Can someone read this for me?

[Mega]

Can't fathom it:-
http://www.istockanalyst.com/article...icleid/3739425
Mike

[globaleconomicollaps]

Re: Can someone read this for me?

Can't fathom it:-
http://www.istockanalyst.com/article...icleid/3739425
Mike

it is long and complex, but the take home is pretty simple. Also it is a repost from zerohedge. give them a tip o' the hat.

http://www.zerohedge.com/article/bra...enfold-or-else

[ThePythonicCow]

Re: Can someone read this for me?

Can't fathom it:-
http://www.istockanalyst.com/article...icleid/3739425
Mike

Short answer:

Wordier answer:

The end of 2008 was "the year the music credit died".

For the year of 2009, the Fed kept things going using Quantitative Easing (QE). Debt that would have defaulted was instead moved onto the Fed's balance sheets. Cash flows that would have dried up for lack of commercial, private or mortgage credit financing or lack of sustained tax revenue were funded with more QE, to keep the economy from coming to a Sudden Stop.

We really didn't increase net debt that much this last year (2009) so much as move it into T-Bills. The article calculates we increased net debt (entire U.S. bond aka fixed income market) by a paltry $200 Billion in 2009. The Fed increased its balance sheet; others shrank theirs.

We really couldn't have increased our (U.S. bond market) debt much in 2009 for lack of any willing or able customers for massive new bond purchases. If anything our "customers" (Japan, China, Saudi Arabia, ...) need to sell bonds, not buy more. The year of 2009 was the year of re-arranging the chairs on the deck of our Titanic.

Now the Fed has a huge burden of short term debt that will need to be rolled over. while we are still living on borrowed money and we still have many balance sheets individual, public and corporate that are loaded with toxic debt. Our bond customers are still unable to buy more.

So we have:

• The only big, new fixed income customer (the Fed) backing off.
• Increased government spending needing more bond financing.
• Increased short term debt needing to be rolled over.
• No hope of significant tax revenue increases.
• No hope of any other big fixed income customer in sight.
• Continuing immense black holes of toxic debt on many balance sheets.

The one thing, the only thing, that got us through 2009 was the Fed.

Now the Fed is backing off QE (I think China, Russia, India and Germany are rather forcing this, amongst other pressures).

The problems are worse (we'll need even more bond financing in 2010) and our only savior is backing off.

Ouch.

[icm63]

Re: Can someone read this for me?

Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March. Then the US is on its own: $2.06 trillion will have to find non-Fed originating demand.

Q: How do you sell $2T of USA bonds?
A: You scare investors into buying them?

MY PICK by late JAN or EARLY FEB stocks are sideways to down for 6 months (SP500 2010 range 1300 to 600). The SP500 PE is 24x earnings, and thats a joke.

Early trade before then is LONG TBT.

UPDATE: Of course if there is sell off in Stocks and the market still dosnt BUY the bonds...GOLD $3000 !!

[Rajiv]

Re: Can someone read this for me?

Mike,

Ilargi has a good explanation on her site - Eyes wide open and pedal to the metal

I think she explains in a fairly straight forward way -- I posted this link on the "who is buying US treasuries" thread