Armchair musings: Something suddenly feels different

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Erik T.'s picture
Erik T.
Status: Diamond Member (Offline)
Joined: Aug 5 2008
Posts: 1234
Armchair musings: Something suddenly feels different

I generally try to approach investing in a methodical, disciplined way. In other words I like to feel that I really understand what's going on before making investment decisions. But sometimes I just get that "I smell a rat!" feeling, and the last several days have been very strong "something just feels different" days for me.

I haven't figured out what it all means yet, because I'm not as good at "connecting the dots" as Chris is. So I thought I'd share a few observations here and see if anyone else has any insights, opinions or perspectives on what might be going on. My stong hunch is that TPTB have a new trick up their sleeve, but I haven't figured out what it is yet. Please post links to more informed articles or blog postings on the net if you know of them.

No pre-action before this week's treasury auctions: I follow the T-bond market pretty closely. There has been a pretty consistent pattern (until now) where there is a sudden and seemingly inexplicable upward move in T-Bond prices late in the week preceding a big treasury auction. I've had the impression that behind the scenes, TPTB were somehow engaged in clandestine monetization or some similar tactic to prop the market up in advance of an upcoming auction, in order to keep post-auction interest rates about where they were before the auction. This tactic seemed to be pretty effective at holding off major sell-offs in treasuries coincident with the auctions. I was expecting a spike up last thursday or so in advance of this week's auctions, but there was none. And this time - for the first time in the last 3 or 4 major auctions - treasuries are selling off in a pretty big way coincident with big auctions this week. It feels to me like TPTB have decided to stop doing whatever they were doing behind the scenes, and have perhaps made a conscious decision to let interest rates move higher. My best guess is that this has something to do with a desire to at least slow the dollar's precipitous slide.

Yesterday's Market action was just plain weird! Usually when markets move, it's a matter of money going from one place to another. One asset class, such as stocks goes down while another such as treasuries or precious metals goes up, reflecting a change in investors' attitude about where to keep their assets. But yesterday all asset classes across the board appeared to sell off markedly and simultaneously. The dollar was up at the same time, but not enough to justify the size of the down-moves in everything else. In a conventional "flight to safety" trade, one would expect falling equity prices to be accompanied by rising treasury prices, but long bonds were falling just as fast if not faster than everything else Monday afternoon. This means that liquidity has changed on a systemic level. I can't figure out what would be causing that, but wonder if it has something to do with a change in dollar policy.

It feels like time for another Dollar Manipulation. Not long ago, Chris gave enrolled members some brilliant insight into how last year's unexepcted dollar strength was not a function of honest monetary phenomena, but rather the result of a massive currency swap with foreign central banks engineered by the fed to prop up the greenback. It feels to me like (politically speaking), it's about time for TPTB to engineer their next dollar intervention behind the scenes. I'm certain the US Gov wants the dollar to continue to SLOWLY decline, but the recent precipitous drops have drawn way too much political attention to the issue, and it feels to me like TPTB are probably  feeling inclined to give the greenback a little boost at least for a while to get the critics off their backs. I have a sinking feeling that this is beginning to happen behind the scenes now, and that the previous two comments might be related to whatever is going on with the USD. But I can't figure out what the mechanism would be.

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Again, I don't claim to know any secrets or special inside information. I just have a really strong intuitive hunch that "something's up", and it feels like the Fed is behind it. Anyone care to speculate on what might be going on?

Erik

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5734
Re: Armchair musings: Something suddenly feels different

Maybe not that different after all?

10/27/09  11:36  Bond Report: Treasurys add to gains before auction

How do they always do this?

I agree though, with your characterization that a turn is coming in the markets.  Perhaps it will be a dollar rally, perhaps another stock market swoon, who knows?

I bet that if I could just get a peek at Goldman Sach's trading book I could tell you.

In my "think like a criminal" trading program the next move will be the one that takes the most money from the most people and hands it over to a relatively few.  I am wondering when the US trader-criminals tire of stealing from us and each other and turn to cannibalizing entire other countries.  I don't know who convinced all those countries to offer dollar denominated debt but I'll bet you anything that these were not good decisions.

The M.O. of wall street is to get everybody lathered up and heading in one direction and then pulling out the rug. Or as someone recently wrote, and I can't remember where, Wall Street is Lucy to America's Charlie Brown.

 

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: Armchair musings: Something suddenly feels different
cmartenson wrote:

 Or as someone recently wrote, and I can't remember where, Wall Street is Lucy to America's Charlie Brown.

What a fantastic line! LOL

I totally agree that taking a look at Goldman Sachs' (the bookie) little black book would be enlightening, but do we really need to? They are in fact the "house" in this market casino, and as such, you can be sure they are positioned against the ubiquitous inflation-trade. 

What kills me, is if this is true, we are looking at a repeat of the de-leveraging event that just ended 8 months ago. This has to be the fastest shift in market sentiment in history. A testament to the true power of the GS money taking machine.

Erik T.'s picture
Erik T.
Status: Diamond Member (Offline)
Joined: Aug 5 2008
Posts: 1234
Re: Armchair musings: Something suddenly feels different

Indeed, treasuries did show a big move up yesterday, but something still feels very different. It'll be interesting to see how this plays out...

Erik

 

Erik T.'s picture
Erik T.
Status: Diamond Member (Offline)
Joined: Aug 5 2008
Posts: 1234
Re: Armchair musings: Something suddenly feels different

Wow! Talk about pre-cognition! Foot in mouth

I had no idea what was going on when I started this thread, but I definitely learned to trust my gut and listen when I get these weird feelings. For the benefit of the non-enrolled readers of the site, I thought I should provide a quick update.

Something really bizarre is going on in the markets. There was extensive talk about this in the comments on one of the Martenson Insider posts in the enrolled member area, then on Tuesday Chris sent enrolled members an alert e-mail calling our attention to a new Martenson Insider Post called Major Market Dislocation. The real-time as-it-happens reporting of the jump in precious metals, the apparent decoupling of gold from the dollar index, and a whole host of other stuff has been extraordinary.

In deference to Chris' business interests, I'll refrain from reposting all the information posted on the Insider by both Chris and other enrolled members. But I must say, if you're not an enrolled member yet and you have any interest whatsoever in investing in financial markets, you really ought to sign up. The insider content lately has been extraordinary.

Erik

 

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