While the News(?) Media is focused on the stock market, the real news is going on in the bond market. Long-term Interest rates have been dropping like a rock – which means that people are bidding up the price of the existing bonds.
The US 30 year Treasury has hovered around 4.2-4.3% for most of the time I’ve paid attention – in the last few days, the rate dropped to 3.8% – that’s a huge move – something like a 15% increase in the value of the bonds in a few days.
This sort of flies in the face of intuition – now that the debt limit bill is passed, the US Treasury has a lot of borrowing to do – the Treasury has been using accounting gimmicks since April, so it has about $300 billion “extra” it needs to borrow in the near future.
There is a little volatility in the Forex rates, but nowhere enough to explain this plunge in interest rates. Things we know that are in play:
– People are getting nervous about Europe
– Oil prices are plunging, suggesting a large economic slowdown
– Switzerland lowered its rates – it doesn’t want the world’s money flowing into the Swiss Franc, making a speculative bubble
– overnight LIBOR rates shot up in the last few days – banks are getting nervous about lending to each other again
I don’t yet have a clear explanation, but this is approaching the September 2008 range. People holding interest rate swaps stand to lose or gain a lot of money from what is going on.
As Warren Buffett says: when people are afraid – be greedy (buy). When people are greedy – be afraid (sell).
Everything is OK. No need to worry, President Zero is in charge. silver is only $42 an ounce, and South Korea dumped the dollar and went to gold. They bought several tons.
Its president zero birthday yesterday or sometime with Jennifer Hudson singing to him, like Marilyn Monroe did to president Kennedy. (gag)
Fiddle fiddle fiddle and while Eric holder sends guns to Mexico. Man, the government is out of control .
Didn’t George Soros just sell some of the gold he holds ? Supposedly he owns somewhere in the neigborhood of 11 tons of the precious metal . I wonder if he sold some of it to Korea, Its just a thought..