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Wednesday, March 10, 2010

I'm Whipped

Yesterday was a long but productive day. I'll post again tomorrow.

Treasury yields in March are very interesting. Compare them to January 2009. Note the relative drop in the 6 mo and 1 year. Bank credit just keeps dropping. Look at loans and leases.

The best we can say about non-financial domestic commercial paper is that it is flat - month end levels show a drop since the CARS bounce.

The Fed has a problem. They've got rising rates on the long-term and low, low rates in the mid-term. Given the chatter, one would guess that several of the governors suspect that they will have to raise rates later this year. Naturally they won't want to do so until after the six month mark is past.

If you look at the 6 month yield in March of last year, and the 1 year yield in December of last year, and then you go back to my previous post on NFIB, you may start thinking hard.



Note that the 5-Year TIPS yields bottomed in March of 2008.

Oil prices peaked in June/July of 2008 though, 3-4 months later.


I find that lag interesting and I can't explain it. It might be that the momentum in the 5-Year TIPS trading simply hit the 0% brick wall and bounced. In any event, there was no further money to be made betting on the 5-Year TIPS yields to fall further. 0% is the bottom.

The 5-Year TIPS yields are currently scraping along close to the bottom again. Meanwhile, oil seems to be scraping along the top again.

$80 oil is clearly not the same top, but then again the world economy has already shown what $145+ oil can do to permabullish oil traders.

That said, copper investors were burned and they didn't mind coming back for a second helping every bit as big as the first helping. So who knows?

Sooner or later, as they say, the dream ends and one wakes up to reality.

I wish I could say the nightmare ends and one wakes up to a more pleasant reality. But that's not the case here.

Mark - we are collectively running into a brick wall.

I find the situation in China disturbing. That is an asset bubble.
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