Wednesday, March 14, 2012

Update

Here's a quick look at how we're travelling (or lurching forward) relative to the up-coming conflagration.

My "Day-job" has been quite demanding of late and as such (unfortunately) this Blog has taken a back seat.

We await with trepidation the US Treasury acceptance of negative-yield bids at Auction (slated I believe for May) ...in the meantime however, Auction details reveal (imo) a look of curious contrivance.

$PoG seems set to continue it's controlled burn here ...which is NOT conducive to Systemic failure - ie: it ($PoG) needs to wash-out hard in concert with a seriously rising DX for the Systemic achilles-heel to be revealed for all to see.

On the Long T's front, Chartists will recognise the Pennant formation which (like clockwork) has broken to the upside and is currently flirting with the 200DMA.


All in all, "things" ...whilst getting tighter and still generally heading toward the proverbial cliff, seem to be "manageable" ...for the moment.

We watch!

34 comments:

Edwardo said...
This comment has been removed by the author.
Edwardo said...

Yes, indeed, "rates" seem to be headed higher all along the curve, but, that, in and of itself, is a kind of death knell for the continuance of the game we have all come to know and loathe as kicking the can.

The cost of debt service that will ensue from even a modest rise in rates will throw a major, dare I say, fatal spanner in the works. Put another way, even if rates were going up for the right reasons, namely as the result of an improving economy, it wouldn't be a game saver because there is in intractable debt load to service. But, my view is that the economy isn't improving, and, therefore, rates are rising for all the wrong reasons.

One Bad Adder said...

Hi Ed: -

I agree mate, this is hardly a "recovery" uptick and it will be interesting to watch the short-long ratio over the coming weeks to better gauge the trend toward a "Here-n-Now" credit (side of the Ledger) collapse.

We watch!

sobione said...

Oh yes. We watch intently!

cheers.
Sobi

One Bad Adder said...

Hi Sobi ...the recent 3 and 6 month bills point to the pressure-cooker atmosphere in the short end with both showing extreme bid-cover ratios.

She's gonna "BLOW" Sobi ..and those enarmoured with GOLD will weather the resultant fallout intact IMHO.

KJ said...

Oba, watching the irx chart - acting like a fluttering engine, trying to be something it can't...

One Bad Adder said...

I think they've changed the input or something. during the trading day it used to jump about ...nowadays it seems to "adjust" in sync with the Auctions....it sure looks like it's on life-support eh KJ.

May is the "tell" I believe ...when they open the door to negative bids.

Watch this space ...then!

tintin said...

Hi OBA, how do you see this:
Treasury to buy back fixed rate bonds with loating rate bonds?: http://www.zerohedge.com/news/if-1951-accord-any-indication-treasurys-imminent-launch-floaters-will-be-signal-get-out-dodge

One Bad Adder said...

Hi Tintin - sorry for my tardiness in response - Day-job is hell at present, trying to clear the decks before departing OS.
Yes - a curious approach and totally consistent with extending the current paradigm "to the last tree standing" IMO ;-)
If not for official "meddling" ie: supporting Bills (Yield) ABOVE parity ...and Bonds (Yield) at these historic low levels, I'm sure my "collapse into the Here 'n Now" hypothesis would have become reality well and truly by now.
These "floaters" will IMHO only forestall the inevitable tintin and as most commentary fails to differentiate between Long and Short maturities TIME RISK, they are all missing the most crucial point.
Can you imagine a 1mo Bill yielding negative 10% ...and a (say) 10yr Bond @ positive 15%?
In extremis - I can!

tintin said...

Hi OBA many thanks for your reply.
I suppose these floaters can further delay the inevitable, perhaps till the floaters really start to float up, and increased debt service burden exert more pressure on the US treasury department?

One Bad Adder said...

I think they (Fed/Treas/GS/JPM) see what most don't ...and that's a potential zero liquidity situation developing in the out-dated T's (say 6mo > )which "floaters" will tend to address ...but ONLY for those resolute system du-jour "believers".

It's getting HOT in this here $Fiat-cauldron methinks tintin ;-)

tintin said...

thanks again OBA.
"a potential zero liquidity situation developing in the out-dated T's (say 6mo > )"

Somewhere I read that the FED is buying 61% of the (new?) treasuries, that is not that far from zero liquidity right?

One Bad Adder said...

I think they're probably also dabbling heavily in Global SM's tintin ...and pretty well "anything" that is NOT short Treasury Bills at this juncture.

...all the while trying to keep a semblance of global systemic normalcy "in the shop-front window" via Hail-Mary passes being thrown whilly-nilly and hoping (in vain perhaps?)that Mr Market will eventually see fit to get back into the game.

We can but watch mate.

tintin said...

Thank you OBA.
Interesting times.

DP said...

We watch

sobione said...

Hello there down under...
I looks like money is again pouring into US long dated paper (10y and 30y)- which translates into depressed yield. However shorter term paper looks unchanged. Any thoughts what is in the cards, OBA?
Kind regards
Sobi

KJ said...

the irx/tnx long term charts are outright depressing; 10yr at 1 year lows...Fekete reiterated speculators dumping bonds on the lap of the fed...why not, yields falling, bond prices rising, guaranteed buyer...how low is 10yr gonna go and as sobione mentions, no movement on the shorter term...perhaps the mentality is why dabble and sit in the short end if one can make guaranteed profits on the longer end...for now...

One Bad Adder said...

I think it's all-hands-to-the-pumps currently in a last-ditch effort to reverse the psychology of the market-place from focusing on the "NOW" ...to returning to Faith in the "Future". We're in Full-scale Fiat Management currently ...or so it appears to me.

$PoG watchers will be thrilled with the reversal today - highlighting (for mine anyway) the absolute need for those who are short metal ...to cover their positions on these all-too-frequent $PoG routs.

Let's see where we go for the rest of the week - next Tuesdays 3mo T Auction could be revealing.

We Watch!

KJ said...

from near 2% to 1.46% & the irx continues its downward trajectory & the digital markets moving swiftly downward for now...thank goodness for the peace of physical gold, would be sweating bullets otherwise.

sobione said...

Mr BAd adder - how are you these days? Hope you are in good condition...

Regards
Rory (Sobi)

tintin said...

Europe is going into negative yield, JPM, BlackRock, and GS etc are suspending their Euro money market funds.

Gold got smashed after all these.

Getting intense.

One Bad Adder said...

Hi Sobi et-al,
Finally home again after a 6 week sojourn to the UK and Europe, so I might get a bit more time to focus on the continuing systemic meltdown.
The $PoG action of late is IMHO reflecting not so much the losing of faith in GOLD, but a deteoriation of faith in the integrity that supports todays PaperGold-market.
Betting it will only get worse as we lurch forward (ie: $PoG sub-$1K here we come!)

Edwardo said...

OBA,

I don't think the paper gold collapse that FOFOA has outlined as being part of the emergence of freegold is on tap just yet.

In the meantime, this is as close to the proverbial bell ringing at the top as you are apt to see.

http://www.acting-man.com/blog/media/2012/07/Bond-Allocation.gif

Bond buyers beware! A chart (the link above) of the allocation to bonds recommended by Wall Street strategists – exceeding the 2009 peak for the first time. Note how bearish they were on treasuries back when it would have been a really good time to buy them. Via Kevin Depew - click chart for better resolution.

One Bad Adder said...

Hi Ed,
Those with a keen eye (IMHO) will have come to identify how $PoG /S are being supported in the futures arena by ...I know not who!
Perhaps those with short positions are "buying the dips" - and will keep doing so I feel (a) to maintain a semblance of normality and (b) in a (vain) attempt to arrest Mr Market snow-balling into the Here 'n Now.

Were we to see $PoG top (say) $1800 I reserve the right to change my mind ;-)

Edwardo said...

Speaking of the here and now, today, I thought of you when I read this entry from Bruce Krasting.

Here's the final paragraph:

"The entire global financial system is based on fiat money and the presumption that the money has “value” as a store of wealth. Nearly every action by the Fed over the past few years has led to the debasement of money. In the final stage, the issuers of money debase it to the point where it is no longer desirable to hold. I see the move to negative rates across the globe as a tipping point, one that will be damn hard to reverse once undertaken."

http://www.brucekrasting.blogspot.com/2012/07/bernanke-post-schumer-gaff.html#comment-form

One Bad Adder said...

The perception du-jour is that TPTB control IR's ...and we (the great unwashed) are at their mercy in this regard - a view I'm none too comfortable with.
IMHO they have somehow "managed" to ward off the inevitable thrust into Short-T negativity for 6 months now ...and whatsmore simply CAN'T do so forever.
How ugly it'll get depends on whether a "natural" ...or "unnatural" resolution develops. We'll know soon enough I'm afraid!

GreenWorld said...

It will get very unnatural and very ugly to boot.
jim rogers farmland

sobione said...

Good day Mr Blackadder
New year is nigh. What do you see in your cristal ball?
Best regards
Baldrick (aka Sobi)

One Bad Adder said...

Hey Sobi:-
The longer they forestall a retreat into 3moT-yield negativity the more pronounced will be the deflation associated therewith I think.

I keep getting an image in my mind of a Zombie (arms outstretched) lurching toward a group of people ...(as they do ;-)
...the cartoon-esque comment-cloud above it's head saying - "all I want is a HUG!"

...and hugging the sucker the markets are it seems

;-)

Edwardo said...

Presently, the $IRX is collapsing towards the zero bound much like a box of hammers thrown off The Empire State building falls to earth.

One Bad Adder said...

Yes Ed the System currently seems to be able to "cope" with negative yield in a couple of the basket-currencies (and even the odd "non-basket") ...through swaps.
I tend to think of the DX arena as a set-o-scales ...or a teeter-totter where any amount of weight (money) can be added to one side ...as long as a (relatively) similar amount is added to the other to keep the thing in balance (give or take)
Ultimately though, the fulcrum collapses under the strain.
They will defend the Zero point on the US$ Dollar side like there is no tomorow Ed for ...as sure as eggs, after we punch through 0% there will literally be NO TOMORROW (in a contango sense anyway ;-)

One Bad Adder said...

The current $IRX retreat is IMHO related to or at the very least exaserbated by the Xmas period ...and concurrent "off-the-table" position-taking.
Many a Camels Back has been broken by lesser straws tho Ed ;-

Edwardo said...

I see the $IRX has, at least for two (count 'em, two) days bounced off its lows into the .40-.45 range.

One Bad Adder said...

There's a lot of loot sloshing around in the short end Ed.
The 1 mth Auction yesterday went through @ basically Par ...and they're all getting done at 4ish Bid-to-cover ...all on the back of a soft DX.
Watch out if the Cliff causes issues.

Basically window-dressing ...or Monetary Xmas decorations Ed ;-)

Complements of the Season mate.

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