Antinomians, They are the Enemy as they Always Have Been. And just as fucking crazy.
40% of $7 trillion in treasury debt maturing in 12 months = 2.80 trillion
expected deficit for fiscal year 2010 Oct 2009 - 09/2010 = 1.457 trillion
Total= 4.196 trillion
the third quarter debt sales released by the Fed for 2009 go as such:
the Fed buys 30% of its own debt,
Dumb or “Forced” foreign interests buy 15%
and a magical sub category called the “Household Sector”Buys close to 50%
(Corporations did alittle funding too, but over all they were net sellers not buyers)
So who is this Household Sector?
Well as it happens to turn out they are a complete phantom entity
A convenient category the fed drops any buyers who don’t fit the above categories I.E.
Monies channeled outside of Money Market Funds, Mutual Funds, ETF’s, Life Insurance Companies, Pension and Retirement funds, Foreign/Domestic Banks, Goverments, Corporations and Closed-End Funds, which are all separate reporting categories. And thus accountable, traceable and knowable.
Or in Other words Magic Ghost People just Bought the Federal Reserve.
Or as I like to call it, It would Look bad if the Fed had to actually Report that they bought
80% of the Debt they Were trying to Sell.
Yeah something like that might look a little suspicious so the only alternative is:
Caspar the Ghost steps up to prop America up for another year or two (or 10, we can all dream right?)
Magical Ghost People, now That’s an Investor you can Trust!
In 2009, total supply of all USD denominated fixed income, net of maturities, declined by $300 billion from $2.05 trillion to $1.75 trillion. This makes sense: the big crunch stopped the flow of credit from January until well into April, and generally firms were unwilling to demonstrate to the market how clothless they are by hitting the capital markets until well into Q2 if not Q3. What happened was a move so drastic by the Fed, that into November, the worst of the worst High Yield names were freely upsizing dividend recap deals (see CCU
) - the very same greed and stupidity that brought us here. Luckily, so far securitization and CDOs have not made a dramatic entrance. They likely will, at which point it will be time to buy a one-way ticket for either our southern or northern neighbor, both of which, in the supremest of ironies, transact in a currency that will survive long after the dollar is dead and buried.Back to the math... And here is the kicker. Accounting for securities purchased by the Fed, which effectively made the market in the Treasury, the agency and MBS arenas, but also served to "drain duration" from the broader US$ fixed income market, the stunning result is that net issuance in 2009 was only $200 billion. Take a second to digest that.
Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March. Then the US is on its own: $2.06 trillion will have to find non-Fed originating demand. To sum up: $200 billion in 2009; $2.1 trillion in 2010. Good luck.
The Fed has Three Options
1: Announce a new iteration of Quantitative Easing. Which will be met with major disapproval across all voting classes (And doesn’t actually fix any problems, it just inflates the bailout bubble further, making the use of options 2 or 3 even more severe)
2: A major Raise of interest Rates. And while on the surface this would appear to be very welcome option for a Fed that keeps hinting that deflation is the biggest concern for the economy, however Bernanke's complete lack of preparation from a monetary standpoint to a forced interest rate increase, would likely result in runaway inflation almost overnight. The result would be a huge blow to a still deteriorating economy. And Possibly a booming surge in sales of Pitchforks and Rope.
3: Engineer a stock market collapse. Whether the resultant rush into safe assets will be sufficient enough to generate the needed demand for Treasuries to avoid default is however unknown. It would likely be correlated to the size of the equity market drop. Meaning about 2.1 Trillion would have to be sucked out of net investments, so to be on the safe side, the stock crash would have to obliterate around double that. Which also creates quite a lot of destitute angry people.
Lets say QE heads into the sunset in March 2010, does the "Household Sector" (freemansory? extraterrestrials?) continue to buy all issued debt? Will We all really continue blithely telling ourselves There is no way the US Government can default on its debt? Everything is gonna be alright?
By the way, I have a suggestion for “the Fed is all powerful crowd“: abolish ALL the taxes and substitute it by the Household Sector. Then the US may fund all its wars in the Middle East AND have a completely free healthcare system without collecting any taxes! The great Household Sector can easily fill all the budget needs, Hell if they could buy Half of 09’s Debt, then by god they can buy Half of 2010’s (Which is a Double Increase in their already Magical Ghost Buying Power) Caspar is Rich and He BELIVES IN AMERICA!
Lets say Interest rates get hiked enough to cover 2.1 Trillion. That’s a Mighty big leap and I can only Imagine it’s off a god damn cliff. The bottom of that inflationary nightmare is most definitely the death of America’s Dollar and Probably herself as well.
after all, "whom the gods would destroy, they first make great"
"When there is a gap between perception and reality, it is only a matter of time until the gap is reconciled. But since reality is so stubborn and tolerates no gamesmanship, it is impossible for reality to rise to meet perception. So it follows that perception must decline to meet reality. Après moi le déluge."
- From the book "Supermoney"
Or, my favorite: "Mother Nature Bats Last"
Am I saying that for 2010 the US need’s huge borrowing and in order to get that, Gov. will orchestrate a stock market crash to divert the money to the treasury market?
I'm not certain that anyone really wants to "crash" the markets. But, it has to do with which patient is bleeding the most. Think of this as the world's biggest juggling act. Stocks/equities got tossed up and now the govt is falling down (looming debts) and will need to be pitched upward. And with each re-thrust the pieces are getting bigger and bigger (bubble proportions), requiring more energy to hold aloft. Meanwhile, mother nature continues saying that she won't suspend gravity no matter what...
"We very well may have passed into the stage where blind growth is the only alternative to a complete collapse. We hope that is not the case." -Times Big Man of the Year, the antinomian B. B.
I'm afraid this is exactly where we are -- and Bernanke knows it. 'Up' is the only way to go because 'Down' is a rocket ride directly to the flames of hell.
Unfortunately, it's getting harder and harder to go 'up' every day.
And so yes, it is possible that I grossly underestimate the ability of the world's central banks to "extend and pretend".
2012 may be more than just a Mayan apocalypse. and 2010 is likely to be another year where smart investors pull out their hair and wonder why on earth we're still floating 'Up'.
However Reality cannot be avoided forever
Our National Debt is 550% of GDP and increasing Exponentially
for 2009 we borrowed above GDP, which should be horrifying to those people buying that debt, It's just, I don't beleive anyone "is' actually buying it. And until the fed stops creating magical categories for magical investors who live in no country and have no names or financial accounts, yet somehow hundreds of billion to spend I'm going to continue beleiving that, and so will the rest of the sane world, which isn't a pretty picture for a country that needs their money and faith in order for its bloated lardgess self to even breath.
At some Point Caspar the Friendly Ghost cannot continue to carry us ever higher towards the promised land, and the longer he tries, the farther down our fall to earth will be.
All of the thousand cuts through which we now hemorrhage seem inconsequential and each special interest fights vigorously for its own sustenance and the reduction of others.
This system is inflexible, there will be no remedy.
The only way it will resolve is a hard, hard stop.
Brace, brace, brace.
FINVIZ screen of 6 metrics illustrates where money has flowed since the late-Feb/early-March coordinated effort. The Screen creates two populations, “Bad” and “Good”.
Metrics:
1) Return on Equity: Less than 0% (Bad); Over +25% (Good)
2) Debt/Equity: Over 0.4 (Bad); Under 0.1 (Good)
3) Gross Margin: Less than 5% (Bad); Over 15% (Good)
4) Price: Over $5 (both)
5) Average Volume: Over 500K (both)
6) Country: USA (both)
The Screening produces plenty of companies. But it’s the Stock prices that really speak for themselves:
4-1/4 years prior to 3/9/09:
Bad companies: -75% average; -81% median
Good companies: +36% average; +26% median
9 months since 3/9/09:
Bad companies: +735% average; +184% median
Good companies: +76% average; +54% median
Makes a Stock Crash look tasty now, doesn’t it?
What an eventful Christmas/Pagan holiday we’ve had:
Celebrity funerals, celebrity arrests, Osama`s daughter in Iran, Al Qaeda terror attempts, (A Fire Cracker scares people on a Plane) fire torched Kingsway & Broadway, plans for putting anti-cancer drugs in junk-food, Pope gets bum-rushed, Obama-care….
Did anyone else notice how much fun we`re having!?
I bet New Years is going to be a hooT!
The Antinomians are certainly having a riot
[And that riot will soon devour them whole.]
-The End-
~Raindear Awelove