Over on Denninger:
That’s two hundred thirty-five billion dollars over the next week!
I guess you should get while the getting is good, but this is going totally parabolic. That money has to come out ofsomewhere, by the way, in order for the sale to succeed, which is going to get rather interesting at some point – but exactly where it matters is impossible to know.
I expected that when we crossed the $100 billion threshold in a week the market would throw up all over it, but it didn’t. Now we’ve got the government trying to sell a quarter of a trillion dollars in debt over the next week, the announcement is out there, and while the bond market is selling off to a material degree equities could care less!
He seems to think that something is going to give… i’m not convinced. All of those treasuries are on the short end. It seems likely that foreign buyers are rotating out of the long end, and recycling the cash into the short-end. If this wasn’t the case we’d be seeing massive falls in overseas holdings.
My guess (and all this is guess work) is that China is just putting the US on a shorter and shorter lead / leash.
Another part of this is that Americans are now saving. Consequently the banks are sitting on deposits, which they obviously aren’t lending out (too risky with the unemployment rising and the economy going to shit..) so it’s either parked with the Fed, or short term Treasuries.
If the theory is that money has to move out of the stock market to support these sales, i have to say i’m not convinced… the rules have changed. We know this because if they hadn’t the markets would reflect the reality of the economy. Which is fucked six ways to sunday.