21st November 2011: The Super (US) Committee vs The Super (EU) Commission – Western Politicians Hit Rock Bottom… Then Started To Dig
Quote of the Day:
A committee should consist of three men, two of whom are absent.
Herbert Beerbohm Tree
Macro Overview
The Super Bad Committee are Super Bad
- Capitol Hill’s finest were assembled into and elite, crack-pot, collection of super-brains, locked into a room and told to “sort out the budget”. Now, as the deadline approaches, it seems to be a Herculean effort just to get them in the same room. The West is at it again, snatching poverty from the jaws of prosperity.
- Check this video out from Peter Schiff a few choice excerpts:
…instead of [the ECB] buying the bonds that nobody wants how about making the bonds attractive to investors…
… it’s not going to monetize its way out of a crisis, it will just monetize its way into an even deeper crisis…
… the increase in US interest rates is gonna start when we get some kind of short term resolution to the European crisis. I think, contrary to what a lot of American politicians claim, the problems in Europe are not hurting the US economy, they’re actually helping this phony US economy sustain itself. Because so many people are worried about the Euro, they’re buying the Dollar, they’re buying treasuries…
Market Overview
The “Giffen Behaviour” of Treasuries – look at the yield curve shape not the absolute yield
- Well American’s can’t complain. They’ve had at least 2 months of respite as Europeans strained every fibre in their collective body to snatch poverty from the jaws of prosperity.
- If I had a dollar for every time some media pundit said “people are ignoring the problems withAmerica’s budget once again because they’re buying treasuries” I’d be a rich man. Let’s be clear, people are not buying treasuries because they are optimistic about the state of the Global or US economy or the state of the budget or political progress. Nor are they ignoring these factors, they are buying treasuries because they are fearful of the economic outlook.
- It is like PIMCO’s Kashkari said;, if you feel a building is going to collapse in an earthquake you run down the stairs, towards the origin of the tremor. Lower and lower treasury yields over the past 5 years are not a sign that people are happier with the state of America’s finances. Do they honestly think, with anemic growth expectations, people are more optimistic now about the state of America’s fiscal position than they were in 2006?
- You see Treasury price-dynamic work on a similar psychology to “Giffen Behaviour” – the less attractive the price is for the product, the more demand there is for it. If you want a better indicator of sentiment in the treasury markets, look at the yield of the 10 year note in relation to the 2 year note, or in other words, the yield curve steepness (see Chart of the Day).
Chart of the Day
US Yield Curve Steepness (Source: Bloomberg)
Events
Macro Events:
Update:
- Nothing Significant
Alerts:
- Nothing Significant
Corporate Events:
Results:
- Nothing Significant
Dividends:
- Hershey [HSY],
Reading, Links:
Nothing Significant
