by John Galt
December 10, 2009
The 30 year bond auction I was worried about yesterday fulfilled my concerns today:
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:
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:
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.