The BUBBLE of all BUBBLE’S

Posted by Eric Solis on December 26, 2009 under U.S. Treasury Markets | 2 Comments to Read

The US Treasury market will be the mother of all bubbles!!! We have seen the tsunami of liquidity that has flooded the world financial markets over the last couple of decades hop scotch from the stock market to the real estate market/derivative market and then to the commodity/gold market(s). But none of these bubbles are even a drop in the bucket compared to the bubble created by the Federal Reserve and Treasury over the past three years. Without going into a long diatribe with regard to the what, where, when, why and how; suffice it to say that anybody caught on the intermediate/long end of the market will be holding the equivalent to what the market calls “zero coupon bonds’ (bonds bought and extreme discounts which mature at par in the future).

If you are a greedy speculator who could give a rip about our country and want to reap profits beyond your wildest dreams, then short as many treasury bonds as you can on margin, with the opportunity to buy them back at penny’s on the dollar within the next 24 to 36 months. Make sure you can carry the trade and pay the margin expense. But rest assured, this will be a blood bath unlike anything the markets have ever seen. And people who thought they owned the safest investment in the world will learn the hard way that irresponsible fiscal and monetary policy of a government, regardless of its size can have a devastating and lethal impact on its lenders.

In the end, maybe they deserve it. How does one come to believe that a country with 12 trillion in debt should pay 0% interest on its debt??? As an old friend of mine once said…thinking so does not make it so!

Louis Carabini said,

In any situation where market forces prevailed the corporation would no longer exist because of managements poor decisions…Whats particularly concerning here is that this type of report is probably a harbinger of what will happen if we adopt the . Perhaps 10 ..6. So the government will ultimately prevent this too large institution from failing and our economy will grow even weaker as these institutions further distort the efficient allocation of capital engage in high risk activities because of moral hazard maintain pay scales unrelated to their actual profitability and through their size and implicit or explicit government subsidies stifle competition and distort the market for their services…Critics of this argument will correctly point out that the Treasury plan also mandates multiple new safeguards to create a less risky financial system.
offshore corporations said,

US News Page 1 of 2 Farrell Be Skeptical of This Rally September 08 2008 07 21 AM EDT.The markets will like the government actions regarding Fannie and Freddie. The stock market will rally the Treasury market will sell off as money is switched back into agency paper that will carry a yield premium to Treasuries with the same backing. The dollar will continue its rally and all looks OK with the world.