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Market Crashes!


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Stock action is nothing compared to what I'm seeing in EM bond land. The buying frenzy has gotten to a point where it no longer looks like there's no tomorrow, but instead as if there's no next five minutes. The street has little to no inventory, and the buyers just lift offers from the dealer screens as if they were Nasdaq stocks. New issue junk deals that no one would touch just a couple of months ago are now being repriced before they even settle, and then gap up 2 or 3 points in the grey market. Argentine defaulted debt has rallied 50% in the last month alone. Short term sustainable? Yes, the flows are there. Money is still pouring into bond funds like mad, and into EM bond funds like crazy. Long term sustainable? I would guess not, but anyone who has even dared to short a bond in this environment has gotten their teeth kicked down their throat so hard they have to eat and chew out of their arse now. Would I buy one of these bonds for my grandmother? No. But if I am a benchmarked bond investor, I have to try and get the biggest allocation possible to the filthiest piece of garbage I can get my hands on in the primary market, ´cause the secondary is always and already a couple of points higher.

 

Loco, loco, loco, but hey.... it is what it is.

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Stock action is nothing compared to what I'm seeing in EM bond land. The buying frenzy has gotten to a point where it no longer looks like there's no tomorrow, but instead as if there's no next five minutes. The street has little to no inventory, and the buyers just lift offers from the dealer screens as if they were Nasdaq stocks. New issue junk deals that no one would touch just a couple of months ago are now being repriced before they even settle, and then gap up 2 or 3 points in the grey market. Argentine defaulted debt has rallied 50% in the last month alone. Short term sustainable? Yes, the flows are there. Money is still pouring into bond funds like mad, and into EM bond funds like crazy. Long term sustainable? I would guess not, but anyone who has even dared to short a bond in this environment has gotten their teeth kicked down their throat so hard they have to eat and chew out of their arse now. Would I buy one of these bonds for my grandmother? No. But if I am a benchmarked bond investor, I have to try and get the biggest allocation possible to the filthiest piece of garbage I can get my hands on in the primary market, ´cause the secondary is always and already a couple of points higher.

 

Loco, loco, loco, but hey.... it is what it is.

who are the buyers? where did they get the money?

people fleeing money markets for bond funds? I think of lot of that "wealth" will be destroyed when rates go up, but I guess if the dollar totally collapses then bond funds in other currencies will be a good hedge right?

butt if Ben starts jackin' even a little, the dollar could pop and them folk what bought the EM bondfunds could lose 1/3 their money right quick, dubble whammy ratejack plus currency whack

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$caSSh is a position, even my 0.28% money market, maybe not a bad position right now either

 

too bad so many folk aren't patient, they want that current yield return on their principal and don't think about the reamturn of their principal

 

$caSSh will still be king when all the B.S. gets flushed

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I've been thinking about Armstrong's thoughts on the possibility of a huge run up in the indices based on the concept of capital concentration. Very briefly and simplistically, it is possible to have a melt up in the indices as money flees government debt and goes into the market, gold, silver, etc...(not sure how difference this is from Mises crack up boom).

 

What I am trying to get my head around is how would this be possible if the US defaulted on it's debt? Wouldn't the cash, which is mostly credit at this point, basically evaporate?

 

I don't see anyway out of the debt situation other than print or default. If you were a Central Banker, what other creative option can be implemented?

 

How would the mechanics of a default occur; wouldn't people on the other side of the transaction only take something physical like gold (or whiskey, food, etc..), which would crash the prices of everything in dollars? In other words, if I had something for sale, I would pull my asking price in dollars and not take dollars at any price if I couldn't do anything with them

 

I need to think more about this... is it possible to compare anything historically to get an idea?

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$caSSh is a position, even my 0.28% money market, maybe not a bad position right now either

 

too bad so many folk aren't patient, they want that current yield return on their principal and don't think about the reamturn of their principal

 

$caSSh will still be king when all the B.S. gets flushed

 

Only if you can get it out when the time comes.

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Stock action is nothing compared to what I'm seeing in EM bond land. The buying frenzy has gotten to a point where it no longer looks like there's no tomorrow, but instead as if there's no next five minutes. The street has little to no inventory, and the buyers just lift offers from the dealer screens as if they were Nasdaq stocks. New issue junk deals that no one would touch just a couple of months ago are now being repriced before they even settle, and then gap up 2 or 3 points in the grey market. Argentine defaulted debt has rallied 50% in the last month alone. Short term sustainable? Yes, the flows are there. Money is still pouring into bond funds like mad, and into EM bond funds like crazy. Long term sustainable? I would guess not, but anyone who has even dared to short a bond in this environment has gotten their teeth kicked down their throat so hard they have to eat and chew out of their arse now. Would I buy one of these bonds for my grandmother? No. But if I am a benchmarked bond investor, I have to try and get the biggest allocation possible to the filthiest piece of garbage I can get my hands on in the primary market, ´cause the secondary is always and already a couple of points higher.

 

Loco, loco, loco, but hey.... it is what it is.

Muni's gapping up big the last 2 days (and the last 6 weeks for that matter),I will miss much of it now but still in the game with less holdings.I was as much as 150% long until a few days ago,now about 80% long..... but somehow I feel naked missing out on the extra profits I could have had. :unsure: :unsure:

 

But I have been sticking with "quality"....Nothing less than A+ ratings in my holdings,most are at least AA.....FWIW

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