U.S. Treasuries

The U.S. Government Bond Bubble

What follows will read like an indictment on our entire economic system. But underlying my (relatively mild) harangue is an observation that people are ignoring the most obvious bubble out there; that is, the bubble in U.S. government bonds. The following is my attempt to figure out why. Efficient Market Theory Let’s face it, markets are inefficient. The efficient market theory, manufactured from the ivory towers of academia, poses perhaps the greatest threat to the…

Stocks Approach Critical Levels

I’m sure most of you recognize that once market sentiment gets extremely bearish, we rally powerfully. Well this is just the way markets work; they tend to revert to the mean. The S&P downgrades U.S. debt and people think the world is ending. Of course after markets rally people totally forget how fearful they were when the downgrade news came out. The S&P totally blew the housing crisis and their…

The Paradox of Investing

Investing is filled with paradoxes. For example, there is a big difference between the domestic and foreign exchange of real estate. When real estate changes hands domestically, it is not necessarily inflationary because we are talking about internal transfers from one bank account to another. If foreign capital comes to America, it is effectively new money that is inflationary. I am making a bet on real estate in part because I believe…

The Stupidity of Raising Taxes in a Downturn

As I’ve said repeatedly, this crisis will make people’s head spin. The latest mind-boggling move is the rise in Treasuries following S&P’s downgrade. At first this is confusing, but remember this is a global crisis, and if global capital panics, only the Treasury market can handle all that capital. So crudely, Treasuries rise. The talking heads on TV misinterpret these moves as a reflection of global confidence in Treasuries, and…

Government Stupidity Now Moving Markets

Gold up $70, the Nasdaq down 4%, the VIX up 20%: these are the effects of government stupidity. Our leaders, most notably President Obama, had a golden opportunity to inspire confidence in Americans by coming together on a debt deal that made sense. Instead, politicians confirmed  they are bungling buffoons that have no clue. This is not a drop in confidence, this is a collapse in confidence. There’s a difference….