Something really bad is about to happen

[Puppycow]

Bund, Treasury, Gilt Yields Drop to Records as Euro Crisis Grows

Quote:

June 1 (Bloomberg) -- German, U.S. and U.K. yields fell to all-time lows after Spanish Economy Minister Luis de Guindos said the future of the euro is at stake, driving demand for the safest government securities.

German two-year note yields fell below zero for the first time and 10-year yields on Austrian, Dutch, Finnish and French bonds dropped to records as data affirmed euro-region manufacturing shrank in May. Spain's 10-year yield exceeded 6.5 percent for a fifth day after de Guindos said yesterday that we're in a "very difficult situation." The euro weakened to a 23-month low versus the dollar as euro-region unemployment rose to the most on record and before today's U.S. payrolls report.

"There is a real sense of impending panic spreading now and that's exacerbating all of these moves," said John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London. "Safe havens are alive and well and risk aversion is likely to intensify as long as Europe's problems remain unresolved."

I think we're seeing panic setting in. The markets just opened in NY and the Dow is already down over 150 points. A dismal unemployment report won't help.

These record-low bond yields (for the countries considered safe havens) mean that there's a flight to quality of epic proportions underway, which means people are at least scared, perhaps panicking.

I'm afraid that that the economic warning lights are all flashing red.

I hope I'm wrong.

[kevsta]

Originally Posted by Puppycow

Bund, Treasury, Gilt Yields Drop to Records as Euro Crisis Grows

I think we're seeing panic setting in. The markets just opened in NY and the Dow is already down over 150 points. A dismal unemployment report won't help.

These record-low bond yields (for the countries considered safe havens) mean that there's a flight to quality of epic proportions underway, which means people are at least scared, perhaps panicking.

I'm afraid that that the economic warning lights are all flashing red.

I hope I'm wrong.

stop being pessimistic, everything's great, the recovery is just a little slow.

lol

[psionl0]

Quote:

German two-year note yields fell below zero for the first time and 10-year yields on Austrian, Dutch, Finnish and French bonds dropped to records as data affirmed euro-region manufacturing shrank in May

If those yeilds dip any further into negative territory then the US/UK/Germany etc could really clean up here.

[MG1962]

Originally Posted by kevsta

stop being pessimistic, everything's great, the recovery is just a little slow.

lol

It wouldn't matter who was President or what economic plan they'd instigated. There are clear signs of a global slow down, and it is acting like a sea anchor on countries like the US. I fear we are heading for the double dip recession that dominated discussions a few years ago

[Beerina]

Iatrogenic government democracy.

[kevsta]

Originally Posted by MG1962

It wouldn't matter who was President or what economic plan they'd instigated. There are clear signs of a global slow down, and it is acting like a sea anchor on countries like the US. I fear we are heading for the double dip recession that dominated discussions a few years ago

couldn't agree more, except you say double dip, I say it was always only ever a QE driven bear market rally.

the idea one country can swerve a global recession, or IMO a depression, is flawed

either we get more (and probably global) QE or 2009 resumes with a vengeance.

[ServiceSoon]

Originally Posted by psionl0

If those yeilds dip any further into negative territory then the US/UK/Germany etc could really clean up here.

The yields don't have to be negative for that to happen. I'm not exactly sure who would buy bonds that pay 0, but the US or Germany could take loans paying 0 and then redistribute it to Spain or Greece for anything greater than 0.

[psionl0]

Originally Posted by ServiceSoon

the US or Germany could take loans paying 0 and then redistribute it to Spain or Greece for anything greater than 0.

If they wait until the yield drops below zero then they can just hold onto the cash and make an instant profit.

They don't have to take risks with iffy Spanish or Greek bonds (their yield is not up to 6.5% for nothing).

[timhau]

So, it's EOTWAWKI all over again?

[Tippit]

Originally Posted by Puppycow

Bund, Treasury, Gilt Yields Drop to Records as Euro Crisis Grows



I think we're seeing panic setting in. The markets just opened in NY and the Dow is already down over 150 points. A dismal unemployment report won't help.

These record-low bond yields (for the countries considered safe havens) mean that there's a flight to quality of epic proportions underway, which means people are at least scared, perhaps panicking.

I'm afraid that that the economic warning lights are all flashing red.

I hope I'm wrong.

Imagine what's going to happen when people suddenly realize that US bonds are more or less the opposite of "quality".

[GlennB]

Originally Posted by timhau

So, it's EOTWAWKI all over again?

My money's in rice+lentils. When TSHTF I'll trade them for gold (physical gold, no damn paper), wait for TSTC and buy Mediterranean villas and Ferraris.

[kevsta]

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Quote:

" a very worrying trend, that is every major part of the global economy is slowing, and slowing rapidly..

..a synchronized global slowdown, and that is very worrying"

re TEOTWAWKI - in the investment world at least its "Extreme fear"

[Democracy Simulator]

I suppose there will be one final 'big print' this summer by the Fed and perhaps the ECB. I have absolutely zero faith in the governments and central banks being able to turn things around. Things could get very grim.

[Caper]

Originally Posted by psionl0

If they wait until the yield drops below zero then they can just hold onto the cash and make an instant profit.

They don't have to take risks with iffy Spanish or Greek bonds (their yield is not up to 6.5% for nothing).

I'm economically retarded... I have no idea what that means.

[psionl0]

Originally Posted by Caper

I'm economically retarded... I have no idea what that means.

If the yield on a bond is negative then the government could sell a $100,000 bond for (say) $101,000. That's an instant profit of $1000 (since the government only has to repay $100,000).

[stevea]

Originally Posted by psionl0

If they wait until the yield drops below zero then they can just hold onto the cash and make an instant profit.

Perhaps you can't "just hold onto the cash" if your government with the co-operation of the ECB forcibly converts your accounts to junk-currency. If you were a Greek or Spanish citizen, and you believe your savings would be revalued into NewDrachmas or NewPesetas then paying a tiny premium (10 to 330eu per 100k eu) and losing 2yrs after tax interest to buy 2yr German notes which are certain to pay in euros seems reasonable.

I don't believe the case for "new currency" is very persuasive, but given the circumstances I can understand the panic.

[psionl0]

As alluded to in post #15, the "they" refers to the governments that sell bonds - not the people seeking safety.

Even with a slightly negative rate of return, bonds are a better (safer) store of value than "euros under the bed" - especially when dealing with large sums of money. Bonds can be stored electronically without being subject to the risks of fractional reserve banking.

[stevea]

Originally Posted by psionl0

As alluded to in post #15, the "they" refers to the governments that sell bonds - not the people seeking safety.

Even with a slightly negative rate of return, bonds are a better (safer) store of value than "euros under the bed" - especially when dealing with large sums of money. Bonds can be stored electronically without being subject to the risks of fractional reserve banking.

The lowest rate paid was -0.033% so no it's not worthwhile to print a $1Trl dollars of bonds in order to obtain $330k in gain.

I have no idea how you can imagine bonds are better than cash when that bugaboo of your (FRB) causes inflation. Bond esp long term bonds are much worse than cash when there is inflation. However the Euro's charter demands it be managed for stable value (low inflation). Maybe you see some other evil at work besides inflation. A paranoiac belief in every pot.

[Skeptic Ginger]

OK, now it is the 11th. The market lost a bit and is recovering. It's not TEOTWAWKI.

Now what?

[Francesca R]

The OP saw panic setting in. Perhaps it was mostly the OP's panic.

[psionl0]

Originally Posted by stevea

The lowest rate paid was -0.033% so no it's not worthwhile to print a $1Trl dollars of bonds in order to obtain $330k in gain.

The yeild would have to be more negative than that for the government to clean up.

Originally Posted by stevea

I have no idea how you can imagine bonds are better than cash when that bugaboo of your (FRB) causes inflation.

Unless you are storing your cash under the bed (where thieves might get at it) your cash is only as good as the bank you keep it in. Putting cash in the bank would not be the first choice of people who fear a collapse. OTOH bonds can be stored electronically without risk of loss.

Originally Posted by stevea

Bond esp long term bonds are much worse than cash when there is inflation. However the Euro's charter demands it be managed for stable value (low inflation).

Bonds are subject to both inflation and interest rate risk. However, they are still safer than cash in the bank or other securities.

Originally Posted by stevea

Maybe you see some other evil at work besides inflation. A paranoiac belief in every pot.

No, you didn't read for comprehension.

[kevsta]

Originally Posted by Skeptic Ginger

OK, now it is the 11th. The market lost a bit and is recovering. It's not TEOTWAWKI.

Now what?

which market? presumably you only know about the US ones?

and if it doesn't happen within 10 days it can't be serious?

lol.

[UndercoverElephant]

Originally Posted by kevsta

stop being pessimistic, everything's great, the recovery is just a little slow.

It's pining for the fjords!!!!

[trustbutverify]

Originally Posted by Francesca R

The OP saw panic setting in. Perhaps it was mostly the OP's panic.

Impossible. The Paultards assure me it's all over. Someday.

[Sceptic-PK]

Originally Posted by psionl0

Unless you are storing your cash under the bed (where thieves might get at it) your cash is only as good as the bank you keep it in.

Google tells me that Australia hasn't had a banking collapse (where depositors lost any money) since 1931. That's a pretty fair period I would suggest. I know we're not talking about AU specifically but your comment was generic.

[Tippit]

Originally Posted by psionl0

Bonds are subject to both inflation and interest rate risk. However, they are still safer than cash in the bank or other securities.

How do you figure? Bonds are merely a promise to pay cash, and carry credit risk. Some thing is always less risky than a promise of some thing, unless your definition of risk in this case are the abysmal returns on cash because it's constantly being debauched. Any event which would cause widespread bank failures will likely trigger bond defaults as well. Your creditor can't pay you the cash you're owed if her bank is having a "holiday".

[kevsta]

Originally Posted by Sceptic-PK

Google tells me that Australia hasn't had a banking collapse (where depositors lost any money) since 1931. That's a pretty fair period I would suggest. I know we're not talking about AU specifically but your comment was generic.

dont fret, I suspect you'll get your turn eventually..

Spain ==> Italy ==> France ==> MASSIVE PRINTING ==> a *little* bit longer

Quote:

Quote:

Credit Suisse explains the real issue and why there are 2 months tops until France is in the market crosshairs

"It’s all about Spain”, so now we are cutting to the chase. Recapitalization of the banks versus funding the sovereign is of course a semantic issue given the nature of the interplay. But it enables the attempted finesse we describe below.

"Portugal cannot rescue Greece, Spain cannot rescue Portugal, Italy cannot rescue Spain (as is surely about to become all too abundantly clear), France cannot rescue Italy, but Germany can rescue France.” Or, the credit of the EFSF/ESM, if called upon to provide funds in large size, either calls upon the credit of Germany, or fails; i.e, it seems to us that it probably cannot fund to the extent needed to save the credit of one (and probably imminently two) countries that had hitherto been considered “too big so save” without joint and several guarantees.

The issue can be finessed for a while by addressing the issues as bank issues and recapitalizing the banks by bond transfer. This hides from the (primary) market and is simply another manifestation of the “Sarko trade” given by the LTRO. That rally lasted four months.

Given the market’s adaptive learning behaviour, we suspect that this finesse might last two. The eventual denouement should be flagged by symptoms of the failure of the credit of EFSF/ESM and/or France.

And there you have it. As evidenced by today's reaction to the bailout, which had a half life of 2 hours, and was a complete failure in 6, the market is learning much, much faster than expected. Which also means that Porter's estimate for the length of time before the next wave of the contagion tsunami strikes somewhere in the middle of the 8th arrondissement is furiously optimistic, but we agree: 2 months tops.

Which is in keeping with the Soros' estimate of T minus 3 months before the Eurozone ends without a major intervention by Germany (which will eventually happen, courtesy of a Berlin-funded DIP loan, but purely on Germany's terms), but also that of Christine Lagarde who just doubled down on Soros' three month estimate as well.

edit afterthought - forgot to say (Swiss) girlfriend in the local Santander yesterday arranging a transfer of Euros to her UBS account, stood behind somebody arguing about the transfer limits, Spanish people are now only allowed to transfer a maximum of 3000 Euros per time from their accounts.

nothing to worry about though, after all its been 10 days now lol.

[UndercoverElephant]

Originally Posted by kevsta

dont fret, I suspect you'll get your turn eventually..

Spain ==> Italy ==> France ==> MASSIVE PRINTING ==> a *little* bit longer



edit afterthought - forgot to say (Swiss) girlfriend in the local Santander yesterday arranging a transfer of Euros to her UBS account, stood behind somebody arguing about the transfer limits, Spanish people are now only allowed to transfer a maximum of 3000 Euros per time from their accounts.

nothing to worry about though, after all its been 10 days now lol.

He's Australian? His views make a little bit more sense now (only a little.)

Yes, Australia is not going to be immune to these problems. At the moment there is a misleading calm in the storm everywhere outside the eurozone, because the political problems inside the eurozone are making the bonds of all other major countries (who can print money) seem relatively very attractive. That means Australia, like the UK and the US, can borrow money at very nice interest rates. Until the eurobomb finally goes off, everything happening elsewhere is distorted by this. When George Osborne said that the eurozone crisis was killing off the recovery in the UK, he was lying. The truth is that the UK economy is flat-lining even though we are benefitting massively from the fallout of the eurocrisis. People in places like Portugal are also currently withdrawing money from local banks and depositing it in places like Switzerland or the UK (as well as Germany), because they see those places as less dangerous than their own banks. This situation is very much temporary.

[UndercoverElephant]

Originally Posted by Puppycow

Bund, Treasury, Gilt Yields Drop to Records as Euro Crisis Grows



I think we're seeing panic setting in. The markets just opened in NY and the Dow is already down over 150 points. A dismal unemployment report won't help.

These record-low bond yields (for the countries considered safe havens) mean that there's a flight to quality of epic proportions underway, which means people are at least scared, perhaps panicking.

I'm afraid that that the economic warning lights are all flashing red.

I hope I'm wrong.

You're not wrong. People aren't just scared, they are absolutely terrified and they desperately want to run somewhere safe. The only reason there is not already a "stampede for the exits" is that nobody knows where the exit is. Why not? Because there's TWO sorts of possible outcome from this point, and unless you know which one is actually going to happen then it is not clear which direction you should run in. Those two possibilities are these:

(1) Inflation high enough to effectively wipe out the enormous global debt-load, or full-blown hyperinflation.

(2) The biggest wave of credit defaults in human history.

As soon as it becomes clear which of these fates awaits us, the stampede will begin. Right now I'm not decided whether this is going to happen quite soon after the Greek election, or whether the eurozone will somehow manage to hold itself together until the presidential election in the US, effectively dumping the problem on whoever wins that election.

ETA: I should add that the above dilemma is only real if you are still wedded to trying to save the existing global monetary system, which nearly everybody who professionally manages money still does. When you finally reach the point of accepting that it can't be saved, then it doesn't matter which of the two outcomes we are heading for. Either way, the only sensible thing to do is turn all your digital/paper-based assets into something real like land or precious metals (or houses in places where there is still a shortage of housing, like the UK.) At some point in the not too distant future, everybody is going to realise this, and that is Game Over for the world as we know it.

[JoeBentley]

That's what I love about economics. So much of it is about about people panicking because they think people are about to get greedy, getting greedy because they think people are about to panic, panicking because they think people are about to panic, or getting greedy because they think people are about to get greedy.

[psionl0]

Originally Posted by Tippit

How do you figure? Bonds are merely a promise to pay cash, and carry credit risk. Some thing is always less risky than a promise of some thing, unless your definition of risk in this case are the abysmal returns on cash because it's constantly being debauched. Any event which would cause widespread bank failures will likely trigger bond defaults as well. Your creditor can't pay you the cash you're owed if her bank is having a "holiday".

You can lose your cash if your bank fails but not your bonds (you don't bank them). Since neither fiat currency nor bonds are backed by anything more than one's faith in the government, there is not much else to distinguish between them as a store of value.

[kevsta]

Originally Posted by psionl0

You can lose your cash if your bank fails but not your bonds (you don't bank them). Since neither fiat currency nor bonds are backed by anything more than one's faith in the government, there is not much else to distinguish between them as a store of value.

ah, Bonds, or "Certificates of confiscation" as they've historically been known

Originally Posted by JoeBentley

That's what I love about economics. So much of it is about about people panicking because they think people are about to get greedy, getting greedy because they think people are about to panic, panicking because they think people are about to panic, or getting greedy because they think people are about to get greedy.

lol, indeed.

I could be considered as getting greedy as others are panicking currently, yesterday's S&P gap-fill (short) was very profitable

[Francesca R]

Originally Posted by psionl0

You can lose your cash if your bank fails but not your bonds (you don't bank them). Since neither fiat currency nor bonds are backed by anything more than one's faith in the government, there is not much else to distinguish between them as a store of value.

So cash on deposit isn't riskier then. The default risk on bank deposits and sovereign bonds is about the same in the same country, since governments have scarcely been known not to stand behind deposits (guarantee them). The duration risk of bonds thereafter makes them riskier.

[angrysoba]

Something bad is always about to happen. And quite often it does.

[UndercoverElephant]

Originally Posted by angrysoba

Something bad is always about to happen. And quite often it does.

Not this bad, from a human perspective. On the other hand, from the perspective of 95% of the rest of the species on this planet, something really good is about to happen.

[Roboramma]

Originally Posted by UndercoverElephant

Not this bad, from a human perspective. On the other hand, from the perspective of 95% of the rest of the species on this planet, something really good is about to happen.

Out of curiosity, what, specifically, does "about to" mean? What sort of time period are you expecting these events to unfold in?

[UndercoverElephant]

Originally Posted by Roboramma

Out of curiosity, what, specifically, does "about to" mean? What sort of time period are you expecting these events to unfold in?

I think we are heading towards a peak in the economic/monetary crisis at some point in the next six months. After that, it gets much harder to make predictions, apart from that almost everybody will find their living standards in sharp, terminal decline. How quickly will this benefit the environment? Maybe we can get an idea by looking at the decline in CO2 emissions from the old Soviet Union after it broke up. Anything that stops humans from consuming natural resources and dumping pollution is good in my books.

[angrysoba]

Originally Posted by UndercoverElephant

Not this bad, from a human perspective. On the other hand, from the perspective of 95% of the rest of the species on this planet, something really good is about to happen.

Time to stock up on spam?

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[UndercoverElephant]

Originally Posted by angrysoba

Time to stock up on spam?

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Personally, I go beyond stocking up on spam. My "job" is teaching people to forage for wild food. I'm currently trying to learn every wild plant that grows in the UK which can be eaten, used as medicine or is useful in some other way (Japanese knotweed being the perfect example.)

http://www.wibberley.org/fungiforaging/

Yes, this is the end of the world as we have known it since the end of WWII. Things like this have happened before, but never on a global, industrial scale. Reality is about to catch up with a human species which has become dangerously detached from that reality. We are about to find out what "unsustainable" actually means. Once the world's attention has moved on from the sorry story unfolding in the eurozone, we're next (where "we" means Japan, the UK and eventually the US.)

Geoff

[kevsta]

Originally Posted by UndercoverElephant

Personally, I go beyond stocking up on spam. My "job" is teaching people to forage for wild food. I'm currently trying to learn every wild plant that grows in the UK which can be eaten, used as medicine or is useful in some other way (Japanese knotweed being the perfect example.)

http://www.wibberley.org/fungiforaging/

Yes, this is the end of the world as we have known it since the end of WWII. Things like this have happened before, but never on a global, industrial scale. Reality is about to catch up with a human species which has become dangerously detached from that reality. We are about to find out what "unsustainable" actually means. Once the world's attention has moved on from the sorry story unfolding in the eurozone, we're next (where "we" means Japan, the UK and eventually the US.)

Geoff

what you mean my prepper storage cupboard wont be enough?