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  1. #121
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    Quote Originally Posted by Aussie View Post
    Cost of insuring U.S. 5 yr. Treasury bond is now 1%

    If an institution buys a 5-yr Treasury and then wants to turn around buy credit default protection on its purchase, it now must pay 1%. The yield on a 5 yr. T-bond is 1.92%. It now costs more than 50% of your rate of return on a T-bond to insure that you get your money back. This is an absolute disaster for our Government. The cost of credit default insurance is a real world, market assessment of the risk of default of the U.S. Govt, as opposed to the fantasy/fraudulent ratings issued by Moodys and S&P. As per this article, the default risk of the U.S. Govt is now considered to be higher than that of Japan, Germany and France. I would also argue that, given the risks being priced into our credit markets, including the Govt bond market, that the level of the Dow/S&P 500 is still way too high:

    http://zerohedge.blogspot.com/2009/0...tion-risk.html
    It's staggering, to me its kind of like buying cds on monopoly money, can't they just print it? I'm racking my brain here trying to come up with a way the us treasury could possibly default... worse case I think the us has trouble borrowing money at such low rates so treasury rates rise, from there if that doesn't work they print money causing possibly hyper inflation and major devaluations of the usd so now 1000 usd = 1 yuan paying back the bond just got a whole lot cheaper... why not short usd to protect yourself, if the US gov defaults in my worst case and you get paid off (from a bank that has been able to outlast the us gov?) your still loosing almost everything you invested because your still exposed to usd... to me this just shows how fear has taken over and that there are big opportunities to make money in select markets... i must be missing something, and i'd be interested to hear what that something is?
    Last edited by Craig3215; 27-02-2009 at 10:11 AM.

  2. #122
    Member Aussie's Avatar
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    Default Fiscal irresponsibility ie. Banana Republic

    Quote Originally Posted by Craig3215 View Post
    . . . I must be missing something, and i'd be interested to hear what that something is?
    your not missing anything Craig and neither is Bill Holter over at Le Metropole Cafe . . .

    __________________________________________________ _

    Fiscal irresponsibility ie. Banana Republic

    What a complete farce we are living through now. President Obama submitted his budget with a $1.75 Trillion projected deficit, yeah this one's manageable, it is only about 12-13% of GDP. Can you say banana republic? Only a day after his "fiscal responsibility" speech we get the details of this porked out, bloated, nation destroying farce of a budget proposal. Did I mention the $643 billion for health care? Actually, I believe this amount was the "down payment" over 10 years, I can't wait until the final tax bill comes. We will probably witness more heart attacks, more inductions into insane asylums, and more ulcers as a reaction than they will cover the previously uninsured.

    This is truly banana land and the market is sniffing it out. Yields on Treasuries are rising and the default insurance on a 5 year note now exceeds that of Germany, France, and Japan. But here is the funniest part of all, if the US were to default, who would be left standing to make good on the default insurance? Aren't the insurers the likes of AIG, GE, and JP Morgan? If the government defaults, would any public finance company be left standing to pay up in Dollars? Wouldn't these Dollars presumably have no value because the "full faith and credit" just went broke? Wouldn't it be a better idea to just take the insurance premiums and buy Gold bullion over the 5 years? Hey, at least at the end you would still have bullion even if there was no default. But the best part, you would have bullion if they did default! I am confused as to what board of directors, money managers, etc. would pay Dollars today [that could be converted into something real] to insure against default of the US, only to receive more currency of the bankrupt entity ? Buying credit insurance on US debt is the equivalent of buying a BIC lighter for fire insurance.

    The whole show has gotten stupid, the autos, banks, insurers, home builders and lenders are all crippled because we went off a deflationary cliff and this in turn has dragged the balance sheet of the Fed and Treasury into a black hole. And what do we hear on CNBC? Now is the time to BUY BUY BUY, especially the banks! They will lead us out! I am no rocket scientist but I can do simple math on a scratch pad, the SYSTEM is broke and no amount of freshly created worthless monopoly money is going to change this. It is over the edge and the only thing we hear from Washington is "we will borrow more money to make the already over levered system right again"! I don't think so Tim.

    This thing is busted, if it wasn't, then 0% rates, $ Trillions in bailouts and stimulus, plans A-Z surely would have turned us around. They haven't worked and in fact things are much worse now than 6-12-18 months ago. The history books will be read 100 years from now and I can already hear an astute 3rd grader asking, "who WERE these people"?

    Regards, Bill H.

  3. #123
    action-reaction arco's Avatar
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    Default Dollar strenght ahead?

    .

    The dollar is approaching a three- year high against the currencies of major U.S. trading partners as the plunge in the yen and Swiss franc leaves the world’s reserve currency the only refuge from economic turmoil.
    (Bloomberg)

    Five months after the collapse of Lehman Brothers Holdings, risk-averse investors across the world are still flocking to the safe-haven instruments, and in the process shunning riskier debt, a signal of the continued woes plaguing the economy and financial markets.
    A slew of US government-bond auctions this week, which totaled $94 billion in sales, underscored the point. At an auction of two-year notes Tuesday, bids for the securities outnumbered the amount being offered by a ratio of more than 2.5 to 1 even though they yielded just 0.96%. The sales were followed up with robust demand at auctions of five-year and seven-year notes Wednesday and Thursday.
    (WSJ)
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  4. #124
    Senior Member ananda77's Avatar
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    Quote Originally Posted by arco View Post
    .

    The dollar is approaching a three- year high against the currencies of major U.S. trading partners as the plunge in the yen and Swiss franc leaves the world’s reserve currency the only refuge from economic turmoil.
    (Bloomberg)
    ...yes short term US treasuries remain the safest asset class of choice

    ...although the US$ may go a bit higher in the short term, the outlook points to a correction;

    ...longer term however, as the Worldwide Currency Race to the bottom accelerates, the US$ continues to be the best of the bad lot and will continue to show strength as the greatest depression ever will hold the world in its grip for a few more years to come

    ...to think in terms of inflation based on hopes of another round of CREDIT EXPANSION (like the Crooks' Crew and 'Bla Bla Brainwash Fairytale Press' wants us to believe) is simply delusional so long as the 52 TRILLION = FIFTY TWO TRILLION in credit market debt keeps imploding;
    'Keep Safe" = 'Stay in Cash' Strategies are winning the day against the crooks' crew best efforts to explode the money supply irresponsibly with just one objective in mind:

    -to save their masters-

    and in the process

    -entice people to ride even deeper into debt trouble

    Kind Regards
    Last edited by ananda77; 01-03-2009 at 05:32 PM. Reason: addition

  5. #125
    Legend peat's Avatar
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    USD/CAD seems to be giving a signal of USD strength - see my post
    http://www.sharetrader.co.nz/showpos...&postcount=260
    has this has now popped its head above the wave 4 triangle and started a wave 5 ?

    USD/JPY and USD/CHF look to me as tho they have more resistance areas directly above them

    thats what I'm thinkin anyway...
    For clarity, nothing I say is advice....

  6. #126

  7. #127
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    I talked to Marty, he is looking for the dow to go to 3600-4000 area by june or sept, with all due respect I hope he is wrong

  8. #128
    Guru Dr_Who's Avatar
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    Quote Originally Posted by Craig3215 View Post
    I talked to Marty, he is looking for the dow to go to 3600-4000 area by june or sept, with all due respect I hope he is wrong
    I hope he is wrong also. This can be catastrophic for the entire world economy. Start farming guys!
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

  9. #129
    action-reaction arco's Avatar
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    Quote Originally Posted by Craig3215 View Post
    I talked to Marty, he is looking for the dow to go to 3600-4000 area by june or sept, with all due respect I hope he is wrong
    Thanks Craig - unfortunately he may not be far off.
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  10. #130
    Legend peat's Avatar
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    Business spectator

    " the Bank of International Settlements calculates that European banks faced a $US2 trillion US dollar funding shortfall at the time of Lehman collapse in September and although there is a lag in collecting the data, there is no doubt that a huge shortfall still exists.

    The implication of this is clear: European banks funded themselves with dollars during the boom and the capital destruction of the past year has left them starved of dollars and scrambling to get them.

    That’s why the US dollar has been so strong and why it seems likely to keep going up, despite the colossal mess in the US financial system.
    "
    Last edited by peat; 07-03-2009 at 12:15 AM.
    For clarity, nothing I say is advice....

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