The Market Ticker
Commentary on The Capital Markets- Category [Federal Reserve]

I'll say it again -- this is just the start folks.  You cannot cheat arithmetic.

QE was not ended because the economy improved.  It ended because QE caused an impending crack-up and Bernanke knew it.  He skedaddled before it became apparent to everyone else, but I assure you that this problem is everywhere in the long-dated bond portfolio world, which means in the folds of pension funds and insurance companies.

It will skull**** them -- and you.

There is no escaping what is coming as a consequence of QE because the damage has been embedded in those portfolios and will take years to run off.

Genworth claims this is all (or at least mostly) due to people living longer.  Uh, nope.

It is all due to (1) monopoly practices in the health care business that are supposed to be felonies under 15 USC but nobody will even look at them, (2) the destruction of purchasing power caused by deficit spending and (3) the suppression of interest income caused by QE and which comes into the ladder of the portfolio over time and causes cumulative damage -- first, in small amounts but then in ever-larger ones.

The really ugly part of #3 is that it requires the entire average duration of the portfolio to pass in terms of time before those instruments age off and out.  Any attempt to sell and replace them early simply crystallizes the entire amount of harm done as an immediate and booked capital loss.

smiley

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