No such thing as a Treasury bond bubble - Eric Janszen

[santafe2]

Re: No such thing as a Treasury bond bubble

Statements like the one below used to shock us, but not anymore. In the desperate global scramble by governments to re-inflate asset prices, anything goes.

“We are facing hyper-deflation, so we need a policy to create hyper-inflation. We have to do something to undermine the central bank and government’s credibility or else we won’t be able to halt the yen’s rise. So, while we know this is drastic medicine, we will do it,” said Koutaro Tamura, an upper house Diet member who will chair the new group. - MPs step up clash with Bank of Japan, Michiyo Nakamoto in Tokyo, Financial Times, Feb. 5, 2009

Thanks EJ. I've been considering exiting Yen holdings. The Japanese government can't possibly pull this off without unintended consequences. BTW, I still find the above quote shocking.

[metalman]

Re: No such thing as a Treasury bond bubble

Thanks EJ. I've been considering exiting Yen holdings. The Japanese government can't possibly pull this off without unintended consequences. BTW, I still find the above quote shocking.

a government official of a first world country telling the financial times that they 'will' override their independent central bank? shocking? it's unfuckingbelievable. the leading edge of chaos. all those fed and central bank haters are about to learn why central banks are bad except for the alternative... direct political control of the money supply by desperate pols.

[jk]

Re: No such thing as a Treasury bond bubble

a government official of a first world country telling the financial times that they 'will' override their independent central bank? shocking? it's unfuckingbelievable. the leading edge of chaos. all those fed and central bank haters are about to learn why central banks are bad except for the alternative... direct political control of the money supply by desperate pols.

this guy is a MEMBER of the UPPER HOUSE of the japanese diet. an institution with relevance somewhere between that the u.s. senate and u.k. house of lords. so if someone in japan were read that a MEMBER of the U.S. SENATE said something stupid, how much should they care? hey, it's a U.S. GOVERNMENT OFFICIAL! how about a member of the u.s. house of lords?

[metalman]

Re: No such thing as a Treasury bond bubble

this guy is a MEMBER of the UPPER HOUSE of the japanese diet. an institution with relevance somewhere between that the u.s. senate and u.k. house of lords. so if someone in japan were read that a MEMBER of the U.S. SENATE said something stupid, how much should they care? hey, it's a U.S. GOVERNMENT OFFICIAL! how about a member of the u.s. house of lords?

maybe i'm overreacting, but i cannot recall a precedent.

[metalman]

Re: No such thing as a Treasury bond bubble

maybe i'm overreacting, but i cannot recall a precedent.

i take it back. read the whole article. this guy koutaro tamura ain't ron paul's antimatter japanese counterpart talking here...

The politicians include Yoshihide Suga, deputy chairman of the LDP’s election strategy council and a close aide to prime minister Taro Aso, and want the government to issue its own notes to fund projects.

The group wants Y30,000bn of the new money to fund programmes supporting new industries and infrastructure projects, including doubling the size of Tokyo’s Haneda airport. The remaining Y20,000bn would be earmarked for government purchases of stocks and real estate.


“We are facing hyper-deflation, so we need a policy to create hyper-inflation. We have to do something to undermine the central bank and government’s credibility or else we won’t be able to halt the yen’s rise. So, while we know this is drastic medicine, we will do it,” said Koutaro Tamura, an upper house Diet member who will chair the new group.

who is Koutaro Tamura?

K

outaro Tamura
Former Parliamentary Secretary for Financial Services
Japan Cabinet Office
Koutaro Tamura served in the last administration as a Parliamentary Secretary for Financial Services in the Cabinet Office and Vice Minister in charge of fiscal and economic policy. He continues to play an important role in the government’s project of promoting Japan as a financial centre in Asia. A member of the ruling Liberal Democratic Party, Mr Tamura sits in the House of Councillors, the upper house of the Diet. Before becoming a politician, Mr Tamura was an investment banker at Yamaichi in charge of mergers and acquisitions and also took care of his family business, which consists of newspaper publishing, cable television broadcasting and menswear. He has an MA from Yale, an LLM from Duke Law School and an MBA from Keio University, and has lectured in law at both Duke and Keio.

not your run of the mill theatrical pol playing to the fringe.

[santafe2]

Re: No such thing as a Treasury bond bubble

a government official of a first world country telling the financial times that they 'will' override their independent central bank? shocking? it's unfuckingbelievable. the leading edge of chaos.

I don't have direct dealings with the Japanese government but the fear in large Japanese corporations is palpable. The dissonance created by the swift turn in the world's requirement for high grade Japanese products has been unnerving for both our suppliers and for those of us who distribute their products. We are trying to balance on an ever narrowing beam.

How can a high grade consumer product be delivered from a country who's products are priced in a currency the world values too much? I own zero interest Yen. A piece of paper that represents the value of Japanese culture. I'm going to sell it now that one of their representatives has made a statement equivalent to the speech Steve Ballmer made regarding Microsoft stock in 1999, but a peak in MSFT is not the same as a peak in the Yen.

As for the 'leading edge of chaos' comment, I really want to discount/devalue that idea, but it has the ring of truth and I've no counterpoint that makes sense to me. I hope this is not how the downturn plays out. It's the WW III scenario and none of us want to watch that baby take its first breath.

[SJ]

Re: No such thing as a Treasury bond bubble

Long rates will rise - Fed controls short rates through Fed Funds rate

[santafe2]

Re: No such thing as a Treasury bond bubble

this guy is a MEMBER of the UPPER HOUSE of the japanese diet. an institution with relevance somewhere between that the u.s. senate and u.k. house of lords. so if someone in japan were read that a MEMBER of the U.S. SENATE said something stupid, how much should they care? hey, it's a U.S. GOVERNMENT OFFICIAL! how about a member of the u.s. house of lords?

We discount these representatives at our own peril. If we've no respect for them, we've no respect for ourselves. For better or worse, they speak for all of us. Their hopes and fears are ours until we elect a new group to lead us forward. If we're sufficiently dissatisfied, we can choose to run for office and lead ourselves.

[santafe2]

Re: No such thing as a Treasury bond bubble

Long rates will rise - Fed controls short rates through Fed Funds rate

I hope you're right since I have a significant investment in this direction but you may be missing something. The Fed has said they will buy long term government obligations. That is, the US Treasury needs to sell and the Fed is a willing buyer. I've walked through these chess moves a dozen times and I'm wondering if I should take my 10% loss and exit. Your conclusion may prove to be correct but your analysis is flawed.

[Sharky]

Re: No such thing as a Treasury bond bubble

Do the "too big to fail" get supported, leaving everyone else to flounder? Further government intervention in the market leads me to think about possible spreads: maybe long S&P 500 (SPY) and short the broad market (something like IWV or RWM)?

If or when this moves ahead, I wouldn't be surprised to see a flurry of acquisitions, as those with access to cheap money buy out their competitors and/or suppliers at dime-on-the-dollar prices.

[magicvent]

Re: No such thing as a Treasury bond bubble

Thanks for the addendum.

[SJ]

Re: No such thing as a Treasury bond bubble

This is a response to Santa Fe (#11 above)

I have a significant short position in long treasuries. So I am putting my money where my mouth is as well. I would rephrase your last sentence: my analysis is not flawed, but my prediction may end up being wrong in the short run.

Look at it from a contrarian standpoint. If the Fed feels compelled to buy long treasuries, how convinced are they that long rates will rise?Corollary: When was the last time that govt intervention of any kind worked except in the short run?

Keep the faith and trust your economic principles. Don't try to time the market.

[goadam1]

Re: No such thing as a Treasury bond bubble

Is your "buying assets" theory based on information, theory, rumor, inside info or something else?

[Many Arrows]

Re: No such thing as a Treasury bond bubble

I think it will result in complete economic collapse because there is no return in this, no real investment in this, and therefore no real future in this other than stagnation and ruin.

Very succinctly and well put.

[stockman]

Re: No such thing as a Treasury bond bubble

U.S. 10 year treasury bonds today are looking Japan 1998-ish.

If the rush to Treasury bonds at the end of 2008 marked the beginning of a longer term trend away from risk, and if the risk-aversion period is anything like Japan's, it could go on for a decade. That does not strike us as a good shorting material.

I agree with the idea that shorting bonds could prove hazardous.

Japan and US yields 020809.jpg

But the intermediate term low in Japan yields did coincide with a substantial rally in equities in 1999-

Japan yield and NIKK 020809.jpg

The US markets have also been directionally correlated with rates since our bubble burst-

NDX and TNX 020809.jpg

So you could make the case for owning US stocks if you think a temporary low in yields has been reached. But it's worth note that in the most recent wave up in yields 2002-2007 GOLD outperformed the SPX. But that's why you hold the GOLD right?

TNX and GOLD SPX 020909.jpg

BUT SILVER OUTPERFORMED GOLD... so I am also long there-

TNX SLV and GLD 020809.jpg

That being said history doesn't repeat, just rhymes right? In 1999 the global economy was expanding AND Japan is an export economy. Is 2009 growth in the cards? Is the US suddenly going to become an export economy? So in this rhyme- bond yields may not have the upside that some expect; stocks rally may fall short of bull's hopes; but just in case I'll hold onto my silver and gold to hedge my cash, bonds and short equity positions.