US TIC report - Scary

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memorrison's picture
memorrison
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US TIC report - Scary

I hope Chris will comment on this report (the TIC report) that came out this morning -  He wrote on last months report and this months report is HUGE news. First, a brief statement -   Our Government recently reported the Federal deficit for the first six months of this fiscal year at 1 trillion dollars!! For comparison, the report deficit for all of last year was about 480 billion dollars......

Basically, the TIC report shows whether the world are net sellers or net buyers of our governments debts (treasury securities). With the deficit numbers in mind - here is a statement directly from the TIC report -

Monthly net TIC flows were negative $97.0 billion. Of this, net foreign private flows were negative $106.3 billion, and net foreign official flows were positive $9.3 billion

This should send shivers down everyone's spine!  At a point in time when we need the world to be buying our debt, the world is selling!  This is what Chris has been talking and warning about......

Would love to hear what others think of this report.... Here is a link to the summary report

http://www.ustreas.gov/press/releases/tg89.htm

Things are heating up..... better get your plans in order!

 

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memorrison
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Re: US TIC report - Scarry

Should have spelled checked - not good when I mis-spell the subject! Just a little shaken with the subject matterYell

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investorzzo
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Re: US TIC report - Scarry

This is why the government is buying it's own treasurys. The jig is up!

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Re: US TIC report - Scarry

Fixed it for ya!  The spelling I mean.

I can't to anything about the TIC report... that thing is a mess.

Second one in a row.

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Re: US TIC report - Scary
memorrison wrote:

This should send shivers down everyone's spine!  At a point in time when we need the world to be buying our debt, the world is selling!  This is what Chris has been talking and warning about......

Would love to hear what others think of this report.... Here is a link to the summary report

me -

I'm not so sure "scarry" was a typo - who knows what things will look like once this runs its course.

This is a perfect example of bucking CW and listening to what others are saying.  There is an old adage on Wall Street that you should do the opposite of what the majority is talking about.  If the majority says, Buy, then you should Sell and vice versa.

After going through this, I think it would be wise to pay attention. 

Not that it will help, since the Collective Idiocracy in DC is hell-bent on printing and spending and they are COUNTING ON foreign purchases to help pay for it.  At least the part "We The People" don't pay for.

I am stunned that despite the evidence provided, our elected officials have the audacity (or they just might be that stupid) to presume continued growth to pay for their playthings.

But we put them in office, and until we vote them out, we get what we deserve...........

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Lemonyellowschwin
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Re: US TIC report - Scary

memorrison,

Thank you for posting this!  Chris, Dogs or others with more brainpower than me . . . . I'm not real good at understanding these things; can someone confirm that this is as significant as it appears.  Chris, maybe a short post with a summary if you have time?

I went back and looked at Chris's blog on March 17, 2009.  It looks like the most relevant line is line 30:  Monthly Net TIC Flows.  For January it looks like the figure was adjusted from -$148.9 billion to -$146.8 billion. 

For February the data is $-97.0 billion. 

Accoding to Chris's blog post last month, we need inflows of +$100-200 billion per month to support the fiscal deficit alone.  So does this mean we just fell behind by another $200-300 billion?

Help?

Tx,

LYS

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DavidLachman
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Does QE show up as Treasury Debt?

Does anyone know if the Treasuries the FED buys as part of QE show up as Federal Debt.  I assume it does as the FED is just the buyer of the the T-bills.  Is there an easy way to keep track of how much the FED is buying of the Federal Government debt.  I'm just assuming that will never be paid back, so I'd like to keep track of the "real" debt, well at least debt that might be paid back, or at the very least debt that we don't owe (or own) ourselves (seriously, why would I ever pay myself back--wait, I know, I might need the money for something--my left hand might need the money so I've got to get it back from my right hand so that my left hand can spend it....but wait, my right hand it empty, now where do I get the money to pay my left hand back?).

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Re: US TIC report - Scary

Lemonyellowschwin- 

You stated (sorry, don't know how to make it a box):

According to Chris's blog post last month, we need inflows of +$100-200 billion per month to support the fiscal deficit alone.  So does this mean we just fell behind by another $200-300 billion?

That is absolutely correct!  Just to support the deficit we need at least 100 billion per month.  Chris has projected a deficit of at least 2 trillion this year and as of the month end 3/31 - we are close to 1 trillion for six months.  That does not include a lot of "off budget" items like the war - borrowings from Social Security trust fund (hahaha)...... So the deficit will easly be 2 trillion for the year and more likely closer to 3 trillion!

The short fall in funding is absolutely staggering and with no indications of a reversal.  In my opinion, only indications of an increasing shortfall....

Interestingly, the Feds are purchasing 30 year treasury securities on the open market today which is helping to keep the long term interest rates lower today.  They should be spiking big time on this news.....

I just wonder how long this game can be played. 

 

 

 

 

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Lemonyellowschwin
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Re: US TIC report - Scary
memorrison wrote:

Interestingly, the Feds are purchasing 30 year treasury securities on the open market today

memorrison,

How do you know this?

You seem to be on top of this.  When I look at this, combined with the January TIC report, last month's Fed Statement, and the desperate need to keep yields down to support low interest rates, I quickly come to the conclusion that the Fed ends up basically monetizing the entire debt at some point in the not too distant future.

How do you see it playing out?  Can we get some commentary from other smarties on this site?

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Ready
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Re: US TIC report - Scary
memorrison wrote:

You stated (sorry, don't know how to make it a box):

Hit the quote button on the post you want to put in a box. In this case I hit the button on your post. Then delete out the words that you don't want in the quote. The site does the formatting for you as long as you leave the the bracketed quote = stuff alone that the site adds.

I am also curious for a link where you can see the Fed buying treasuries.

Thx,

Rog 

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memorrison
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Re: US TIC report - Scary

Ready-  thanks for the tip! 

As for where you can see the Fed buying treasuries, I am not sure.  I have a friend who is a bond trader on the floor of the exchange.  He told me this morning that they the Fed is buying 30 year treasuries.   I will ask him and let you all know if there is a site we can go to.  My guess is, this is not public knowledge until the purchases are made, otherwise traders could be trading in advance of the actual purchases - just a guess.

As for where I see this all going - I am not sure, but it is not good.  The Fed is desperately trying to keep interest rates low for various reasons not the least of which is mortgage rates.  This is part of the problem that got us into this mess in the first place, interest rates that are artificially low!  People blame capitalism, but when we are playing games with interest rates and mortgage rates, that is not capitalism.  The people with lower credit scores should pay a higher mortgage rate.  I should stop and not go off on a tangent....

Ultimately I think we are going to a one world currency.  I think it will happen sooner than later.  I do not believe our government would go willingly to a one world currency.  We would just loose to much power.  My guess is a cataclysmic event will happen that will cause the shut down of the world financial system. At that point we will have to go to a new currency.  That event could be a natural disaster, a major country defaulting on its debts or a terrorist activity.  I have no idea what will cause it, but I really feel it will happen - the worlds financial system is on the ropes and we are leading the way.  We are on the razors edge and in my opinion, it would not take to much to topple the system.  I would like to hear others opinion....

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Re: US TIC report - Scary

Since I'm sitting on a sizable short position on 30 yr treasuries, I watch the prices every day.

The last couple days they shot up considerably, indicating heavy buying by someone. The idea that the FED would start buying in ADVANCE of the TIC report being released (in order to mitigate the effect of the news) makes perfect sense to me.

However, I thought that when they announced this monetization campaign, there was a statement to the effect that the buying would be done on a schedule with no timing of the market. I'm not certain of that - maybe someone else is? In any case, judging from the price action they are buying pretty aggressively and have been for a couple of days now.

Erik

 

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DavidLachman
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Re: US TIC report - Scary

Thanks Erik, since you are watching treasuries so closely, maybe you know of a quick way to monitor the FEDs aquisition of T-Bills in the QE program.  Did you see that story about the FED planning on doubling its balance sheet again by the end of 2009.  I wonder what number that means they expect they will reach and how they think that will impact the Treasury market?

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Erik T.
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Re: US TIC report - Scary

David,

No, unfortunately I am not aware of any way to see "who" is doing the buying. The price and volume data are public knowledge and available everywhere. From it, you can deduce that "somebody with a LOT of money to spend is doing a LOT of buying", and given past announcements you can deduce from that that the buyer "must be" the Fed.

I'm pretty certain that there is no way in "normal private party transaction" markets to know WHO is doing the buying or selling - the principals obviously have a vested interest in keeping that secret.

One would hope that given it's our tax money, public purchase programs would have a little more transparency, if not in advance then immediately after the fact. But sadly I don't think that's the case.

memorrison wrote:

I have a friend who is a bond trader on the floor of the exchange.  He
told me this morning that they the Fed is buying 30 year treasuries.

My guess is that what memorrison's friend really meant to say was Someone is buying 30-yr treasuries in a manner that causes professionals to speculatively assume that the Fed is the party doing the buying. My own comments were based on the same rationale... Somebody came out of nowhere and started "buying sloppy", meaning that they were buying without trying to "play the market" and buy on the dips, nor did they appear to be concerned about the effect of their own purchases pushing market prices higher. The conclusion that the Fed must be the buyer was a speculative assumption on my part.

Erik

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DavidLachman
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Re: US TIC report - Scary

Hi Erik,

Thanks for the clarification.  Good luck on your short positions.

Erik T.'s picture
Erik T.
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Re: US TIC report - Scary

Wow!

Have you guys been watching the price action on the long bond? I'd post a chart here but I'm traveling and working from my laptop which isn't set up with SnagIt and the other tools I use to post charts on the forums.

So here's the trend I see: Each time the Fed starts buying long treasuries (like last week), they appear to be buying in bigger size. I don't have data to support that - I'm responding to how quickly the price action reacts to their buying. The 30-yr futures contracts were up almost $3 in a couple of days.

But... Each new round of buying seems to have even less lasting effect than the one before it. In this case, as soon as the Fed buying eased, the long treasury futures fell down to below the level they were before the Fed's buying started.

This seems to confirm my own hypothesis that each time the Fed starts buying, someone (probably Chinese) just sells into that buying in order dump as much of this junk paper as they can, returning the market to its pre-Fed-buying level.

I used the opportunity to exit my short position on the long bond at 125. I'm still bearish as ever on the long-bond's long term future, but I'm pretty confident that the fed will just keep throwing more and more money at this. As soon as they start buying and bid the prices up a few bucks again, I'll re-enter the short.

Did I just refer to U.S. treasuries as "junk paper"? Holy cow, I wasn't really thinking when I typed that, but I'm sticking to that characterization. Financial history was made in the '80s when someone coined the phrase "Junk Bonds" to refer to what had previously been known as the high-yield market. Who knows, maybe I'll go down in history as the guy who coined the term Junk Treasuries. This truly is a sad state of affairs for our country. :-(

Erik

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