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Bernanke's cut backfires; bond markets reject him and sends interest rates higher

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01/24/2008 08:53 PM
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Bernanke's cut backfires; bond markets reject him and sends interest rates higher
[link to market-ticker.denninger.net]

Thursday, January 24, 2008

Boing! Go Interest Rates

Got priapism?

The Bond Market does.

Our government never ceases to amaze me.

They of course announce a "bipartisan stimulus package" to supposedly "help" our economy.

The bond market no likey, to put it bluntly.

The TNX, 10 year Treasury Rates, spiked hard - by more than 20 basis points, to 3.64%.

That's a six and a quarter percent change on the day!

Oh, and before someone says "oh it was rotation out into equities", no it wasn't.

It was the bond market telling our government to quick jacking around with bullshit "handouts" and tampering with sound mortgage lending practices!

What Pelosi tries to giveth, the Bond Market taketh away, and faster than Pelosi-cum-clown can try to hand it out.

Specifically, what the market didn't like was the prospect of bypassing OFHEO and indexing Freddie and Fannie to "average" home prices for the rest of the year.

Well DUH.

Oh, that wasn't all of it.

We also found out that a supposed "rogue trader" caused a multi-billion-dollar loss for a French Bank, which they had to unwind last week and into Monday.

Then this afternoon The Fed claimed this had nothing to do with their deliberations, and further, that they didn't know about it before their teleconference?

One word: HORSESHIT.

Let's talk about what probably really happened at The Fed.

* Ben and Buds saw a precipitous drop in commercial credit demand last week. They were faced with either draining huge amounts of liquidity or dropping the FFT.

* Instead of allowing the market to sort out what was going on or doing the right thing and telling the banks - both in the US and overseas - to fess up to what was going on "or else", they PANICED, and held an emergency meeting via teleconference, "agreeing" that the solution was an emergency rate action. This decision was allegedly made (according to Steve Lies-man) Monday night.

* NOW we find out that the "collapse" in credit demand (and flight to Treasury debt) was actually caused by this "rogue trader" who spasm'd the equity markets worldwide. Or was it? Was that a rogue trader or was it really an institutional attempt - with authorization - on their part to bail themselves out of a bad position or three? Hmmm... who knows.... but the CAUSE of the panic is now clear.

* And NOW the crack-whore equity market is demanding another 50 bips in rate cut next week!

Now this wouldn't be so bad except that BenDover had to inject a shitload of liquidity to maintain the target today. In fact, the slosh took a fairly sizeable rocket shot northward.

The bond market, being experts at sniffing out bullshit, saw all of the above and, having behaved itself up until this point along with a slowing economy, reversed hard, rocketing the cost of money for government debt upwards by six percent in one day!

Oh, and if you look at the short term (13 week) Bill market (the IRX) it rocketed higher by NINE PERCENT!

But but but you sputter, I thought BenDover's move was going to make mortgages and other loans more affordable?

Well let's see.

On 1/18 the 10 year closed at 3.648%.

Today, the 10 year closed at 3.640%.

Rate cut? Lower interest rates for mortgages and other debt?


BenDover cut the FFT by 75 bips and the Treasury Market gave him the finger, taking it ALL back in less than 24 hours!

You had about three hours yesterday to capture that lower mortgage rate.

If you didn't lock yesterday, tough crap - you missed it.

And if The Fed - and Congress - doesn't listen to the Bond Market and stop this stupidity government debt costs will continue to skyrocket and drag private debt costs higher, instead of the other way around, and will ultimately force the government to contract itself due to an inability to meet its interest obligations.

You only think The Fed controls interest rates.

It doesn't, and this is what the debt markets do when they get pissed off at government stupidity.

You want to know what I think homeowners who are upside down ought to do after being RAMMED by the politicians today and Ben Bernanke on Turesday?


They should walk away. Send in the keys. Fuck it. Yes, your credit will be trashed for 7 years. So what?

Tell the bank to get fucked.

Today we had reported the first ANNUAL decline in home prices since the statistics began in the 1960s, and in all probability, since The Depression!


House prices will continue to decline for the next TWO TO THREE YEARS, and if you're underwater NOW, you're going to be MORE UNDERWATER in a couple more years.


CUT YOUR LOSSES! Screw it. Check with an attorney to see if you can have other assets attached (in MANY states the answer is "no" on a purchase money first) and tell the people who have screwed you - and us - to get fucked.

You can either default the debt NOW, or LATER, after throwing even more money down the rathole. But either way, as the economy contracts and your job comes under stress, if you're upside down you're screwed.

Better to take the pain RIGHT NOW and cut off a finger rather than losing an entire LEG in a year or two!

Hell, even Cramer recommended doing this ON NATIONAL TELEVISION a couple of months ago!

Oh, and guess what - the mainstream press is even talking about it! Read all about it right here!



As this deflation of the monetary base gains steam if you do not act you will have thrown away valuable money you could have otherwise held on to. Go rent a place first - so you pass the credit check and dig yourself out of your personal housing hell!

Beware equity investors.

The short bus is busting at the seams.

Buy this rally? Oh hell no.

It won't take long before reality sets in.

This is a time to sit on your hands and patiently wait for the opportunity to throw darts at the quote page of the Wall Street Journal, then short whatever you hit.

That day is coming, and soon.
User ID: 4120
01/24/2008 09:36 PM
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Re: Bernanke's cut backfires; bond markets reject him and sends interest rates higher
Thanks for posting this OP. Tells it like it is - doesn't it? Look at TPTB playing the stock markets games (or should I say dancing to their tune) The only power that wouldn't play ball was the ECB.

Just look at this past few days.

Day one - Tuesday on Wall Street - Fed' cuts interest rates by 0.75%

Day 2 - next we have to bail out the bond insurers - market does a 600 point turnaround to close up 300. Question is who is we? Looks like in the finish the Insurance regulator asked the banks to cough up $15 billion - seems they wern't too keen.

Last night - Wednesday U.S. time and oh' dear Globex is still looking a bit shaky. "What do we do now" asks TPTB. Better get that stimulus package signed quick was the answer.

At this rate they are going to run out of bailouts in a minute - but wait there's more - the market can still demand another 0.75 percent interest rate cut next week. I am reminded of the stock market crash on Wall Street in 1929 when the bankers kept on moving in to try and stop the rot. 79 years later and the same baloney is going on -only bigger. Google the name 'Whitney' and you might be able to read all about it

Sarcasm is dripping I know, however I don't have a stake in the outcome and I am not short and bitter. My super is at risk along with everyone elses - and that' about it.

Meanwile ATMIT the sun is still shining and the buses are still running and those two white ants are busy holding up the show.

Enjoy - take care all and long live Trinity and GLP.