Shenandoah

by John Galt

January 4, 2010

May this decade be as interesting as the last one. Yes indeed. But here we are facing a new reality as Rick Santelli from CNBC so accurately describes in a video from the December 29, 2009 Squawk Box program. While I “gasp” took a few days off here and there to spend some quality family time with my wife’s family, the entire world watched in utter amazement as the United States government announced that if you live overseas, own a sovereign wealth fund or control a central bank and you were stupid enough to believe our investment banks and rating agencies that the MBS you purchased was indeed AAA certified horse crap, well, we’ll buy it back and still call it AAA certified horse crap. And in exchange, if you demand it because we already owe you buttloads of money, we’ll give you some AAA THOROUGHBRED horse crap called United States Treasuries! Woohoo! What a freaking deal!

Of course what have we really done? We took the foreign dogs out to the fire hydrant, let them hump it and told them “Here boy! Did that feel good! Good boy! Now that should make you feel good for a while!” The reality is that the foreigners might think they got short term relief but when they realize the raw deal they got (sorry for the pun) they are going to act like one pissed off Pit Bull. For some reason, the next action they take I fear will not be a friendly visit to the fire hydrant (aka the US Treasury auctions) but more of a leg lifting maneuver.

Rick Santelli hit a very salient point in this video that I wish to discuss briefly. If you take AAA government paper and use it to guarantee AAA MBS paper then why have ratings at all? He didnt’ say that but the pig slop inference should be loud and clear and the next two, ten and thirty year auctions should clear the air succinctly as the Bubblemedia can not cover up a rising yield and the Fed can not tolerate it for any duration or this grand “recovery” (snarf, snicker, belly laugh) will implode.

Thus why I warn you now, if you see a Chihuahua humping a fire hydrant, ignore it;  it’s probably a representative of the Mexican central banking system. If you see a Pit Bull, run like hell.

It’s probably a cross breed of Asian, Arab, South American and Russian attack dogs and they have a nasty tendency to clamp down with their jowls on Uncle Sam’s most tender private parts:

His bonds.