Funny how, in the 2nd video, just as Kyle is saying he would NOT be a muni-bond buyer, CNBC flashes their little disclaimer that the opinions expressed by the guests do not reflect those of CNBC, etc.

I don't recall seeing that when guests come on who are pumping the **** sandwich du jour.

Unbelievable.

I wish he had been given the opportunity to explain why he doesn't think States will default on their debt, only certain cities/local govs. I just don't see how Illinois or California get out of this short of a federal bail out and I don't see that happening with the Republicans controlling the House. My bet is that if they don't default on their debt then they'll have to default on something else, maybe all those fat pension obligations. It's real tempting right now to buy some of those Cali bonds at the interest rates they're offering but I look at them as junk bonds and very high risk.

To me, one of the glaring statements Kyle made was about the question posed to the attendees of the CFA Annual Meeting. The meeting with lots of so-called financially literate people; 'Does anyone know what the weighted average cost of capital is' (for Greece).

Not a single hand goes up.

If you had asked that same question to 500 of your average regular Ticker-Forum readers you'd have at least a few hands go up, maybe 10-20% of em'. That right there is an example of how we have wayyyy to many over-educated idiots posing as learned experts on economy and finance.

It also says that many of these 'tools of higher education' will rise to policy making positions somewhere; each and every one of them that gained nothing useful from all their years of theorizing getting ample opportunity to wreak the damage of the Bernank.

What a delightful look in to the future of our country.

he said he is invested in 'other assets' rather than stocks or munis
anyone know what he is referring to?
is he a gold bug?

All three (3) are wearing pink ties - that is encouraging.

Quote:

he said he is invested in 'other assets' rather than stocks or munis
anyone know what he is referring to?
is he a gold bug?

Hey! I saw that guy at my local gun shop, racking the slide on a Springfield Armory M1A! Looked like he had several thousand rounds of ammo, and the back of his Mercedes was loaded with rice, and beans.

...on second thought, I saw him at the airport, buying a ticked for Chile...

The Bernank; "He's buying every single new bond that's issued."

Kyle kicked some Bass! Vegas I was wondering the same thing.

At the end after saying he would not buy muni debt he said (or it was on the screen) he was in short term credit assets (which I assume meant cash equivalent or safe short term assets) and some short term speculative equity plays. Sounds like he is playing a little long till the bubble pops but would appear to be in preservation of capital mode. Since he believes interest rates are going straight up, if he is right, there should be a pretty solid equity selloff while bonds go***** up as well.

Sounds like the conditions for the multi asset class liquidation and end game many here are expecting, with rates rising to further emasculate the dickless Bernake. I hope he is right that the time is near because I want to get this show on the road. Like others here, he also sees reality being recognized from Europe. Now where have I heard that???

My guess is that as EU rollovers or squabbling over suckling the German teet start to cause real stress, they will administer another sham stress test (propaganda), but this time after they release the glowing results the world goes kaboom. Just a theory.

Bass is short Japanese bonds for one thing, either through default swaps or directly. More than anything else, Japan bears watching. If you look at his chart, Japan's government is 19 years revenue in debt. This means if they tripled taxes, they would still be over 6 times revenue in debt. I think the chart showed the US at 3 times. I think it is closer to 10 times.

On any account, there won't be any clothes on the emperor once the **** hits the fan in Japan (good title for a song, seeing as it rhymes). I think one reason the Japanese bond holds up is the massive short position from years of carry trade and that is about the extent of it. Hedging a 10 year Japan return against a 10 year US return has to present an attractive alternative, as long as the yen doesn't move too much. A load of Charmin might be needed at the Fed if these derivative positions start to rock too much

@Fatso, re the disclaimer - it was the end of the show, the disclaimer runs every day at the end of the show, no conspiracy there.

Re Bass' comments - the implicit point he was making, I think, is that most estimates of the US budget deficit do NOT include estimates for ramping interest expense on US Treasury debt.

For the life of me, I don't understand why Treasury isn't more aggressively extending maturities, as it stands now a preponderance of our debt rolls within 5 years.

Yeah, borrow short and lend long, where have I seen this business model before?

Quote:

For the life of me, I don't understand why Treasury isn't more aggressively extending maturities, as it stands now a preponderance of our debt rolls within 5 years.

I have been asking this same question for many many months now.

Treasury should have been selling the long end of the curve hard for over two years.
When the Markets were bottoming two years ago there was almost nowhere else deemed safe to go to.

Likely Treasury was trying to accommodate Institutions that wanted Short Duration Paper.

Regardless of the reasoning; -rolling 50% of US debt every few years is going to ultimately prove absolutely disastrous.

Also consider that as the Boomers retire and the SS 'Trust Fund' Paper is rolled over to pay out there will need to be further emission than is projected even if deficit spending is restricted...

they are going to try to move into longer Ts

the reason they are in shorter term Ts is because that is where the demand has been
if they were to go into longer maturities — rates would have jumped already

here is Karl on the TBAC report the other day
http://market-ticker.org/akcs-www?post=1....

and go here for the pdf
read it
talks about where they are going to get the money to roll those T's
*warning— lube up first*
http://www.treasury.gov/press-center/pre....

The Treasury does NOT have to offer any particular duration of Bond.

Treasury should have stopped offering short term paper and ramped the duration when Everybody ran to Treasuries for safety.


The FED is probably gonna keep rolling the short duration over as it can't back off...

Look at what has been being purchased in recent POMO.



Aside from providing the Markets ( Banks ) with short term paper -'liquidity'; what is the reasoning behind constantly rolling short term debt?

IMO, the Treasury Market isn't being run so as to garner the best debt term/structure for the Sovereign US; it is being run so as to control the injection or withdrawal of liquidity into the Repo Market.

The National Deficit/Debt has become a vehicle for Private & International Fiscal Management and is no longer a vehicle for Public Fiscal Management.


When Interest Rates spiked under Volker: what long term fiscal sense did it make for the US Treasury to sell the 30 year duration?
-When debt is EXPENSIVE why borrow LONG duration?

When Rates bottomed under Bernanke what long term fiscal sense did it make to for the US Treasury to sell short duration?
-When debt is CHEAP why borrow SHORT duration?

Why is the US borrowing hundreds of Billions in SHORT duration if it is clear that it CANNOT/WILL NOT be PAID OFF in the near term -and WILL HAVE TO BE ROLLED?

Bernanke has said that QE was about lowering Interest Rates.
People were encouraged to take advantage of the Low Rates and Refinance their Mortgages -their LONG DURATION DEBT- to save money.

Why isn't it just as Important -if not more so- for the US Treasury to do the same?


Selling 50 year or 100 year callable Treasury Bonds should have been done in 2008 and 2009 -if it is going to be done.

IMHO, Geithner is a ****ing idiot for having waited this long.

This guy is a smart mother****er. Karl should interview him.

We really are screwed and the masses still don't see it coming.

@Nanna

Things to remember, the Treasury maturity on the 2.5 Trillion Social Security Lock Box ( of the 4.6 Trillion intergovernmental) http://www.treasurydirect.gov/NP/BPDLogi.... is supposed to be, and used to be recalibrated every June 30, to the same principal coming due every year from 1 to 15 years out. So when the yield curve made the big hockey stick the US Treasury cleaned up big time because the lock box had an average maturity of 7 to 8 years depending on the month, when the outgo beyond interest paid to the Lock box is years in the future. Who woulda known the Lock Box is helping keep the deficit smaller.

The maturity distribution on publicly held/tradable debt is a different story.

Borrow short, lend long, many times, including Continental Illinois in the 70s/early 80s, the orginal TBTF, but then they were buying Treasuries. That was on top of the bad loans they acquired. You almost had to be there to see the Bond price fluffer when the 30 year yield perked up to 18 in the aftermarket.

I had a front row view when earlier Continental Illinois financed the bankruptcy buyout of where I worked, and the day of the force reduction the CEO's bank leased gold Porsche appeared in his parking slot next to the front door.

Another sure sign of a burglary in progress is when the meth addict has the car running, backed into the disabled parking slot while his buddy is running out the door with a couple of cans of paint.

But on the whole, the jury is still out on whether a solvency crisis can ever lead to over all inflation, granted the commodity bubble and globalization of US monetary policy, but in the end, most of the bubble is on borrowed dollars, and in a solvency crises, at the Minsky moment, the debt liquidators are piling up at the exit door with the bar/disco fire burning behind them.
People wont be selling the trash, there is no market for trash at that point, they will be selling the good stuff, and selling at any price they can get.
The anomaly then is the good stuff sells off faster in price than the trash.

I wish he would have said where he is putting his money.

@ Vegas:



Page 51 cracks me up. I can see it now:

Buy US Bonds -- Do Your Patriotic Duty and Keep Us From Defaulting.

The New 100-Year Treasury Bond -- Buy Now Or Be Priced Out Forever.

Really. This is their plan. If you squeezed the heads of anyone employed at Treasury, would you get any juice out? I'm pretty sure there's nothing but air there.

@video said

"It also says that many of these 'tools of higher education' will rise to policy making positions somewhere; each and every one of them that gained nothing useful from all their years of theorizing getting ample opportunity to wreak the damage of the Bernank."

I work with people with no collage what so ever and they have a better grasp of the mess we're in than any of these people. What they lack in education they make up for with something called common sense.

Extended education is a huge killer of common sense.

I have witnessed such my entire life.

Kyle is a good looking guy. Calm, cool, collected. Of course he's in Finance! Smart bloke. Only, I sorely wish that I hadn't acted on that newsletter of his from Spring of 2009...

How come his hair hasn't turned gray in the interim, like mine? Hmmm.

Hussman is one good-looking genius too. He's bearish on equities, and he's calm/cool/collected. He's got a fitness website (hussmanfitness.com)! And in his spare time, he has mapped the molecular pathway of autism (see his 1/31 newsletter at hussmanfunds.com). Heck, why not? We all need a hobby when the wheels of the stock market are popping the skulls of your clients. Plus his kid is autistic.

Glad to see that irrational stock markets offer so many opportunities for the well groomed.

Personally, I've had enough of this charade. These talking heads differ only in degrees of unctuousness.

@VR ..

Quote:

the reason they are in shorter term Ts is because that is where the demand has been
if they were to go into longer maturities — rates would have jumped already

Actually the last 3 year auction was horrible, and the 10 year much better than expected, go figure!

Donethat,

You sound like an experienced bond trader, so I respect what you're saying. But one correction, there is no real "Lock Box", it exists only in Al Gore's imagination. Every dime of money that was supposed to go into the SS trust fund was spent by other governmental agencies. The idea that there is a trust fund suggests a bunch of Treasuries or other assets that can be liquidated to pay claims. However, the only thing in the trust fund are IOU's, worthless paper claims that have to be converted into treasuries by borrowing.

In other words, for every $100 in the trust fund the treasury must sell debt to get the money.

The idea behind the "lock box" was that any money coming into Social security (prior to 2009 or so it ran a surplus) would be put into an account that could never be touched by any other part of the government. It was one of the few Al Gore proposals that made sense. Unfortunately, it was never implemented.