one more bubble...

muldoon · December 04, 2008, 01:08:13 AM

I have written this post 3 times now since Monday morning. I keep closing the browser instead of posting it because I dont want to be the bearer of bad news, I dont want to spread any more fear, and I dont want to be right on this. God help me, I hope I am wrong.

I think we have an established bubble in the treasury.

This chart looks like something from the dotcom days. To think it is the 10 year long bond, the historically boring tnx is amazing. What we are seeing is much more than just the massive flight to quality, the fact that not only are people willing to accept 2.6% on 10 years, but in fact droves are piling in as it is the last safe haven should alert you to the gravity of the situation. There is no upside on this trade; it is not real estate bubble - it's not a dotcom stock, not oil spiking up. It's a 10 year governemnt bond yielding just over 2% and people are driving it like its on fire.

I have learned a few things about charts over the last decade. This is not sustainable. This will not hold, it will reverse violently. However, understanding the mentality to why it is occurring is quite a concern because it is the last bastion of pretend safety. When it reverses - katy bar the door - there will be no where to hide. That is the day we see a true firestorm for the exits across the bond market. It is no longer avoidable in my opinion.

At that "theoretical" point we break the rules. At that point, money does not need to chase return, it simply needs to exit, in any way possible, at any loss. I realize things have been rough in the economy but looking at this I am truly scared for the first time in a long time. If this were a baseball game, were just in the national anthem part.

sparks · December 04, 2008, 01:52:24 AM

Nice insight Muldoon. Do you believe the market will dip below 7000 before Obama takes offiice?

sparks

December 04, 2008, 02:49:04 AM

muldoon, pardon me for this, but what does it matter?

There is nothing you or I can do about it. Nothing at all. What will come will come.

wildbil · December 04, 2008, 08:12:32 AM

I keep trying to get my wife interested into why we should start preparing for this mess. I keep thinking mass starvation, people freezing to death when the heat is shut off, looting, stealing, basically mass chaos. Noone thinks it can happen to us. But remember way down inside people are still animals.

My only suggestion for IF that time ever comes, is to gather everyone you trust and head way out into the wilderness. food, water, shelter; everything else is secondary.

good luck

Wildbil

glenn kangiser · December 04, 2008, 10:22:59 AM

Quote from: MountainDon on December 04, 2008, 02:49:04 AM
muldoon, pardon me for this, but what does it matter?

There is nothing you or I can do about it. Nothing at all. What will come will come.

I'm afraid you will have to look at this one, Don. muldoon is not saying there is anything to do about it. He is saying that now may be the time to do something for yourself... and hopefully you don't have any money tied up there. The backing is not gold.... it's air. It may be better to use what money you have sooner rather than later as it will only buy air later. You can roll over close your eyes and accept fate but preparation could be prudent.

This is reality. This is likely the last bubble. When it pops there is no savior. That is what muldoon is saying if I have it right. This may be Osbama's change and the possible start of martial law in the US as well as the removal of your guns and any value left in the toilet paper dollar. Nothing you can do but prepare as it can't last forever. Please correct me if I am wrong, muldoon.

This one is what the Feds are preparing for. This one is the one the want to take your guns for. Even the Feds are in fear of this one hence the deployment of troops on US soil and the FEMA Haliburton concentration camps to control those who would go after them.

They know it is unsustainable as muldoon has stated. If they print their way out of it, they have stolen everything that the world has invested in the US besides all it has invested in itself. Even the world will be pissed at the US as their investment now is what is strengthening the dollar. It will be short lived.

It can't be covered because all of the backing has been stolen by the CEOs and bankers already. Printing their way out is like paying it back with air. You think investors aren't going to be pissed? Toxic Wife, look out....her wrath won't even compare.

I feel sorry for anyone who isn't at least prepared if muldoon is right. He's not the only one saying it.

December 04, 2008, 10:28:17 AM

muldoon, does this have to wait the 10 years when the bonds are payable or can it collapse before that time? Do I understand the situation correctly? hmm

Bishopknight · December 04, 2008, 11:15:25 AM

I think it can be best described as this. The United States used to be able to atleast repay its obligations. Around the early 2000s, it started transitioning towards a unit which marginally repaid its obligations. The last year has seen the full gravity of our debt start to come down on us with no repayment possible. Its like a car progressively getting faster and faster screaming towards a brick wall. The fed is just trying to push the brick wall further and further away. By postponing the crash, it will make things worse.

MountainDon · December 04, 2008, 11:24:09 AM

Quote from: glenn kangiser on December 04, 2008, 10:22:59 AM
I'm afraid you will have to look at this one, Don. muldoon is not saying there is anything to do about it. He is saying that now may be the time to do something for yourself... and hopefully you don't have any money tied up there. The backing is not gold.... it's air. It may be better to use what money you have sooner rather than later as it will only buy air later. You can roll over close your eyes and accept fate but preparation could be prudent.

Maybe I should have elaborated... Our preparation is about as complete as it's going to be. We haven't had much money in stocks, etc. for many years. That's one reason why I haven't bothered commenting on most of the threads relating to what's happening in the various financial markets, other than to say that I don't like the bailouts. I just don't talk much about where our money is; to me that's private, but we own "valuable stuff" and rental real estate. So far we're not suffering in any way with the real estate. Whatever happens out there in the financial markets is beyond my control. As far as politicians go, the best we can do to this point is exercise the right to vote and watch what they're doing.

After what we've done preparationwise, if I spent my days worrying about the markets and all the doom and gloom reports I'd make myself ill. I'm going to sit back now and see if I can enjoy/survive the ride. As Peter Nap has said, I might need more popcorn.

glenn kangiser · December 04, 2008, 11:36:53 AM

I see now, Don. I just didn't know where you are coming from.

I didn't think it didn't matter to you -- it's just that you have already made preparations.

This one is not just the markets though as I see it. It will affect the world whether they want it to or not.

I could affect peoples decisions so they need to be aware of it in my POV. What to do about it--- nothing we can do as you say.

What do we do? hmm

The best thing we can do for ourselves based on the knowledge we have and intelligent study. It could be a better choice than we would make if we do not look. It is an individual decision and action. We are at least stocking a good supply of ammo and dry goods that have up to 30 year storage life.

Money? Maybe some of it can be salvaged, likely better earlier rather than later as hyperinflation sets in and the presses can't keep up with the money demand.

Each person has to decide for themselves based on available information.

December 04, 2008, 11:39:02 AM

Quote from: MountainDon
muldoon, pardon me for this, but what does it matter?

There is nothing you or I can do about it. Nothing at all. What will come will come.

It does matter because it defines a big change to me at least. I have for quite some time defined a safety posture. Low bank account holdings (under fdic), low debt, holdings in mostly short term treasury debt like VIPS and or treasury direct.

One rule I have always seen in trading is that money flows like water. When something goes down, the money just flows into another area. When the stock market tanked in 2000 - it flowed into houses - when houses tanked in 2007 and early 2008 it flowed into oil - when oil tanked and the stock market tanked it flowed into treasuries.

Why does money always have to flow? Because it is borrowed. All money is borrowed thus it is not enough to simply keep it on the sidelines. You must continually seek return on the principle or you lose ground. It is required that you earn either interest or appreciation with your funds to service the debt of having it. It could be interest on a loan, it could be margin requirements, it could be fighting inflation, it could be you investing someone elese money and needing to generate excess to pay yourself, or all of them. The point is that now this rule does not hold anymore.

If the return is 2% for 10 years, or 0.05% for 3 month, you are not generating more than the cost of debt. It is by definition going to generate losses. Consider how many institutions are borrowing from the treasury at 9% and putting back into treasury bonds at 3% and letting the federal reserve (tax payer) cover the loss. Money seeking return is gone. Now we have people only seeking return of capital, not return on capital. And its looking like a bubble. When it pops, there is nowhere safe to go because the government is the only one holding things up. 8.5 trillion in 6 weeks makes it pretty clear that were no longer the lender of last resort but the only lender. Who can pay if they cant? There will be nowhere to hide.
Thats why it matters, and your right there is nothing you or I can do about it. However, what will come will come is not exactly the best approach either, do we wait for the wolves to be at the door before we think about it?

Quote from: sparksNice insight Muldoon. Do you believe the market will dip below 7000 before Obama takes offiice?

No idea. I have been "early" on nearly everything I have said to date. I do not wish to give financial advice like this -- and I certainly wont give any timing advice. Good luck if you choose to chase it.

Quote from: wildbilI keep trying to get my wife interested into why we should start preparing for this mess.
...
My only suggestion for IF that time ever comes, is to gather everyone you trust and head way out into the wilderness. food, water, shelter; everything else is secondary.

good luck

good luck to you as well. My wife was in a similiar position. It is pretty big to get your head around. It's about as life changing event as one can possibly imagine once we start mentally going down the rabbit hole and thinking about what the ramifications are. It may be helpful for you to keep a few things in mind.

People need you and you will need them. Friends, family, neighbors, -- fighting and conflict is not helpful to the situation. The only way to get through this as I see it is to pull together as a family - or as a community if you can.

The second thing to keep in mind would be the 5 stages of mourning. Were talking about a huge loss here, childhood memories, loss for our childrens futures, our own dreams in many cases - it's quite a tramatic event. I copy/pasted this from another website but if you search for stages of mourning or grief cycle you'll find alot of information on it; what each stage is and how to deal with the emotions.

Quote
* Denial (this isn't happening to me!)
* Anger (why is this happening to me?)
* Bargaining (I promise I'll be a better person if...)
* Depression (I don't care anymore)
* Acceptance (I'm ready for whatever comes)

Help your family and friends get through this however you can, dont give up on them, they need you.

Quote from: Bishopknight
I think it can be best described as this. The United States used to be able to atleast repay its obligations. Around the early 2000s, it started transitioning towards a unit which marginally repaid its obligations. The last year has seen the full gravity of our debt start to come down on us with no repayment possible. Its like a car progressively getting faster and faster screaming towards a brick wall. The fed is just trying to push the gas pedal through the floorboard ~~brick wall further and further away~~. By postponing the crash, it will make things worse.

fixed that for you.

wildbil · December 04, 2008, 11:43:51 AM

unfortunately I'll be in one of those unready families if it happens before the next two years. I can try stocking up on a few things and learning as many survival skills as possible, but until I am more independant of the failing system I'm pretty worried.

glenn kangiser · December 04, 2008, 11:49:23 AM

Thanks for sharing this muldoon. Your explanations help to make this understandable to a lot of others including me.

Bishopknight · December 04, 2008, 12:22:22 PM

QuoteHelp your family and friends get through this however you can, dont give up on them, they need you.

My parents seem to think there is no cause for concern, along with my friends. I guess the unprecedented events of the last year weigh no consequences on them. They're all sheep, or as I like to say, they're floating down shits creek with no oars. One thinks he's timed the bottom and is almost ready to "go in big".

How can I help people who can't even help themselves?

DIYJandS · December 04, 2008, 12:57:00 PM

Quote from: Bishopknight on December 04, 2008, 12:22:22 PM

My parents seem to think there is no cause for concern, along with my friends. I guess the unprecedented events of the last year weigh no consequences on them. They're all sheep, or as I like to say, they're floating down shits creek with no oars. One thinks he's timed the bottom and is almost ready to "go in big".

How can I help people who can't even help themselves?

Hi Bishop,

It's to bad about your parents but if they're anything like my mother, they may just need you to not give up on them. Do all of your friends think the same way? Did any of them help with your project? I'm new to this site but I had a chance to check it out and it looks great if not completely exhausting

Its hard not to get overwhelmed with everything. I found this site when this post came up in one of my endless searches. Thanks for sharing Muldoon, it's appreciated.

December 04, 2008, 01:25:19 PM

Thank you for the kind words.

I don't want this thread to digress into a personal rant. Some have offered to help. I'm sure if the drive to my land wasn't 3.5 hrs, it would be different.

muldoon · December 04, 2008, 02:12:24 PM

Quote from: Bishopknight on December 04, 2008, 01:25:19 PM
Thank you for the kind words.

I don't want this thread to digress into a personal rant.

Well, the thread can go wherever it wants in my opinion. If we get too far off course and a moderator feels necessary to intervene I can live with that too. We can always start a new thread if we destroy this one ... threads on forums are cheap to create you know

I feel for you on the situation with your parents, it's a story I have been hearing alot lately. It hits a personal note for me as well and my Dad has lost quite a bit because he is too stubborn and now he feels trapped without options. What can you do? Not alot, remind them that while yes they have lost alot of money nothing really important has changed. The same people that loved them 3 months ago love them now. If they do want to change, removing risk keeps getting more and more appealing.

As for the helpers for your project, I have the same thing. Got some helpers who are all about going up to shoot hogs or just drink beer and fish. When it's heavy lifting time they seem to lose some interest. Can't blame them a whole bunch, but on the other hand it's becoming quite clear who will and will not enjoy the fruits of the labor over the longer haul.

QuoteHow can I help people who can't even help themselves?

You know the answer to this already I am sure. you cant.

DIYJandS · December 04, 2008, 03:02:34 PM

Quote from: muldoon on December 04, 2008, 02:12:24 PM

It hits a personal note for me as well and my Dad has lost quite a bit because he is too stubborn and now he feels trapped without options.

Similar thing happened with mine as well. A little over a year ago I thought I was helpless too until I adopted a proactive state of mind.

As for the thing about helpers, there are surely a lack of people willing to be so selfless nowadays. I hold onto them and I appreciate anyone that helps me as I would help them in a heart beat. I'm most lucky because everyone is close by. I could have nothing besides my friends and family and I know I would be okay.

apaknad · December 04, 2008, 07:18:38 PM

this will not last ten years. it may not last four years.

muldoon · December 05, 2008, 01:21:52 AM

Quote from: apaknad on December 04, 2008, 07:18:38 PM
this will not last ten years. it may not last four years.

It certainly will not be overnight, but it may not last 6 months either.

http://www.euromoney.com/Article/2060042/CurrentIssue/65745/The-treasury-market-reaches-breaking-point.html?ID=65745&single=true

It's long, even I didnt read every word of it. Highlights, treasury is seeing a high amount of fails to deliver. They simply do not exist, some 2 trillion of them have not been delivered after being purchased. This is about to just fall apart.

Were not even talking about corporate bonds - maybe 75% total defaults. or state and muni bonds - maybe 60% total loss looming. Now federal ,,

harry51 · December 05, 2008, 03:04:41 AM

Interesting article, muldoon. It's really disgusting to read about the degree of outright dishonesty has been tolerated by the SEC, the Treasury, the Dept. of Justice, the Fed, etc., in the casino we've allowed the financial markets to become.

According to the article, willful failure to deliver by broker/dealers, by which they can nearly triple their net revenue over earnings from an honest sale in about two weeks time, appears to be the cause of the current problems in the repo market in Treasuries.

I find it sickening that some of the players quoted in the article don't seem to see much wrong with the stealing. When we get to a place where we are comfortable doing the wrong thing just because we can get away with it, we are a society in decline for sure. Judging by that article, some people who should be held to the highest standards of honesty and accountability are at that place now. Not a good omen for the future.

December 05, 2008, 05:25:16 AM

you're right muldoon. and because of the spin put on the situation to protect us(?) by the time we realize what happen as far as an absolute collapse it will already have been to late to try and adjust(read survive). panic will set in and god knows what will happen after that. hate to be doom and gloom but for some they will see the hand writing on the wall and start planning NOW!

Bishopknight · December 05, 2008, 09:55:19 AM

I just had an email all filled out with multiple sources and quotes ready to send to my friends and family about this, but just as I was about to send it, I thought, none of them will read this, they'll all delete it or find it unimportant and insignificant. None of them balked when I sent out the email that the bailout hitting 8.5 trillion. Why would this be any different?

All this will do is make me look like some extremist who is taking things too seriously. I've already heard the "relax", "we'll be fine", "this is normal" excuses. I mean I'm not ripping my hair out or anything but I would like to warn people or make people aware atleast.

I mean, one of my friends thinks it will actually be a GOOD THING if supermarkets ran out of food or gas stations no longer received gas. How do you even talk to someone like that?

peternap · December 05, 2008, 10:30:43 AM

Don, I see your point but am glad Muldoon posts these things. Like you, I have my preparations but food storage, ammunition, guns, etc, are short term preps to me. I fully expect a meltdown and I want things that will allow me to completely change my life if necessary.

This is where we have to look at what we believe will happen and what is important to each of us. There isn't set plan that's right for everyone.

I'm still in the market but trading carefully. It's still working and to get the things I feel important, I need money. Today I'm hoping that the stocks I'm watching, will drop hard because of the jobs report and shorting, so I'll have an entry point. I'm using very little money so I'm only investing in the big ripples.

One thing I am buying is more land. I found another 100 acres near me that is going at a good discount. I can pay cash for it. Because of this approach, I feel I need every bit of information I can get about current and future events. At some point, I'll have to sit back and change my life.

apaknad · December 05, 2008, 11:17:24 AM

you don't. it's all falling on deaf ears at this point. you did your job, now get your house in order the best you can w/the resources you have.

Bishopknight · December 05, 2008, 01:51:42 PM

Heres more fuel for the fire.

http://onlinejournal.com/artman/publish/article_4059.shtml

"About five years back I began scrutinizing US T-bill holdings. Three years ago to my great surprise it appeared that both China and Japan had stopped accumulating US debt. Out of nowhere came a new category of buyers referred to as "Carribean Banks" . My understanding is that this is a nice euphemism for Fed-owned hedge funds who serve as a shill buyer to keep up the appearance of demand for US debt."