May 27, 2009 saw the S&P 500 index dive 2%. When this happens, even the novice investor would expect to see the 10 yr Treasury drop as investors sought safety.
The exact opposite happened. The treasury went 1.5% in the direction it normally does on a trading like the 27th.
The public is being told “the banks are fine, the economy is showing strength.” This does not reflect REALITY.
Treasury yields MUST go higher to support the trillions being pumped into the banks and the welfare state. This is a simple function of inflationary action. If yields must go up in the future, why would banks loan large amounts to businesses or individuals now? Wouldn’t it make more sense to wait till the %’s go up and then loan out money? Shareholders demand a return on their equity holdings, don’t they? That is what I would do…but then I am the Feral Capitalist.
We are 12+ months into the residential mortgage meltdown. The trillion dollar elephant in the room is the looming commercial real estate paper market.
This summer and this fall is going to give the historians something to write about for YEARS.
Expect the market to dive (Elliot Wave pattern 3rd wave downward) by the end of the summer, credit cards to dry up, and more Gov’t intervention by Christmas.
Nature abhors a vacuum, the equation must balance, the market will find an equilibrium, pick which ever you like…but you can’t stop the “invisible hand” that is going to bitch slap those who lie, cheat, steal in order to move markets or economies.
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