since bullish conviction is getting reinforced, when will see the LT treasuries really sell off in earnest...or could it be managed by indirect bidders..
bond mayhem coming?
Started by
andiron
, Apr 15 2010 07:19 AM
2 replies to this topic
#2
arbman
-
- Traders-Talk User
- 19,504 posts
Quant
Posted 15 April 2010 - 09:31 AM
Fed is increasing the cost of living for everyone with its printing, this is what the near zero percent interest rate policy does. The US markets got an enormous boost due to the weakness in Euro, otherwise this market could get in a lot of trouble with the possibility of USD crashing and burning by now...
Now, is it necessary for the US taxpayer to subsidize the speculative assets in order to achieve higher employment as a whole? This is what the free money to buy all these assets will be doing from here. The people in all sorts of these industries of the last speculative bubble such as banking, construction, real estate brokers may be able to maintain their businesses because the rest of the people employed in more productive industries in real terms will be subsidizing them with their tax dollars.
Basically, the near zero interest rate policy means the tax subsidy of all speculators. You do not have to be a genius to understand this obviously. Most of the time what begins as a speculative product or company can result in a real industry. So, I am trying to look beyond just the tax dollars spent right now in subsidizing the speculators, stopping the bleeding was also critical. However, I mean when the dot com collapsed, it only collapsed because some of the business models have become completely speculative, but we did have a lot of good businesses surviving who simply used the internet for optimal marketing and sales...
I am just trying to figure out what this last bubble achieved, apparently nothing since it didn't achieve the objective of permanent new jobs and growth industries. In that sense what happened after 2004-2007 was a true economic collapse, then why should the govt simply subsidize more and more of the same?!? The answer is desperation, but that's about it, it sure seems like US taxpayer subsidized these assets at the lowest interest rate, thanks to Fed.
Obviously, the bubble will not be coming back, it may be a good thing too. At the same time it also means unfortunately though that unless the industries that support this subsidy grow exponentially faster and faster from here --it is not impossible, eventually the cyclical bull will end and the secular bear will be back. The interest rates will simply fluctuate with this reality, I doubt the rates will get ahead of these since the balance is still very fragile...
I remain optimistic for now, I think the markets are headed back up to 1280 as the majority is in a more financially responsible shape, in fact having cleared the crash gap and trading over 1200 with the correct leadership, I tend to think we may continue to see new all time highs over the next few years, especially if Euro continues to remain weak and China has to fight inflation and cannot devalue against USD fast enough such that USD remains in a somewhat stable but a down trend. It means while the next major world economy (Euro-zone) will have to buy US assets, China will loose somewhat its competitive edge. This would benefit USD and US exporters...
For now we go few weeks at a time...
Now, is it necessary for the US taxpayer to subsidize the speculative assets in order to achieve higher employment as a whole? This is what the free money to buy all these assets will be doing from here. The people in all sorts of these industries of the last speculative bubble such as banking, construction, real estate brokers may be able to maintain their businesses because the rest of the people employed in more productive industries in real terms will be subsidizing them with their tax dollars.
Basically, the near zero interest rate policy means the tax subsidy of all speculators. You do not have to be a genius to understand this obviously. Most of the time what begins as a speculative product or company can result in a real industry. So, I am trying to look beyond just the tax dollars spent right now in subsidizing the speculators, stopping the bleeding was also critical. However, I mean when the dot com collapsed, it only collapsed because some of the business models have become completely speculative, but we did have a lot of good businesses surviving who simply used the internet for optimal marketing and sales...
I am just trying to figure out what this last bubble achieved, apparently nothing since it didn't achieve the objective of permanent new jobs and growth industries. In that sense what happened after 2004-2007 was a true economic collapse, then why should the govt simply subsidize more and more of the same?!? The answer is desperation, but that's about it, it sure seems like US taxpayer subsidized these assets at the lowest interest rate, thanks to Fed.
Obviously, the bubble will not be coming back, it may be a good thing too. At the same time it also means unfortunately though that unless the industries that support this subsidy grow exponentially faster and faster from here --it is not impossible, eventually the cyclical bull will end and the secular bear will be back. The interest rates will simply fluctuate with this reality, I doubt the rates will get ahead of these since the balance is still very fragile...
I remain optimistic for now, I think the markets are headed back up to 1280 as the majority is in a more financially responsible shape, in fact having cleared the crash gap and trading over 1200 with the correct leadership, I tend to think we may continue to see new all time highs over the next few years, especially if Euro continues to remain weak and China has to fight inflation and cannot devalue against USD fast enough such that USD remains in a somewhat stable but a down trend. It means while the next major world economy (Euro-zone) will have to buy US assets, China will loose somewhat its competitive edge. This would benefit USD and US exporters...
For now we go few weeks at a time...
#3
Data
-
- Validating
- 2,618 posts
Member
Posted 15 April 2010 - 09:51 AM
SEC phased in new rule that requires MMFs to own 30% cash or U.S. Treasury securities. Funds are expected to complete their portfolio adjustments by May.
http://www.sec.gov/n...010/2010-14.htm
http://www.sec.gov/n...010/2010-14.htm
