[Jotapay]

The MBS guys are crapping their pants today.

http://www.mortgagenewsdaily.com/mortgage_rates/blog/

$this->bbcode_second_pass_quote('', 'S')pecial Report on MBS "Black Wednesday:" Among The Worst Day Of Losses.... Ever....
by Matthew Graham
Posted May 27 2009, 06:31 PM

Damage Report 5/27/09

The dust is finally settling and ashes finally floating away, at least for today. We are left with one of the most grotesque images to come out of the MBS marketplace in years: the visual representation of the deservedly named "Black Wednesday."

[copious.abundance]

^
From you own link:
$this->bbcode_second_pass_quote('', 'P')lain and Simple: this means that many fixed income accounts are selling debt that has a long maturity as economic prospects improve. Lower rate MBS is longer maturity (since mortgage holders are less likely to refi) and corresponds more to the "longer" end of the treasury curve (5-10 yrs) which also got crushed today.

[...]

The Why: Technical Logic

But WHY did MBS bring tsy's down? Why all the selling? Why today? Why all at once? Why only technical warning signs and limited fundamentals? Why why why?!

[...]

Basically, by looking at the chart, we can see the spread improving steadily and with a narrowing trading range ever since the Fed announced buying in late Q4 2008. Anyone who says the Fed hasn't accomplished anything with this should be reconsidering that statement upon viewing the above chart. In the middle of last week, spreads were at the lowest point in over a year, a "too tight" zone. This was occuring even as treasuries began to sell and yields moved higher, even then we witnessed MBS coupons outperform their benchmarks.

[...]

[Jotapay]

$this->bbcode_second_pass_quote('OilFinder2', 'S')orry, no doom here!

[gollum]

Me thinks peestols and riifeels is the place to be today.

[Voice_du_More]

The inflation has to kick in at some point. I mean you cannot run an economy on optimism forever, there actually have to be inputs which keep pace with demand growth. I could not believe that the IEA is still projecting 130 million barrels per day of demand by 2030. What planet are these guys from? We are struggling to keep what we have and they think we can somehow ramp it up to meet 130 million barrels in just 20 years? You might as well have said the moon is made out of flamable green cheese.

For those here who know more than I do, which is all of you in some area of knowledge or another, let me ask, how long until the meltdown, what will it look like?

[Jotapay]

It's a bit more than I want to type in bed. Deninger, Pika-Steph and Mr. Mortgage/Mark Hanson are all right on in my opinion. Go to Tickerforum and read these threads. It's all about the bond market at the moment.


http://www.tickerforum.org/cgi-ticker/a ... indnew#new
http://www.tickerforum.org/cgi-ticker/a ... post=96599
http://tickerforum.org/cgi-ticker/akcs- ... 47#1243807

I emailed the ticker there to one of my best friend's fathers. He is from an old Dallas family who lives a few blocks from SMU. My friends father is a second-generation investment advisor who handles much of the money for Dallas's oldest families in banking and oil. My friend let me know today that his father agreed with Denninger 100%. I've been trying to get my friend to prep for a while, maybe this will wake him up. It's over for our economy, folks. Circle the wagons. Peak oil is not the largest gorilla in the room. Gird your loins for crushing money supply contraction.

[copious.abundance]

Hmm, let's see . . .

Bond yields are spreading, in particular because long-term bond yields are going up.

This is a reflection of increased longer-term inflation expectations. Which, in turn, is a reflection of increased expectations of economic recovery.

If (when) the economy recovers, then:

1) The Federal government's revenue will increase, and:
2) The Obama administration can pull back on some of its stimulus programs. And:
3) The Fed can raise interest rates again - heck they might not have much choice since the market will raise T-bill yields (and hence, interest rates) for them.

- If (when) #3 occurs it will put a damper on inflation.
- If #2 occurs the gov't will not take out as much debt as originally advertised.
- If #2 doesn't occur, it will stimulate the economy even more, thus increasing #1. This, of course, will increase the chances of inflation, but then we have #3 to keep that in check.
- Regardless of the others, if (when) #1 occurs it will reduce the gov't budget deficit. The only question is to what degree, and at what rate.

Essentially, in order for everything to go wrong, you'd have to assume Bernanke has no clue what he's doing and the entire FOMC is equally as stupid and they all don't look at any economic indicators anywhere and will have blinders on once excess inflation starts rearing its ugly head. Which is a pretty stupid assumption. And even if we were to assume they were that stupid and we went though a period of hyperinflation, aforementioned hyperinflation would reduce the value of the government's debt, thus making it easier to pay off.

In other words, you can't have your doom and eat it, too.

[copious.abundance]

$this->bbcode_second_pass_quote('Jotapay', 'G')ird your loins for crushing money supply contraction.

[Jotapay]

$this->bbcode_second_pass_quote('OilFinder2', '')$this->bbcode_second_pass_quote('Jotapay', 'G')ird your loins for crushing money supply contraction.

[Jotapay]

$this->bbcode_second_pass_quote('OilFinder2', 'H')mm, let's see . . .

Bond yields are spreading, in particular because long-term bond yields are going up.

This is a reflection of increased longer-term inflation expectations. Which, in turn, is a reflection of increased expectations of economic recovery.

If (when) the economy recovers, then:

1) The Federal government's revenue will increase, and:
2) The Obama administration can pull back on some of its stimulus programs. And:
3) The Fed can raise interest rates again - heck they might not have much choice since the market will raise T-bill yields (and hence, interest rates) for them.

....

[Jotapay]

/cough

http://www.tickerforum.org/cgi-ticker/a ... indnew#new

[Voice_du_More]

$this->bbcode_second_pass_quote('Jotapay', 'I')t's a bit more than I want to type in bed. Deninger, Pika-Steph and Mr. Mortgage/Mark Hanson are all right on in my opinion. Go to Tickerforum and read these threads. It's all about the bond market at the moment.


http://www.tickerforum.org/cgi-ticker/a ... indnew#new
http://www.tickerforum.org/cgi-ticker/a ... post=96599

I emailed the ticker there to one of my best friend's fathers. He is from an old Dallas family who lives a few blocks from SMU. My friends father is a second-generation investment advisor who handles much of the money for Dallas's oldest families in banking and oil. My friend let me know today that his father agreed with Denninger 100%. I've been trying to get my friend to prep for a while, maybe this will wake him up. It's over for our economy, folks. Circle the wagons. Peak oil is not the largest gorilla in the room. Gird your loins for crushing money supply contraction.

$this->bbcode_second_pass_quote('Jotapay', '')$this->bbcode_second_pass_quote('OilFinder2', '')$this->bbcode_second_pass_quote('Jotapay', 'G')ird your loins for crushing money supply contraction.

[Jotapay]

$this->bbcode_second_pass_quote('OilFinder2', 'I')f the money supply is being "crushed" then the value of the dollar will go up (scarce dollars = more value for each dollar).

[Jotapay]

$this->bbcode_second_pass_quote('Voice_du_More', '1'). If you are already in bed get back to me on this, but if we were to see cash become king again then...?

2. Is'nt most money just a number in a spreadsheet anyways nowadays?

3. When I think of cash, I usually mean my checkcard, because why stop at the ATM when the card is so convenient?

4. We are not in the same place we were in the 30's with this are we?

5. The problem is government debt now and they cannot support the dollar by taking on more debt but they cannot avoid the necessary adjustment in the markets unless they keep trying to deflate one bubble by passing the gas (pun intended) into another one, correct?

6. So someday this giant check comes due no matter which path we take. So someone has to decide who are the winners and who are the losers, is that all we are really watching happen?

7. I heard a rumor that only 10% of the TARP is actually in the system, where do we go if they drop in the other 90%?

[patience]

The TICKER folks are still on the bond situation today:
http://tickerforum.org/cgi-ticker/akcs-www?post=96496

That link discusses a dire post from Across The Curve, a bond analysis blog. The MBS mess spilled into the Treasury market. Nobody is happy about this. Like Jotopay said, one step closer to Mad Max.

[mattduke]

Jotapay, the flight from dollar bonds will not be to cash. Indeed, the flight from dollar bonds will occur exactly because the cash those bonds pay out is dropping in value. The flight from bonds will be to real goods, such as oil, ag, and especially, gold.

[Jotapay]

$this->bbcode_second_pass_quote('mattduke', 'J')otapay, the flight from dollar bonds will not be to cash. Indeed, the flight from dollar bonds will occur exactly because the cash those bonds pay out is dropping in value. The flight from bonds will be to real goods, such as oil, ag, and especially, gold.

[Voice_du_More]

You know Adam Smith told us so long ago that an economy needed two things to grow a) to grow it's resource base b) to keep credit at about ten times the gold on deposit. The limiting factor in the end is the growth in the resource base because that allows for productive labor (not to mention population growth without a reduction in the per capita income.) Growth in Non-productive labor (service sector labor) and credit bubbles without the formentioned are like trying to run on a faster and faster treadmill. So most of this so called wealth that has been extracted from market volatility is not guaranteed to be worth anything in the long run. It might feel nice now but what does it profit a man to gain the whole world and lose his soul?


An old article,

http://www.time.com/time/business/article/0,8599,1864746,00.html

another one,

http://www.forbes.com/2009/04/02/treasury-bonds-investing-personal-finance-treasury-bubble.html

BTW right now I am simply watching the cards fall to the ground. Soon they will try to rebuild the house on a surer foundation but even though it will be grand in concept it won't last long.

How long for $70 oil? Do you all remember how we were talking here when we first saw $70?

[TheAntiDoomer]

Treasury Yield Surge Has Silver Lining: Pimco's McCulley

http://www.cnbc.com/id/30967890

as OF2 say's you can't have your doom and eat it too.