Financial topics

[OLD1953]

Vince, as they say back where I was born, that dog won't hunt.

http://www.gallup.com/poll/127616/infla ... te-us.aspx

[vincecate]

I used to think that history would blame Greenspan or Bernanke for the
coming financial crisis. But now I think that it's going to be blamed
on Europe.

People usually understand enough about hyperinflation to realize that the flood of money is due to the central bank, so Bernanke will be blamed. If he suddenly disappears then he has realized what is going to happen.

However, the real cause for hyperinflation is that the government spending has gotten out of control. Since the government makes the laws and has the police, the central bank always does what the government needs. When things get really bad the government needs money and gets it from the central bank. If Bernanke decided not buy Treasuries he would be replaced with someone else who would. So in truth it is not really Bernanke's fault.

[vincecate]

Vince, as they say back where I was born, that dog won't hunt.

http://www.gallup.com/poll/127616/infla ... te-us.aspx

While it is true people are concerned about inflation, that is not the same thing as expecting hyperinflation.

[Higgenbotham]

Two that I've heard from people on the street this year:
There will be a QE3, a QE4, a QE5, a QE6 and on and on to infinity.
There's going to be hyperinflation like Weimar Germany.

I don't see these sentiments being expressed as pervasively as they were at the top of the Nasdaq and real estate bubbles but I'm not sure that's necessary because gold is a much smaller part of the economy than tech or real estate.

When they are expressed pervasively the 30 bond interest rate will NOT be below 4%. There are those of us who think hyperinflation is coming but we are still clearly in the minority.

Are you claiming there will not be a QE3? Seems like foreigners have stopped buying Treasuries. The taxes only cover about half of the Federal government expenses. If the Fed does not buy Treasuries, who else will be doing so in the volume needed? What kind of person thinks that 4% for 30 years is a good deal on US dollars that they are printing like crazy?

http://www.treasury.gov/resource-center ... ts/mfh.txt

If the consensus is that there will be a QE3 of a certain type and dollar amount within a certain time frame and that expectation is reflected in the gold price, then the gold price will fall if the expected QE3 doesn't materialize. The same will happen with hyperinflation expectations.

There's one constant in the markets - sellers - and it's true because of the 2 things we can't avoid - death and taxes. Years ago, I walked into a coin shop in a mid sized city. I asked the owner if he had any Krugerrands for sale. He said, wow, have I ever had a lot of people come in here to sell Krugerrands lately. He discovered a gold hoarder had died and left his stash of 300 Krugerrands to assorted relatives and in they came one by one. He had damn near 300 before they were done. Buyers need a motivation - it normally needs to be a combination of increasing price and a plausible story line (like the story lines I presented above).

There is massive potential demand for US Treasuries. To prove that point, all one needs to do is look at the huge drop in interest rates on US government bonds since February along with the fact that money flows into US Treasuries have barely scratched the surface. For example, if the US corporations are sitting on stockpiles of cash in the trillions and they are not currently holding US Treasuries and not investing in expansions, then those stockpiles have potential to move into US Treasuries. I did the calculations a few weeks ago and was surprised, actually shocked, to see that interest rates on US Treasuries have fallen faster than they did in 2007 over the equivalent time period. There have been huge money inflows from Europe to the point that US banks would be forced to buy US Treasuries by default. As I stated months ago, there are many sources of money for US Treasuries and they have barely been tapped. If foreigners are moving out of US Treasuries as interest rates are falling further that is in fact bullish. This is because as the foreigners sell, the market is absorbing the selling with even greater demand than the supply the foreign selling is bringing into the market.

[Higgenbotham]

L.1 Credit Market Debt Outstanding (1)
I adjusted the numbers to trillions.

1 Total credit market debt 52.554 trillion
8 Federal government 9.739 trillion
____________________________________________________________

L.10 Assets and Liabilities of the Personal Sector (1)
I adjusted the numbers to trillions.

1 Total financial assets 45.803 trillion
13 Treasury securities 0.695 trillion

(1) Combined statement for households and nonprofit organizations, nonfarm nonfinancial noncorporate business, and noncorporate farm business.


L.101 Nonfinancial Business (1)
I adjusted the numbers to trillions.

1 Total financial assets 18.263 trillion
13 Treasury securities 0.091 trillion

(1) Combined statement for nonfarm nonfinancial corporate business, nonfarm noncorporate business, and farm business.


L.105 State and Local Governments (1)
I adjusted the numbers to trillions.

1 Total financial assets 2.665 trillion
13 Treasury securities 0.484 trillion

(1) Data for employee retirement funds are shown in table L.119.


L.107 Rest of the World
I adjusted the numbers to trillions.

1 Total financial assets 17.729 trillion
13 Treasury securities 4.438 trillion


L.108 Financial Business (1)
I adjusted the numbers to trillions.

1 Total financial assets 66.191 trillion
13 Treasury securities 3.865 trillion

(1) Sum of financial sectors shown on tables L.109 through L.130.
_________________________________________________________


http://www.federalreserve.gov/releases/ ... ent/z1.pdf

[Higgenbotham]

Potential US Treasury Purchases Total Assets/Assets in US Treasuries (Trillions)

L.116 Property-Casualty Insurance Companies 1.413/0.092
L.117 Life Insurance Companies 5.320/0.158
L.118 Private Pension Funds 6.346/0.520
L.119 State and Local Government Employee Retirement Funds 3.009/0.186
L.120 Federal Government Retirement Funds 1.341/0.136
L.121 Money Market Mutual Funds 2.638/0.342
L.225.i Individual Retirement Accounts (IRAs) 4.861/unknown

Totals 25 trillion in assets with about 1.5 trillion in US Treasuries

One reason for the low allocation to US Treasuries in these accounts is that everyone is still chasing yield in order to meet projected payouts/needs. It's a question of return on capital versus return of capital with allocations shifted in favor of hope that returns will be high enough (around 8%) to sustain the payouts/needs.

[aedens]

Potential US Treasury Purchases Total Assets/Assets in US Treasuries (Trillions)

One reason for the low allocation to US Treasuries in these accounts is that everyone is still chasing yield in order to meet projected payouts/needs. It's a question of return on capital versus return of capital with allocations shifted in favor of hope that returns will be high enough (around 8%) to sustain the payouts/needs.

The other advantage for the Chinese companies: "they have a wolf pack strategy in which three or four of their companies -- all state-owned -- bid at the auction," says Luft of the Institute for the Analysis of Global Security. "When you have a few companies all working under the same umbrella, bidding simultaneously, that gives a huge advantage. I wouldn't be surprised if the bids are coordinated."
"As for Iraq-to now, China is the biggest beneficiary of Iraq's oil treasure,"
Cameron Hanover analyst

As we conveyed wolf pack market.

[Higgenbotham]

As we conveyed wolf pack market.

Forcing the yield down creates latent demand. Rope-a-dope strategy siphons money from West to East.

[aedens]

As we conveyed wolf pack market.

Forcing the yield down creates latent demand. Rope-a-dope strategy siphons money from West to East.

October 7th will mark the 10 year anniversary of America's longest war.
Consider who has over a ten year thought map.

[OLD1953]

I see the market did that infamous 3:30 bounce. I'd really love to know how that works.