but the dollar amount is less. What do you think the interest rate will be the day that happens? I'll guess 7.2%.