The Credit Crisis Financial Stocks Short Journal

The Fed stays at 0% forever trade seems to be becoming the widespread view. The Mar 2011 contract is pricing in 46%, I dont necessarily think this is correctly priced by its not as juicy as back when Dec 2010 was pricing in 75%. Furthermore just about every analyst is now at Q1/Q2 2011
So now the dilemma is, do I try to capture the small juice left for early 2011 or I just wait till there is a hike scare then jump big time on that?
I'm inclined to hold the Dec 2010 waiting for a correction, it should affect more the back end. Problem is, that is conflict with my view that stocks will decline with a double dip as a serious possibility. A correction might get everyone and their mothers saying H2 of 2011
 
Quote from Martinghoul:

Have you read today's Macro Man?
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They talk about 'a very large convexity-led sell-off in rates markets.'
I dont understand how that is supposed to affect the front end, isnt that a 10y & 30y story?
Furthermore if there is a double dip, in theory we would be in one of the scenarios he discarded, 'where the Fed is expected to cut rates', its just that the cuts would come in the form of QE
 
Quote from Daal:
They talk about 'a very large convexity-led sell-off in rates markets.'
I dont understand how that is supposed to affect the front end, isnt that a 10y & 30y story?
Furthermore if there is a double dip, in theory we would be in one of the scenarios he discarded, 'where the Fed is expected to cut rates', its just that the cuts would come in the form of QE
More...
It affects the middle part of the curve (mostly arnd 10y, from my experience), but it normally pushes the whole curve hard. In the current environment, it would be likely to cause a steepening, if it were to occur.
 
Gross is calling for more Fed stimulus in the form of capping 2y rates
http://www.cnbc.com/id/15840232?video=1528852993&play=1

Says fed should change language to 'hyper extended period'. Its going to be funny if the economy tips into recession or a significant slowdown. The Fed will again change to the side that said their language IS a timetable. They originally put that in 2008 based on that Bernanke anti-deflation idea that it would help bring down long-term rates, then in 2010 once the recovery was stronger, they claimed its not a timetable. Now they might just have to bit their tongue and claim it is again because they will need some bullets
 
Oh and btw, this UST 10y rally has trigged one more criteria of the Hussman recession modeal
' A yield spread between the 10-year Treasury yield and the 3-month Treasury yield of anything less than 3.1%'

Now all that is necessary is
"4: Moderating ISM and employment growth: Manufacturing PMI (at or) below 54, coupled with either total nonfarm employment growth below 1.3% over the preceding year (this is a figure that Marty Zweig noted in a Barron's piece years ago), or an unemployment rate up 0.4% or more from its 12-month low"

The model has never been wrong the pundits on the other hand have been wrong a ton
 
Quote from Daal:

Oh and btw, this UST 10y rally has trigged one more criteria of the Hussman recession modeal
' A yield spread between the 10-year Treasury yield and the 3-month Treasury yield of anything less than 3.1%'
More...
I think another common variant of this is the spread between 10y UST and FF Effective. I don't see how you could call something based on instantaneous mkt prices a model, though.
 
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