Treasuries: Get Out Now (?)

[Willette]

Re: Treasuries: Get Out Now (?)

The whole counterparty discussion reminds me of why TBT will be only a small part of my holdings, with most in precious metals: NO counterparty to worry about.

[Willette]

Re: Treasuries: Get Out Now (?)

EJ's latest answer to the question, as of last week:
http://www.itulip.com/forums/showthread.php?t=7213

The question is, what will dislodge the bond hoarders this time? Will the government pull another drastic 1934 style maneuver to crash the bond market with a radical currency depreciation? We don't think so. We think the central banks of US trade partners will do it for us, first by not buying more Treasuries, which with that market being dependent on continuous inflows will in and of itself weaken prices, perhaps leading to a run in the manner of all bubbles. Subscribers will note that we have not issued a "Time at last to short US Treasuries" call yet in the manner of our December 2007 "Time at last to short stocks" and June 2008 "Time at last to short commercial real estate." We're keeping an eye on it, but we're not there yet. When it does happen it will be decided by a currency-related event, as in 1934.

To complicate the issue, the eventual end of the love affair with Treasuries will be more politically than market driven.

[Charles Mackay]

Re: Treasuries: Get Out Now (?)

EJ's latest answer to the question, as of last week:
http://www.itulip.com/forums/showthread.php?t=7213

The question is, what will dislodge the bond hoarders this time? Will the government pull another drastic 1934 style maneuver to crash the bond market with a radical currency depreciation? We don't think so. We think the central banks of US trade partners will do it for us, first by not buying more Treasuries, which with that market being dependent on continuous inflows will in and of itself weaken prices, perhaps leading to a run in the manner of all bubbles. Subscribers will note that we have not issued a "Time at last to short US Treasuries" call yet in the manner of our December 2007 "Time at last to short stocks" and June 2008 "Time at last to short commercial real estate." We're keeping an eye on it, but we're not there yet. When it does happen it will be decided by a currency-related event, as in 1934.

To complicate the issue, the eventual end of the love affair with Treasuries will be more politically than market driven.

I was a little confused by EJ's remark at the end. He's saying that the Treasury Bond sell signal will be given by foreigner's dumping dollars which to my way of thinking is a market event. Is it not?

[Willette]

Re: Treasuries: Get Out Now (?)

Yah, it IS a little confusing, and even MORE than a little confusing. Since the bank/government cartel can create both bonds and dollars at will, it is not going to act like a normal market. The USG can theoretically buy back any amount of bonds with freshly minted US dollars. Of course, once it is recognized that they will in principle replace the entire stock of T-debt with cash, we will have arrived at hyperinflation.

EJ expressed the core of it when he wrote, "central banks of US trade partners will do it for us, first by not buying more Treasuries". There are polar ice caps of UST debt obligations in China, Japan, etc. When these stop accumulating and finally begin to melt, they will quickly flood the market. But so far China, for instance, has played the game because the result for them was to import our jobs and manufacturing plant, and finance sales of their products to us. Their people are the ones who have "paid" for those UST bonds in their foregone wages.

But the decision to initiate that process is not likely to be made by individual market players, it will be made by government officials for political reasons, viz., they determine that the jig is about up and can't be prolonged much further.

Clear as Mud, No?

So EJ says "Not Yet."

[Charles Mackay]

Re: Treasuries: Get Out Now (?)

Yah, it IS a little confusing, and even MORE than a little confusing. Since the bank/government cartel can create both bonds and dollars at will, it is not going to act like a normal market. The USG can theoretically buy back any amount of bonds with freshly minted US dollars. Of course, once it is recognized that they will in principle replace the entire stock of T-debt with cash, we will have arrived at hyperinflation.

EJ expressed the core of it when he wrote, "central banks of US trade partners will do it for us, first by not buying more Treasuries". There are polar ice caps of UST debt obligations in China, Japan, etc. When these stop accumulating and finally begin to melt, they will quickly flood the market. But so far China, for instance, has played the game because the result for them was to import our jobs and manufacturing plant, and finance sales of their products to us. Their people are the ones who have "paid" for those UST bonds in their foregone wages.

But the decision to initiate that process is not likely to be made by individual market players, it will be made by government officials for political reasons, viz., they determine that the jig is about up and can't be prolonged much further.

Clear as Mud, No?

So EJ says "Not Yet."

Well, OK... if it's the decisions of foreign governments that tip the scales then I guess it would be a politically driven event. Ultimately the footprint of the market is already on the dollar chart and that IS slightly clearer than mud!;)

[raja]

Re: Treasuries: Get Out Now (?)

If you thought it was a good buy at 139, and based on the prospects of CRE tanking, assuming that comes to past, then SRS is a helluva buy at 55 I beleive. Bot a bit myself yesterday.

Yeah, Jim . . . SRS is probably a screaming bargain right now. But I'm done with it :eek:

My bout with SRS went like this:

SRS had recently been up to 250, so when it fell to 139 I thought it was a safe bet. Especially since the housing market continues to deteriorate.

But I decided to scale in, a cautious path due to past blunders. My first foray was at 139. SRS continued down, so I bought again at 119. Down again, so I bought again at 81. Continued to plummet down to 49. An approx. 80% drop in a month. How could that happen with all that's going on in the housing market?

Now I'm s p o o k e d. I realized I just don't know what's going on. For all I know, SRS could drop to zero. So, I have yet to buy again.

Can it go to zero?