Friday, February 19, 2010
Fiscal Balance Watch and Core Inflation Drops
Core inflation drops for the first time since 1982. Soon Goldman Sachs, etc. will be dumping oil and stocks leading to a drop in overall CPI.
From comments of Thomas M. Hoenig, President, Federal Reserve Bank of Kansas City:
"government finance is taking center stage....Knowing inflation is not an acceptable alternative to strong fiscal management... Finally, there are no short-cuts. We currently must adjust from a misallocation of resources. There is no way to avoid some short-term pain in fixing the fundamentals in our economy. It is inconvenient for the election cycle, and it is undeniably terrible to have at least 10 percent of the labor force out of work. But short cuts now mean people out of work again...
China is still buying US debt through other channels...
China finds new ways to buy U.S. debt
Monday, February 15, 2010
Is the government starting to say no?
Looks like fed and senate saying no to more support...for now. With mortgage rates rising, defaults will rise quickly in mortgage market....precipitating the next crisis.
Saturday, February 13, 2010
TLT trades with Oil
Oil drives TLT valuations in the short term with CPI driving it on a longer time frame. As mild deflation will continue for the next 5-10 years, TLT and long term treasuries can be held during this period. TLT can be traded in short term using the following chart:
Friday, February 12, 2010
China buys US Treasuries
China orders retreat from risky assets
China has ordered managers of its vast currency reserves to withdraw from risky dollar assets and retreat to core debt guaranteed by the US government, a clear sign that Beijing is battening down the hatches for fresh trouble on global markets.
By Ambrose Evans-Pritchard
Published: 1:31PM GMT 10 Feb 2010
A Communist Party directive leaked to the Chinese-language edition of the Asia Times said dollar reserves should be limited to US Treasuries or agency mortgage debt such as Freddie Mac that enjoys Washington's implicit backing.
BNP Paribas said the move has major implications for global risk assets. "The message from Beijing is that we don't like this environment," said Hans Redeker, the bank's currency chief.
.......
David Bloom, head of currencies at HSBC, said the explosive dollar rally over the last six weeks has been the reversal of the dollar carry trade. "It has been short, sharp, and vicious. People borrowed in US dollars to invest in places like Brazil, Turkey, and New Zealand and now it is unwinding."