$35Bn worth of 3-year notes to sell today.
That will be followed by $21Bn worth of 10-year notes tomorrow and $13Bn worth of 30-year notes on Wednesday. The 3-years are expected to fetch about 1.5%, 2% for the 10-year and 3.12% for the 30-years despite the fact that that represent negative returns to inflation. So, either it's just a scam where the Fed, through its member banks, purchase whatever Treasury wants to sell to keep up the illusion that the US is able to borrow cheap OR the rest of the World is so horrifically scary that Global investors are willing to take a loss on $69Bn long-term, rather than risk leaving it in a bank or putting it into a stock or commodities or in the notes that are handed out by other countries.
Like Greece, for example, who were just "fixed" yet today the NEW BONDS are trading as 18.1% for 11-year notes. Hmm, 18.1% for Greece, which has just been declared "safe" by the EU or 2% for US notes? Something is clearly wrong with this picture… You KNOW something is wrong but, if you are buying equities, then you are choosing to pretend that, although there is a very obvious scam going on in the bond markets, that it somehow doesn't affect the equity markets. Come on – admit that you are lying to yourself – you'll feel better!
Buying equities in a Federally funded, Bot-propped rally is no different than participating in an obvious Ponzi scheme. You KNOW it's fishy but EVERYONE is doing it so you just want a little taste and you tell yourself you're just going to help yourself to some of that free money and then you will get out (dumping your shares on some other sucker who will be closer to the eventual burning than you were). That's called the greater fool theory and it works great as the World is bursting at the seams with fools but, eventually, the fools and their money are parted and SOMEONE is left holding the bag.
Will it be you? Of course not, you are no fool! Someone else will buy your GMCR shares for $63, right? Well, that was right on Thursday, but on Friday they dropped to $52.50 and that was after drifting gently down from $69 earlier in the month. It was "just" a 10% loss and then, suddenly, it was a 30% loss. Sometimes there just aren't enough fools around when you need them. John Hussman was interviewed in Barron's this weekend and declared the current market "A Who's Who of Awful Times to Invest" describing the current market as "the basic 'overvalued, overbought, overbullish, rising-yields' syndrome." My comment to Members in our Weekend Reading section was:
Hussman – Sure I agree with him. That's why I pulled back in the Income Portfolio as we're in a very dangerous spot here. If we hold up this week and next (real end of quarter), I'll feel better but the Fed neglecting to ease on Tuesday could knock us back pretty hard and I'm simply not seeing the data to support the markets. As noted above (and by me for a while), take out BAC, AIG and AAPL and the ENTIRE S&P has negative earnings. That's including AAPL suppliers and including auto makers and their suppliers.
This is a rally based on ignorance and we have a lot of ignorant people but, eventually, even they run out of money. If the media starts pointing out some negatives, tone can change very, very quickly and why on Earth would we believe that there will suddenly be any kind of volume of buyers to come in to relive the people who want to cash in their 20% gains at the top? That goes back to my car lot model – we've marked up the entire market based on not even 10% of it being bought and sold and we KNOW 80% of the buying and selling is Robots gaming the system who don't even hold their shares for more than a few milliseconds so now we're down to basing a $10Tn move in now $40Tn market on 2% of the shares being actually transacted. That's some pretty dangerous leverage to base valuations on.
Ignorance is what the MSM feed off of. They program to ignorance while their Corporate Masters then use that ignorance to extract wealth from the masses. I do my best to pull back the curtain on these scams but THERE ARE SO DAMNED MANY OF THEM! The biggest one, of course, is oil and, as you can see from the chart on the right (thanks Mish) from the EIA, the US is now using LESS Petroleum than we did in 2001, when oil was $20 per barrel.
Petroleum by itself has sunk to mid-90s levels of usage when we had oil priced in the teens – back when Al Gore wanted to put a 0.04 tax per gallon on gasoline so we could research alternative energy solutions to prevent our nation from being at the mercy of foreign oil prices. Gore was defeated by the Republicans, who said a 0.04 increase in the price of gasoline (then 0.97 per gallon) would wreck the US economy.
We all know who won that debate – it was Al Gore, who won the popular vote but was defeated by the Supreme Court in the post-election so, instead, we now pay $4 per gallon for gas but at least we don't have that pesky 0.04 tax, which would have raised $132Bn to fund energy research since 2000 and instead we spend, in the US alone, $827Bn a year more than $1 per gallon for fuel and WE STILL DO NOT HAVE A BUDGET FOR PURSUING ENERGY INDEPENDENCE! Would you even know if there were a 0.04 per gallon tax. Hell, we wouldn't even notice .40 and then we'd have $100Bn PER YEAR to put towards the problem. If only Al Gore had been allowed to serve:
Gold is another major scam, also based on fear and misinformation. Gold spiked to $850 an ounce in 1980 and that was up 466% from $150 in 1976 and then, between 1983 and 2003, gold drifted around between $250 and $400, bottoming out as the market was flying in 1999 as stocks were clearly a better investment than gold, as was housing at the time. Stocks and housing have gone nowhere since 2000 but gold is now $1,700 per ounce, up 580% from $250 or let's call it up 466% from $300. If gold is a hedge against inflation – what exactly is it besides gold that's up 466% since 2000? Oh yes, oil!
Like oil, we are not using more gold than we did in 2000, we are just paying more for it as the Mainstream Media is now controlled by the very people who want you to buy oil and gold. They pull black goo and shiny bits of metal out of the ground and you break your back all day working for currency that you exchange for less and less of what they produce and you never question it because every single channel on television gives you the same message: Shortage, FEAR, new paradigms, incompetent Governments, nuclear war – whatever works to get you to live in the kind of fear that drives you to overpay for commodities and it's never going to stop until we get to the root of the problem. That was the great accomplishment of the Bill Clinton Presidency, he made the fear go away and people who are not terrified don't pay $4 a gallon for gasoline or $1,700 an ounce for gold.
Without a war, without a shortage, without significant increases of demand, we are paying "emergency" prices for commodities. We pay this because, in 2001 the gutting of the Commodity Futures Trading Commission (CTFC) paved the way for commodity speculators to run wild and repeals of key sections of Glass-Steagall made commodity trading a primary source of income for investment banks. Glass-Steagall limited banks' securities and derivatives trading to less than 2% of their assets, in case such trading might be necessary to help service customers' accounts. Then-Fed Chairman Alan Greenspan raised these limits first to 5%, then 10%, then 25%. When Glass-Steagall was repealed in 1999, all the limits went out the window, a process also furthered by Phil Gramm's so-called Commodities Futures Modernization Act of 2000, known as the "Enron Bill," which totally deregulated derivatives.
We are still suffering the after-shocks of that madness and, just like in 2008, Global consumers are once again being pushed to the limit with inflation in India and Egypt back at near 10% levels that sparked riots that presaged the global collapse that year. As John Hussman points out – this is a particularly dangerous time to invest and we have moved to cover our gains in our Income Portfolio (see weekend update) as we've had a really good run – it's time to give the bag to some other fools and give them a chance to get rich quick while we take a little break.
We have goals in our Big Chart and, IF we can take those technicals, we'll be happy to play a technical rally bullish – but we're not there yet. We're at the point where things could go either way and, if they are going up another 20%, we won't miss very much by sitting out the next 5%. If they are going down 20%, then we will have lovely, lovely cash on the sidelines and, who knows, maybe we'll even want to buy some gold for $850.
Be careful out there – it's going to be a crazy week.
During the little bit I was I’m the DR I was told that diesel fuel was smuggled in from Haiti.
The longer I live the more amazed I get about the stupidity / ignorance level of the average / median american. This counrty is full of unbelieveably stupid and uninformed people.
I've heard, don't know if it is true, that in Europe, the populace is generally MUCH more aware of reality, current events, poilitics, etc and that the people understand things a lot better than Americans do.
There are a lot of uninformed people in every country on the planet. I'm not sure about Europe, but for example in the UK they have the BBC which is a huge source of reasonably accurate information via several TV channels, many radio stations, and the Internet. However, this just means that most people tend to parrot what they heard on the BBC. Most European countries also have national newspapers which means that people who want to be informed are likely to read the leading sources. The US does not have national newspapers, and most people don't read Time or Newsweek. In his book about a walking tour of England in about 1984 (Island by the Sea) Paul Theroux commented on how everyone in the UK talked about the same news stories, for example an escaped convict. I think people in leadership positions in the US are usually very well informed (this may not extend to Congress), but that most people in the hinterland just live in their communities without much awareness of the outside world. If I can just give one final example, in the UK there has been a lot of media coverage and political discussion over the years of the issue of mentally ill people who are released from hospitals and then kill people and how this danger should be managed. In the US many similar dreadful events happen, but they rarely get attention beyond the local newspaper and don't become political issues on a statewide, let alone national level. How they are managed will often be decided by the Supreme Court with little or no grassroots input. Also things happen mysteriously, like Florida had a referendum item that banned factory farming of pigs on the grounds of cruelty to animals. I never heard any discussion of this issue before I saw the ballot paper and although the item passed, I have never heard of the residents of Florida protesting about the sale of pork imported from other less humane states that don't respect pigs in the same way!
Nuance/Peedle – Yes, we won't get hyperinflation until we get wage inflation, which is what keeps me from being more bullish. We don't need a reset (we sort of had one in housing and CRE), what we need is money to flow through the economy again but to drive up wages we need higher employment levels and that's not coming any time soon unless we're going to add 1M jobs a month for the rest of the year. I don't subscribe to the prepper case, see "The Worst-Case Scenario: Getting Real With Global GDP," which I wrote in June of 2010, when we had another 10% drop in the markets and people were very disheartened but I was calling it a buyable bottom at S&P 1,050. I think, on the whole, that hyperinflation is the fix. We can never pay back our debts – it's just never going to happen so we either default (unthinkable) or we print money to pay off our debts. Default leads to the guillotine for our leaders and the top 1% so I'm pretty sure they're going to choose to print money…
GDP/StJ – I think that all forecasts underestimate the domino effect of austerity. China already feels Europe's pain, even Germany and Australia are slowing down – how do people in France, the US and the UK think they won't be affected? That's just not how the World works anymore.
Big Chart – RUT right on the line, they are going to be key. Futures up half a point at the moment with Dollar at 79.73 and oil touching $107 again.
AAPL/Flips – It's a bit long-term conservative for my taste but it's a good trade for a more hands-off style portfolio. I prefer to wait for stocks to fall and then get aggressive on them but sometimes, you do get bored waiting…
KORS/ZZ – I'm not sure if insiders cashing in on an IPO is a smoking gun. Sometimes there are tax issues and people NEED to cash shares in. I certainly don't think they are a buy but I'd need more reasons to short them or we might have to listen to Jabob saying "FU KORS" as well every day.
And what Pstas said!
Fungible/Newbie – Frankly, by the time I got to the end of your comment I had not idea what the question was anymore so I read it all again and now I need to go to sleep. If oil were truly "fungible" then Canadian oil wouldn't be trapped in the low $80s and gasoline in Saudi Arabia wouldn't be $1 a gallon (or many other OPEC nations) etc. etc. Again, I think you miss the point that there is NOT a shortage of oil so it's not about keeping it in this country or that country. There is an adequate supply to meet the demand and, therefore, the price of oil should be a reasonable mark-up over its extraction cost. What you have though, is a monopolized (or oligopalized) supply that is not extracted in a free market, which prevents price mechanisms from working properly and ON TOP OF THAT, you have speculators controlling the flow of oil and you also have local refining and distribution cartels doing what they can to jack up margins along the way.
What's really terrifying, is these same people are already moving to take control of our water supply and, when they do – you can expect the same sudden shortages and supply shocks and price spikes we get with oil. When they are done with water, I won't be surprised if they figure out a way to go after air – the real criminals are the ones who insert themselves into the human necessities, usually where their participation is not even necessary, in order to put themselves in a position to profit from every basic human function – the kind of things you can't choose to cut back on.
As to whether XOM would send a $100 barrel of oil somewhere else if they could make another $300? Duh, wouldn't you? The nature of the markets mean that won't happen but what speculators do is try to push the price of all oil to the high end of the curve. We are a net exporter now because it's more profitable for our refiners to ship oil out than sell it here. Plus, we're not using it anyway (see today's demand chart). Perhaps this cartoon will help you:
Also Newbie, your 2nd attempt at your paragraph on Navy Seals made your point infinitely better than your first attempt BECAUSE it used 1/10th as many words. Think about that.
PSW TV/Peedle – I met with Sirius about doing a Sirius Stocks channel but it never went anywhere. I did kind of like the idea of doing something similar to what we do here but on the radio live during market hours. I used to do a radio spot with ZMan, those were lots of fun…
TLT/Scott – So greedy. You violated the Microwave Oven Theory – you let some arbitrary target you set in the past bind you to poor actions in the present in spite of new information (ie. my 10:18 comment on TLT or the general concept of ALWAYS selling into the initial excitement). And with this week calls, you should be totally ashamed of yourself for not taking the money and running when you had the opportunity. So those are my thoughts, not much help. Now you'll have to get lucky into tomorrow's auction or it will be time to roll out to a reasonable spread in April.
Uninformed/JMM – I think the British are far better schooled in history than we are and most have a passable knowledge of philosophy, geography and economics. They all know their multiplication tables and, of course, they are generally good at English (and most have a 2nd language) so they are simply more prepared to process news than the average American. Also interesting in British schools is that they teach sex ed and religion but they teach religion as if you have a choice to believe what you want – they just want you to know about them all, which I think is great. Imagine US kids coming home with the Qur'an as required reading?
EUR/JPY – look slike the BOJ is edging ahead in the QE race…
TOS iPad app – updated the iOs5 on my iPad 2, and now the TOS iPad mobile app won’t open.
Anybody else have this issue? TIA
aussie_opt. I am in the same boat.. it sucks
Thanks for the heads up, won't be upgrading the IPad for a while.
It was TOS that let me look at the futures in bed earlier and decide it wasn't worth getting up for other than the usual oil short at $107 but if I still have to get up to tell you guys that one – I'm giving up!
So, what have we learned lately?
We've learned that the Dollar gets stronger when the EU opens. That's our classic 3am trade although Europe doesn't open until 4 this week so kind of messed up. The Euro was $1.3078 at 1:40 on Monday, topped out at $1.32 when Asia opened and the EU had been closed for 10 hours and has since fallen back to $1.3132 so the people who LIVE in Europe seem to be the ones who want out of the Euro.
The Yen made a huge move from 82 to 82.70 and that saved the Nikkei off that 9,850 line. That means the BOJ is back to buying Dollars today (since the Euro dropped and the Dollar popped) so we can expect to go over 80 and that gives us confidence in our shorts.
Oil is already $106.80, gold $1,698, silver $33.50 (good short line on /SI), copper $3.87, nat gas pathetic at $2.25 and gasoline $3.33 (1/2 of $6.66 – Lloyd must be pleased!).
For those who don't know, the basis of the 3am trade began long before the whole World went manipulation crazy. The BOJ have been propping up the Dollar for years to make the Yen weaker so during the Nikkei sessions, like clockwork, they would buy Dollars to knock the Yen down and make their exporters happy. The nature of BOJ buying was that it would come in waves so the 3am trade was streaky and would work for weeks, then not work, then work for weeks again. I think generally they would approve some Billions of Yen and spend them and then they'd need to go print more before the next round.
What that meant is that, at 3am, when the Nikkei closed, we could count on the Dollar being at the Day's low and that meant the Futures would often be at the day's highs – or at least the pre-market highs and there were very easy shorting opportunities. Since our premise was that the Dollar would go up – just like today, we could pick a line like 80 and only stick with our short plays if the Dollar was over – otherwise our premise is shot and we just walk away and try again tomorrow.
This thing was such a regular joke for years that, for a while, I went about 6 months detailing the trade in the public post – just to see if more people participating would break the cycle but it is amazing how strong it is – even the Forex traders couldn't stop the Yen from rising (and why would you when you can play the Yen up from midnight and win 3 out of 4 times?). So we learned that the BOJ will do ANYTHING to defend the Yen at certain levels.
The big difference is that, lately, they have changed strategies to prop up the Euro as well as the Dollar and that makes it much trickier for us to play. Oh yes, and the 3am is not literal – it's AROUND 3am and this week, with the daylight savings time, I couldn't possibly tell you how it all lines up.
I can tell you I'm a dumb-ass though as I said right in the Weekend Reading comments at 1:42 am yesterday:
We forgot to make a bullish bet into the close and we are, in fact, up ahead of retail sales and may spike higher still on that good news. So let's not expect to make a lot shorting the Futures this morning but, at 8:30, if we spike up, that might be a good shorting opportunity again.
Tuesday's economic calendar:
7:30 NFIB Small Business Optimism Index
7:45 ICSC Retail Store Sales
8:30 Retail Sales
8:55 Redbook Chain Store Sales
9:00 Ceridian-UCLA Pulse of Commerce Index
10:00 Business Inventories
1:00 PM Results of $21B, 10-Year Note Auction
2:15 PM FOMC Announcement
6:00 AM Overseas: Japan +0.1%. Hong Kong +1.0%. China -0.2%. India +1.3%. London +0.7%. Paris +1.1%. Frankfurt +1.0%.
your not kidding about Chicago rental market–my daughter was just hired by the Obama campaign headquarters in Chicago and is paying double the rent she paid for an apt in DC—did not get double the salary though
Question Every one is crying about gas prices why don't they switch to nat gas much cheaper ?????
I did the April 19/33 BCS and is up now. Would you keep holding this or get out with a 25% profit now? Thanks
Phil/religious education UK
Ah, yes, as part of the deal by which government took over elementary schools formerly owned and run by the Church of England, it was agreed that religious education would be part of the curriculum in all schools and that there would be an act of worship at the start of each school day. (This was called Assembly). This created the interesting anomaly by which the only mandatory subject on the curriculum in English schools is religious education, while in the US religious education is the only subject that is banned. As a result English people are heavily indoctrinated God-fearing people, while Americans are all happy agnostics? No! Actually the reverse is true, because the last thing on earth that churches in the US would want to see would be a rational attempt to educate people about religion or any classroom discussion about the truth of religious doctrines.
yodi/switch to gas
In a free market, they probably would. As I have mentioned before, many taxi drivers and others here in the Dominican Republic run their cars on propane. It is very cheap to do the conversion and install a tank in the trunk. It seems to be impossible to do this in the US for regulatory reasons, insurance coverage etc., and because of safety concerns. However these issues don't seem to be much of a problem in the DR. Sugar cane alcohol is more of a danger when drivers use it as a fuel, because it affects acceleration, braking, and steering, especially after dark. Every aspect of life in the US is controlled by the stifling and parasitic legal system, and I think a lot of people who vote for "less government" think they are voting to get out from under this, but they aren't.
Thanks and sad to read you explanation. Are they not using much more dangerous fuel for rockets? I can only shake my head. They must have picked up that stupidity from the Germans