Let's see if I can count this up....
70 day CMBs, $30 billion (tomorrow)
13 week Bills, $32 billion (July 27th)
26 week Bills, $31 billion (July 27th)
52 week Bills, $27 billion (July 28th)
2 year Notes, $42 billion (July 28th)
5 year Notes, $39 billion (July 29th)
7 year Notes, $28 billion (July 30th)
19 year, 6 month TIPS (reopened), $6 billion (July 27th)
That's two hundred thirty-five billion dollars over the next week!
Almost one quarter of a trillion....... geejus.
I guess you should get while the getting is good, but this is going totally parabolic. That money has to come out of somewhere, by the way, in order for the sale to succeed, which is going to get rather interesting at some point - but exactly where it matters is impossible to know.
I expected that when we crossed the $100 billion threshold in a week the market would throw up all over it, but it didn't. Now we've got the government trying to sell a quarter of a trillion dollars in debt over the next week, the announcement is out there, and while the bond market is selling off to a material degree equities could care less!
This is flat-out insane. At this run rate we would be trying to sell twelve trillion dollars over one year's time, an obviously ridiculous and impossible-to-peddle amount of debt at any price.
When does the rest of the world wake up (not to mention the primary dealers) and say "NO!"? Never? Is there a truly insatiable demand for our government's debt, despite the fact that President Obama got up on the national stage last night and promised to spend another trillion dollars we don't have?
How do equities power higher into this sort of debt issuance? Is it simply that the market has deduced that the government will hand all of this zero-interest money out - indefinitely?
Guess what - that which is impossible won't happen, and the stock market is now telling you that the impossible will become reality. There has been and will not be any amount of fiscal sanity on the part of our government until the market imposes it, and when it does it is going to happen in exactly the same way it happened to Bear Stearns, Lehman, Fannie and Freddie. May I remind readers that it was said that Fannie and Freddie "couldn't" get in trouble due to their implicit government guarantee? Well guess what - they both effectively failed, but when the US Government finds itself in the same situation it has nobody who can take it into conservatorship and as such we're just going to have to deal with the consequences of failed debt auctions - that is, dramatically increased funding costs across the board in the economy, including the government, which will choke off any hope of economic anything.
Folks, this is how you get detonation of a nation's monetary and political system. Timing the "event" it is not easy, but the certainty of outcome given this sort of outrageously irresponsible activity is not in doubt.
I'm increasing my stock of things that "will never go to zero" and keeping my ear to the ground. The "short the phone book but make sure you get out fast before you get trampled" moment approaches - mark my words.
5 Comments
SenatorRusso
I think the rest of the world has woken up. From what I understand Russia and China aren't having anything to do with U.S. debt anymore and Fed notes printed after the initial crash back in the fall of 08 aren't being accepted. The world knows what's up. I wil take great pleasure watching the crime syndicate that runs the West get more desperate and obvious as the days go by. Their flagarance will lead to more awakening, which of course will ultimately lead to their "fall."
PS. FUCK PAPER MONEY BACKED BY NOTHING.
ptownman
The US needs to borrow $250 billion a month for the next 5 to 7 months and then after that, it will need to borrow $350 billion a month for the foreseeable future. Yep, the next 18 to 36 months are going to be very interesting, to say the least.
jlounsbury59
I agree with Karl - this issuance will negatively impact stocks, but the timing is uncertain. If the markets continue the 10-day advance through the start of auction, it may be underprescribed. driving interest rates up. The reaction in equities will be a retraction from the highs, possibly back to the bottom of the current range in the low 8000's. If there is a pullback in stocks over the next three trading days, the treasury auction may go better and the pullback in stocks will be smaller. Looking out 2-3 months the big risk is that the stock market will start anticipating a "W" shaped recession and sell off in a major way, perhaps to create a double bottom equal to the March lows. I'm estimating a 30/30/30 probability distribution for the three most likely scenarios: (1) No "W" and the market continues a ragged advance 10% or more higher over the next 6-12 months; (2) No "W" and the stock market remains in in a trading range (Dow 7500 - !0,500) over the next 12-18 months; (3) There is a "W" and we revisit Dow 6500 within 6-9 months. The remaining 10% probability I'll assign to the Marc Faber collapse scenario, with the Dow going significantly below 6500.
JimQ
In the last 3 days, I've reinstituted my position in Leuthold Grizzly Short fund. I sold the whole position in March. This current rally is on light volume driven by Goldman and the other zombie banks models. Karl is right. We don't know exactly when, but this whole sham comes crashing down sooner than most expect.
eijenkinson
The DOW jumped over 9K by close 7/23 today. To all you shorts, don't lose your shorts when the margin call hits. Yes, fundamentally everyone who has previously posted is right, BUT, a lot of people will go broke and have gone broke shorting in the 2500 pt uptick since bottom.
I took a stats class (awhile ago), and my professor was an obvious indulger in the vice of gambling. The question was posed on simple bet removing the 0, and 00, at a roulette wheel; how much money would you have to bring to the table if you doubled your bet each time you lost starting with a dollar, before you would win? The answer of course, is theoretically you would have to bring an infinite amount. Streaks happen. Now stack the deck with a Goldman Sachs (the 0 and 00) plus give them a loaded wheel, and a rigged table, and the answer is infinite to the infinite power. They (Goldman Sachs) have been betting black and taking the reds for the proverbial ride.
Truthfully, I am in shock and awe that they have done such a superb job floating this game on so much borrowed money and borrowed time. When the market hit 6500, I was sure the goldman goose was cooked. I am glad I didn't bet against them.
Conclusion: 1. just because it is obvious doesn't make it so, 2. don't risk what you can't lose, 3. careful what investment advice you give, especially to friends, family, and colleagues.