Obamarket Update for 12/10/09: Beware of the Sovereign Wealth Funds

by John Galt

December 10, 2009

The 30 year bond auction I was worried about yesterday fulfilled my concerns today:

12_1030YRRESULTSjgfla

When you add the current yields (My 1-3-6 Rule) of the short term Treasuries as I discussed on Glenn Beck’s program this morning, there is a major storm brewing should the trend in the 10 and 30 year bond auctions continue. Here is a quick and dirty picture except the 6 month has already fallen back to 0.14% after the market close:

UST1MY3mo

UST3MY3mo

UST6MY3mo

These short term charts strongly reflect the massive moves into the short term maturities over the past 90 days and begs the question as to who is scared of what and why? I have a theory that I shall propose tomorrow night after I speak with a few contacts inside the securitization industry but what I am smelling is a real estate, employment, and consumption nightmare all peaking again within 60 days along with Sovereign Wealth Funds extracting funds from our markets due to domestic instability within their own nations. The list of countries beyond the PIIGS (Portugal, Italy, Ireland, Greece & Spain) which are experiencing issues within their economies is starting to get rather lengthy and when nations like Mexico, Ukraine, GCC members beyond Dubai, and the Baltic nations start to have banking problems we will see an even greater flight to safety and away from any long term investments.

In my opinion, the SWF crisis could be the trigger for a divergence with high long term interest rates, 0% short term rates, a strong dollar (technical surge) along with a recovery in the gold price and other liquid commodities (Financially liquid). Thus why you can no longer depend on the canned news from the MSM or local media and must continue to explore the news sources beyond our borders to get information about problems before they hit here. We might be enjoying a Christmas ham or opening presents while a banking collapse initiates half a world away. Thus I say enjoy the holidays and pay attention.

Domestically the news of an expansion in the unemployment claims for last week is not a shocker and to pile on to the bad news, Clusterstock.com comes up with a chart from DiscoverCard Small Business Watch which reflects the dangerous problem of small business owners with cash flow issues:

clusterstock12_10

Why does this relate so strongly to employment and inventories? That’s simple. The cash flow problems first slow the efforts if not eliminate the idea of expansion. The lack of available credit is stifling any hope of small businesses with a successful model expanding rapidly thus keeping the lid on hiring and dimming the hopes of millions who keep hearing about this recovery thing the news keeps promoting along with the Bubbleconomist crews.  I fear that tomorrow morning’s retail sales report will simply reinforce the notion that there is no recovery under way, no how, any time soon. This is a statistical recovery created with government money and the final revision to GDP will probably reflect that fact.

Thus I must give today’s market action 3 full Obama Fails based on the bond auction and his actions in Europe. He can not be happy after being called out by the Norweigen king and then finds out that the aliens he summoned were late for the program and thus could not get a seat at the Nobel presentation for the peace he has yet to create. Sort of like all those jobs he has yet to create.

ObamaFAILObamaFAILObamaFAIL

  • Chris

    You wrote:
    “I have a theory that I shall propose tomorrow night after I speak with a few contacts inside the securitization industry but what I am smelling is a real estate, employment, and consumption nightmare all peaking again within 60 days along with Sovereign Wealth Funds extracting funds from our markets due to domestic instability within their own nations.”

    60 days from Obama signing the Copenhagen Treaty on Dec. 18th would be about February 22nd. Interesting how that correpsonds to the timeline for your “Day the DOllar DIed Series”!

    More interesting is the cipher on Dollar bill that says the US will be destroyed on 2/22/10 to usher in the NWO. Another cipher date on the bill is 12/20/09.

    Say a prayer….it is the only thing that can change things.

    • Administrator

      You know, I didn’t even think about that Chris. Now you’re spooking me.

  • Chris

    By the way, if the SWF crisis hits next weekend, then I am officially off the grid.

  • Lidya

    Sorry, I still haven’t got it. If Big money and other SWF want to hold cash (USD) and short term paper, isn’t this bearsih for general market and bullish for the dollar?

    Then why are you predicting dollar collapse by Feb 2010?

    Thanks.

    • Administrator

      The dollar collapse story is FICTION. I only hold it out as a potential outcome. The dollar is only strong due to technical, not fundamental reasons. If any nation starts withdrawing their funds from the U.S. to support their own nation they will be converting out of and getting rid of dollars very quickly when their country starts to collapse IF they see that we are going to continue on the path of inflating or debasing our own currency.

  • Ryan

    John! I was listening to some guy on Glenn Beck today talking about bonds and I thought, wow I wonder if it’s that guy who’s blog I’ve been reading. That’s amazing that it was you! Do you think Beck seriously didn’t know what you were talking about/doesn’t follow this stuff? I know everyone has been blowing plenty of smoke up your behind but seriously I check your blog 3-4 times a day now ever since the DTDD series started, its really great writing.

    To Chris: Ok, seriously what is this crazy dollar bill cipher thing you keep talking about? I can’t even find anything about it on the almighty google!

    To Anyone: I’m new to this preparedness thing but I’m quickly becoming a true believer. What can someone like me with limited money do to prepare? Other than pray…. Any good places to start would be much appreciated

    • Administrator

      Ryan, I’m going to refer you to three links for prepping first:

      1. SurvivalBlog
      2. Frugal Squirrels
      3. The Tree of Liberty

      All have excellent resources for getting started and in a hurry preparing for the worst.

      Glenn wanted me to slow down for the audience’s sake as some time, and I was guilty of this on my own show, I would blow through a subject and people’s eyes would glaze over. I understood why, believe me. He’s a good egg and I know he misses the simpler things in life with all that is going on now.

  • As good old Ayn Rand would have said, a Soeverign Wealth Fund is a contradiction in terms.
    Yes John I have been patiently waiting for the bond market to demolish itself but the FED has been persistant in supporting its own handy work and till recently it has kept the long bonds down in yield.

    I can remember the 30 year bond trading at around 13% back in the 80’s. At the time while I was on the CBOE floor trading, we use to wait for the Thrusday afternoor FED release. Like Santelli today we would trade the new numbers while the guys on the BOT crushed the long bond contract if the money supply grew too much. I can remember days where the lond bond [then 30 year] would fall 8 entire points in about 5 millaseconds. This is where the term “Bond Vigilantes” came into existance.
    Ah for the good old days.

  • Just found this and it is great: Gold: The Ultimate Un-Bubble:

    http://fofoa.blogspot.com/2009/12/gold-ultimate-un-bubble.html

  • John,

    I do not know if you are aware of the “enterprise corruption” website and the guy the runs it reinhardt. But he’s got major debasement happening around the same time frame in Feb. Seems like there is a general agreement for that time frame from other folks I watch and monitor. Looking forward to your next post.

  • John Hoffmann

    I heard Jim Rogers saying the the SWF are all short the dollar, so when they get in trouble they have to liquidate all their positions to raise capital – one of those positions being cover their dollar shorts – and that is the reason for dollar strength when Dubai fell apart. Does anyone else agree?

  • Chris

    I do not agree with everything on this website, but his discussion of the ciphers on the dollar are interesting to say the least. Movies like National Treasure only add fuel to the fire.

    http://www.thecomingepiphany.com/

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