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Big Bang II- Professional Edition Fed Report

The Fed stood pat on the Fed Funds target, its hands tied by the fact that even a $70 billion cash injection yesterday could not push Fed Funds anywhere near the current rate, let alone a rate lower than that. Last night Fed Funds were still trading at 2.64, even after the $70 billion injection, and repo rates at the Feds Open Market Operations went into the stratosphere yesterday. Today, they came back to earth, helped in part by the massive Treasury paydowns this week. But this may be as good as it gets. The Treasury will need to start pounding the market with supply again as soon as next week, especially if they have to start raising the money for all of the bailouts, backstops, and rescues they are committing to. Given the level of panic into Treasuries, at current levels, I suspect that Treasuries may represent the greatest short selling opportunity in the history of the Universe since the Big Bang. So let’s call this Big Bang II or BBII for short. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.

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  1. Shankar Khadye

    I presume Big Bang – I means the coming equity big bang (and not the Big Bang – 0) which started this universe.

    You are right that Treasuries will represent short opportunity of the lifetime, but not before BB-I (equities) occurs. Then every Tom, Dick, Harry, his foster parents and He-Who-Must-Not-Be-Named will be in treasuries. Foreign markets and currencies will sell-off. And that is when you short treasuries.

    Sometime ago, someone asked me what bubble can Fed inflate now? You know the answer – Treasuries.

    A few days ago, Michael Panzner had a great article on 1929 crash and how the markets behaved thereafter. That will roughly how things will work now (IMO). The time between these could be different now.

    So far, we have had inflationary recession. Now, it is transforming into deflationary recession. So far so good. Its when it would transition back into inflationary (due to Fed’s efforts) conditions is when we would see the treasury blow-up. And that my friend would be the beginning of the deflation depression which will probably last till 2020-2022.

    Any thoughts?

  2. Lee Adler

    No with Big Bang II, I was referring to the coming collapse of Treasuries as Big Bang II. This would be an infinitely more important event than the collapse of stocks. BB I was the beginning of the universe. Pardon the hyperbole. 🙂

    I have not read the Panzer article, so I can’t comment on what the differences might be between now and what his points were about 1929.

    I will say that the Fed cannot inflate Treasuries if all the other big players are selling them as they lose confidence in the US Gummit, and the Fed.

    My gut reaction to what I see going on in terms of the level of panic in the Treasury market is that this is the absolute endgame. It is sheer mindless panic. The Treasury is broke, and getting broker. It has been running a Ponzi scheme. As soon as even one major investor begins to pull out, it will collapse. My gut says we are there now. My gut says that the Fed’s efforts, regardless of what they are or might be, will be irrelevant when it becomes the only bidder.

    That’s my gut reaction. Might that be wrong? Absolutely, absolutely. As I wrote here, it’s all too much for me to get my little brain around completely.

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