Sunday, December 23, 2012

To Zero ...and beyond!

For many and varied reasons it’s been a while since I’ve added to this blog - not the least of which  being the ability of TPTB to forestall what I consider to be the inevitable breaching of the Zero (yield) line at the short end of the curve (< 3mo T’s)

We “watchers” have however borne witness to a generalised  market abandonment of the Long- End-of-the-Curve,  which is consistent with my prognostications …ie: (hypothetically currently) being  a direct result of going through …and beyond the Zero (Yield). This abandonment however (so they say)  has also largely been absorbed by “official” activities.

The sum-total of these events presents a bit of a quandary …looking forward!

General commentary would have us believe that we are but a hairs breadth away from $US demise as the World Reserve Currency and, as a direct result thereof, Hyper-Inflation is and will be a no-brainer sooner rather than later…

 …and that may well be the case, although I’m inclined toward disagreeing with that particular hypothesis.

Let’s then take a peek into the future and try to see what may transpire.

The first point of clarity I would like to highlight is to draw attention (again)  to the Fed IR increase back in ’05, or thereabouts?  Mr Market shortly thereafter convincingly and unceremoniously turned its back on the IR -hike by further driving down Yields and declaring once and for all that IT …and NOT the Fed were in charge of proceedings going forward. The Fed promptly dropped their official rates in deferment.

…so, to my way of thinking, the Market, which is hell-bent on breaching this Zero-line on the short end of the Yield curve,  is again being thwarted by “official” activity which ultimately will be over-come.

In the grand scheme of things, the Fed (et-al) activities is now and always will be subservient to the Market IMHO…which is basically a sub-component of what some refer to as the Super-Organism - …and the Market of which is in turn subservient to it.

A portion of this S-O obviously reacts to the various machinations of the aforementioned Market,  Fed et-al …but essentially (I feel) the S-O will do whatever the S-O is destined to do based on developments external to the activities of these its servants –( Market, Fed etc. )

Trying to predict how the S-O will evolve is nigh on impossible but rest assured, it WILL have its way eventually!

…so this current goosing of the natural evolution process doesn’t bode very well going forward IMHO.

With all realignments, the transitional “end-result” can be quite a shocking experience.

We’re currently, almost on a daily basis being confronted with signals from the S-O whispering (and occasionally yelling) a tune that portends a Future not similar to, or even consistent with the Past …and so it may be a worthwhile exercise to try and disseminate a few thoughts on what I think may be relative to this imminent transition – and particularly as it pertains to crossing and / or embracing  the Zero point…

 …and with particular reference to GOLD!

Let’s,  disregard the Monetary / Fiscal perspective as discussed above and previously for the moment …and venture into the realm of the neutral or “sublime” point - a topic which is essentially avoided like the plague by all those intent on creating a “point-of-difference” in this-here World as we know it.

To Zero …and beyond! ……….(as Buzz might say)


We have since Adam and Eve been conditioned to accept the ”notion of difference” being the essence of our existence here on Earth eg:  Man – Woman, Heaven – Hell, Life – Death,  Good – Bad, Black – White,  Positive – Negative,  Democrats – Republicans  …ad-infinitum …always and everywhere a  point-of-difference, however it appears to me that these “opposites” are rarely if ever “really” that …and  by seeking out and attaining a neutral perspective (“seizing  the micro-moment” as it were)  betwixt these various supposed opposites, an opportunity for Sublime Revelation may well  presents itself. These opportunities should be (a) identified and (b) embraced …with gusto.

To digress a little -

I can recall one such occasion which, when looking back upon it, still gives me shivers up and down my spine  

- 6 or 8 years ago my daughter and I travelled to the centre of Australia to witness a 23 second “total solar -eclipse” (a 5 day round-trip)

The “totality” was awe-inspiring …however, given a combination of wind-blown haze and  the Sun being very low on the Horizon, we were able to look directly at it …and the Moon - from about 7/8th cover onward.

There was a moment (probably about 10secs) when I was able to witness a “triangulation” ie: Me on Earth – the Sun—the Moon, with both of these celestial orbs clearly discernible “in the round”   …and which absolutely and unequivocally identified MY place in the big scheme of things …right then and there.

I experienced a complete trans-fixation. For a brief time ALL thought simply evaporated  …a humbling and revealing experience -  let me tell you!  

Now …if I’m not mistaken, just such a revelation awaits the S-O as and when $IRX embraces the Zero point and drives into negativity  effectively neutering TIME in the monetary context…

…upon which the S-O will undergo an  “Ar-Ha! moment” and all hell will break loose.


Lets Watch!


burningfiat said...

Excellent post OBA!

I love the description of your eclipse experience, and I am intrigued by the idea that short windows of sublime thought-less insight, can sometimes make things clearer than years of thinking (difference between knowledge and _KNOWING_?).
Can't wait to experience this sublime monetary A-HA moment with you and the rest of S-O!?

Let's watch :)


One Bad Adder said...

Yep mate, that (elipse) moment wasn't something I was expecting or anticipating just "happened".
As I've said before (on FoFoA's Blog maybe?)- because of it's unique Suite of Properties - effectively rendering it (Monetarily anyway) immortal, Gold "OWNS" the Zero % Interest point /burning. Any pretenders that surface in that there hallowed ground should (will) be sumarily dealt with ...methinks ;-)

John Fry said...

interesting post OBA, thanks, and 5 days later, $IRX down 80% on the week.

One Bad Adder said...

Thanks JF: -
...But will this $IRX dip into virtual parity stick?
It may well have been the catalyst for the SM rout on Friday ...which is consistent with my prognosis, but we'll have to await next weeks action for confirmation I feel.

Bill Morris said...

All central banks are ultimately just subservient to the market, and the whole fiat money idea is a rigged game. This is why it makes sense to have at least some allocation to different types of alternative investments like gold, forestry or farmland

Andy said...


If you have time to give your thoughts I will be interested. Thanks.

Last Wednesday, the little-followed, largely overlooked ProShares Ultra 7-10 Year Treasury ETF (NYSEArca: UST) went from $12 million in assets under management to more than $833 million overnight.

The increase in assets of more than almost 6,000 percent overnight was enough to catch our eyes on its own, but the fact that it accompanied a 53 percent increase in assets in a similar, multibillion-dollar ETF—the iShares Barclays 3-7 Year Treasury Bond Fund (NYSEArca: IEI)—really rang the alarm bells.

In the five days through last Thursday, there were more than $2.5 billion in net creations in the two funds, and on Friday, UST had added another $240 million in assets. In other words, someone is clearly making a huge bet on these two funds that target the middle of the Treasury curve.

The UST trade is especially aggressive, considering it is part of the “Ultra” line of products from ProShares, whose promised returns are equal to two times the daily return of the reference index.

In the case of U.S. Treasurys, that means whoever is responsible for these outsized inflows is not only betting hard on a further decline in yields in the 7- to 10-year pocket of the curve, but doing so with leverage.

One Bad Adder said...

Hi Andy - been a while since I've had reason to "drop-in" here (as it were)
Imagine being the Fund Manager ...blythely looking after $12M one day ...the having $1Bil land on your doorstep for placement - OUCH!
I'd imagine even finding $12 mil worth of Call-writers would be difficult ...let alone $1B.
There certainly seems to be a disturbance in the force lately and I'd say (maybe) ...given the state of the short-end Bid-to-Cover ...there MAY be an "announcement" pending re: acceptance of negative bids at < 3mo Auctions.
This will (initially) drive Yields in the centre of the curve lower ...but I'm thinking a vastly different outcome will ensue when (if) the Bills are "in-fact" bid into negativity.

Let's watch eh?

Andy said...

Yep, let's watch! I always learn from your comments here and elsewhere - thanks OBA.

One Bad Adder said...

No worries Andy - it's an area I'm keenly interested in and have been for 15 odd years now.
This Zombie existence we're currently experiencing does at times seem never-ending but ultimately it MUST end ...and it certainly won't hurt to be "aware" of ALL possibilities as and when it finally does.

Podoloski advani said...

thank you

Ogniwa fotowoltaiczne

Pete Dale said...

OBA - very interesting thoughts here and at FOFOA....any chance of a new post to summarise your latest thoughts based on where we are now (if you have any update that is) its been a while since your last

anon said...

Have to agree with Pete...I find the latest TXY-IRX spike very interesting given all the odd stuff going on with the delivery fails.

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