Anybody else short US 30 Bond
- Thread starter richard_m
- Start date
What's with the volatility?
Well, I think we've just had the opening blows of the new bear environment. I've pretty much scaled out of my long put positions, perhaps a bit too readily earlier today given the continued descent in the afternoon, but I was just itching to take some profits... I took a hit before the FOMC QE2 and perhaps could have finessed this short play a little better.
Short term, I think maybe Tuesday/Wednesday we'll hit a bottom, after such an enormous bond market rally in the past year and a half I would expect we'll get some sort of re-test attempt of the QE2 highs in the next month or so, which should fail. Low CPI/PPI will likely be a cue to cover shorts if the rally attempt begins this week.
You have to think Bernanke is not going to go down without a fight. He might respond to today's 'open letter' with a stronger statement of intent as to why printing gazillions of $s is not an inflationary risk, even if I don't believe history will judge him kindly.
Hopefully some more dovish comments from him will set up another sharp rally to sell into so I can load up again on bond put options.
You just wonder if bonds do indeed take a sustained hammering over the next few months how the Fed will be able to crystallize their losses when they decide to tighten... A taxpayer's bailout of private sector bank owned Federal Reserve?!
And for anyone interested, the book "When Money Dies" about the Weimar hyperinflation in the 1920s will get you really bearish on bonds:-
http://www.amazon.com/When-Money-Dies-ebook/dp/B0042JSRU0
Short term, I think maybe Tuesday/Wednesday we'll hit a bottom, after such an enormous bond market rally in the past year and a half I would expect we'll get some sort of re-test attempt of the QE2 highs in the next month or so, which should fail. Low CPI/PPI will likely be a cue to cover shorts if the rally attempt begins this week.
You have to think Bernanke is not going to go down without a fight. He might respond to today's 'open letter' with a stronger statement of intent as to why printing gazillions of $s is not an inflationary risk, even if I don't believe history will judge him kindly.
Hopefully some more dovish comments from him will set up another sharp rally to sell into so I can load up again on bond put options.
You just wonder if bonds do indeed take a sustained hammering over the next few months how the Fed will be able to crystallize their losses when they decide to tighten... A taxpayer's bailout of private sector bank owned Federal Reserve?!
And for anyone interested, the book "When Money Dies" about the Weimar hyperinflation in the 1920s will get you really bearish on bonds:-
http://www.amazon.com/When-Money-Dies-ebook/dp/B0042JSRU0
First, I don't disagree with most of what you are saying. Think we are in an oversold mode but the market is still net long.
Now, as to this taking-losses business - the Fed doesn't have to. They technically don't have to deflate their balance sheet by selling the assets they bought. They can very well let all that run off to maturity (thereby taking no losses) while use the conventional tool of raising the fed funds rate to tighten the money supply.
Furthermore, on a bigger picture level, if the Fed succeed in restoring employment with acceptable inflation (not saying QE2 will do the job, just saying that if it does) and the Fed tightens by shrinking their balancesheet via selling their treasuries, then isn't it arguable that the restored wealth and growth of the general economy is worth the market to market losses taken by the tax payer via the monetary policy? Moreover, most of the 'gains' are accrued to pension funds and endowments, not 'wall street banks'. Not to mention in normal times the Fed actually makes money that it submits to the treasury (no reference handy; I think I'm right on this - but welcome corrections)
Now, as to this taking-losses business - the Fed doesn't have to. They technically don't have to deflate their balance sheet by selling the assets they bought. They can very well let all that run off to maturity (thereby taking no losses) while use the conventional tool of raising the fed funds rate to tighten the money supply.
Furthermore, on a bigger picture level, if the Fed succeed in restoring employment with acceptable inflation (not saying QE2 will do the job, just saying that if it does) and the Fed tightens by shrinking their balancesheet via selling their treasuries, then isn't it arguable that the restored wealth and growth of the general economy is worth the market to market losses taken by the tax payer via the monetary policy? Moreover, most of the 'gains' are accrued to pension funds and endowments, not 'wall street banks'. Not to mention in normal times the Fed actually makes money that it submits to the treasury (no reference handy; I think I'm right on this - but welcome corrections)
Quote from benwm:
You just wonder if bonds do indeed take a sustained hammering over the next few months how the Fed will be able to crystallize their losses when they decide to tighten... A taxpayer's bailout of private sector bank owned Federal Reserve?!
And for anyone interested, the book "When Money Dies" about the Weimar hyperinflation in the 1920s will get you really bearish on bonds:-
http://www.amazon.com/When-Money-Dies-ebook/dp/B0042JSRU0
FWIW my wife (Japanese) say's we'll have deflation, not inflation. She's usually right! So it far from clear to me how this great experiment will resolve itself...
One aspect which I'm not too clear on is the relative magnitude of QE in Japan 2000-present and the US. My vague understanding is that the Fed's QE has been on a much larger scale to the Japan QE. At some point enough money printing HAS to be inflationary, but the Shadow Stats website still has M3 money negative suggesting broader money has not been expanded.
One aspect which I'm not too clear on is the relative magnitude of QE in Japan 2000-present and the US. My vague understanding is that the Fed's QE has been on a much larger scale to the Japan QE. At some point enough money printing HAS to be inflationary, but the Shadow Stats website still has M3 money negative suggesting broader money has not been expanded.
This is correct...
125 handle target achieved if y'all look at that chart 125.18 is 50% of whole move should see some rally off here, but was glad to see that sell off...(on page 377)
that was everyone in Elite Trader land free money trade of the month! hope you all bought that area!