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May 29, 2013 – Comments (13)

Fool™ named "inthemoneystock" noted that 10 year T-note yields spiked 5% over where they've been trading, and concluded from this that the Fed is "screwed."

I don't agree.  I think the handwriting is on the wall for those who are paying attention.  Fannie and Freddie are showing unexpected profits, causing Congressmen to get up in the aisles and make angry speeches.  The FHA has just changed their rules, levying a giant 1.25% "mortgage insurance premium" surcharge for the life of their newly issued 30 year fixed mortgages, which makes it a lot less attractive to get an FHA mortgage. Buried in the back pages, student loan debt, which was fixed at 3.4%, will soon 'sunset' and reset to 6.8%, unless Congress acts, and most think Congress can't act on this particular issue.  (Bear in mind student loan debt is the only debt that can't be discharged in bankruptcy!  It's real debt.)

Others have called for more QE.  But why?  The markets are rising, corporate earnings look good, housing and Case-Shiller is way up from last year, unemployment numbers are hitting 5 year lows, and the price of gold is not going up.  The next step for the health of the banks is that rates go up, so they can make a little money.  And, just in case you had forgotten, Bernanke and the Fed Board of Governors are politicians.  No, wait, they're captains of industry.  No, wait, they represent labor unions.  No, wait for it --

They are bankers.  Never mind for a moment that they control the global economy.  Recall who they are; they are bankers.

Greenspan used to hide behind Fedspeak and used the Fed rate as his major tool.  I don't think Bernanke cares about the Fed rate much; he used it to puncture a Greenspan bubble and now is using a bunch of hidden tools under the name Quantitative Easing.  I think Quantitative Tightening is now under way and leaving the dock, and I expect a rate hike at any time.

13 Comments – Post Your Own

#1) On May 29, 2013 at 1:32 PM, Mega (99.97) wrote:

So you agree with inthemoneystock that QE will taper sooner than expected. And you go further in predicting a rate hike soon (despite many public statements to the contrary).

His claim that the Fed is screwed is just silly, no one with any sense believes that. Your claims aren't silly, but still quite unlikely.

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#2) On May 29, 2013 at 1:35 PM, Mega (99.97) wrote:

"he used it to puncture a Greenspan bubble"

I think you are misinterpreting. He had no idea there was a bubble, never once mentioned a bubble, he raised the fund rate to control inflation.

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#3) On May 29, 2013 at 4:23 PM, Valyooo (99.48) wrote:

What does he gain from crushing the value of the treasuries he holds?

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#4) On May 29, 2013 at 6:13 PM, awallejr (79.54) wrote:

I take what Garreth of "inthemoneystock" with a grain of salt.  I strongly suspect his agenda is not to be sincere with potential readers.  I do think the "PMI" for the life of the loan is a game changer to many.

The problem with the media is it is 24/7 and needs to fill air time.  They spent a ton of time on Greece.  I had to stop listening to Bloomberg on the radio since I got tired of hearing Bonnie Quinn keep asking every quest "so what about Greece" everyday.

Now the topic is "tapering."  There is no reason for a rate hike right now, nor tapering.

I like days like today since I view them as potential buying opportunities.  I bought some more AGNC.

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#5) On May 29, 2013 at 8:26 PM, rd80 (97.99) wrote:

Others have called for more QE.  But why?

I think you gave the answer right after you asked it. "Others" want more of this:

markets are rising, corporate earnings look good, housing and Case-Shiller is way up from last year, unemployment numbers are hitting 5 year lows, and the price of gold is not going up.

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#6) On May 29, 2013 at 9:31 PM, Valyooo (99.48) wrote:

I bought a lot of agnc. I hope I'm not wrong 

 

The blue chips and utilities need a 25% haircut though 

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#7) On May 29, 2013 at 9:32 PM, ikkyu2 (99.22) wrote:

Boy, you guys sure trust what Bernanke has to say.  Doesn't anyone recall the days of "Fedspeak?"

Nothing would surprise me, including a rate hike soon - I actually said "at any time," not "soon" - or indeed any other methods of tightening or tapering at Mr Chairman's disposal.  At some point the apron strings have to get cut - I will avoid a "pushing on a string" joke, although that's my point - and the various markets have to sink or swim on their fundamentals. 

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#8) On May 29, 2013 at 10:33 PM, MoneyWorksforMe (< 20) wrote:

Tightening...that's funny. Sounds like the same story we've all been hearing since 2009 and with the same EXACT flawed logic. Still people come up with this nonsense...AMAZING.

The reality is there will be no tightening because there can't be tightening because there are no good fundamentals.

And finally, the only reason the fed is currently engaged in such high levels of QE is to keep rates in check. Who is going to buy all those bonds selling at ridiculously high artificial prices? Ans.: Nobody. 

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#9) On May 29, 2013 at 10:54 PM, MoneyWorksforMe (< 20) wrote:

If anything, rising rates will cause the BOJ and Fed to increase their QE programs to help keep rates down...for just a little longer...

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#10) On May 30, 2013 at 1:58 AM, awallejr (79.54) wrote:

I bought a lot of agnc. I hope I'm not wrong

Personally I like the stock but it is not a large position in my portfolio.  I much prefer MLPS like PVR, BWP, MMLP or BBEP. As for BDCs I like PSEC, ARRC, AINV.

I have been touting these since 2009.

And Ikky as for this : Nothing would surprise me, including a rate hike soon. There is no reason for this to happen.  I have been the one person on this site that has been spot on with respect to Bernanke.  There is simply no reason why he will raise interest rates or "taper" in the near term.  But the so called "pundits" will keep discussing this because they need to fill air time.

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#11) On May 30, 2013 at 2:27 AM, Valyooo (99.48) wrote:

Awalle, we disagree often but I will give definite props, you've been #1 on any site I've seen in regards to bernanke. If you care to write a blog on bernanke, mlps, bdcs, I would gladly read it

 

i too have been buying those asset classes. But I own ticc kmp etp hrzn eroc line agnc uan

 

i also own a lot of bonds. Bab ief tlt tei bcf vcit vmo lqd

 

only stocks I own are aapl PM KOL and rig

I also heavily shorted spy two days ago 

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#12) On May 30, 2013 at 12:11 PM, awallejr (79.54) wrote:

As a quick response, stocks you mentioned are fine.  I've been eying TICC. KMP and ETP doesn't yield as well as the ones I have but they still are good stocks.  I used to own LINE but sold it years ago when it went up too high.  AGNC I do own (only 600 shares tho).  EROC and UAN are good ones too.  Keep adding to these over time (assuming no change in the thesis for holding any) and you will be surprised how your income stream grows and grows.  You have time on your side.

Your common stocks are good too except I like SDRL over RIG.

I can't really comment on your bonds since I haven't followed them.

I would be careful on shorting the market.  Take quick profits because dips will be bought. As we are seeing today.

I've blogged about MLPS in another's thread in response to Harry but I can't find it.   The thing I love about them is their tax treatment.  Plus they build things (like gathering stations, pipelines, storage facilities).  

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#13) On May 30, 2013 at 6:56 PM, awallejr (79.54) wrote:

Might want to look at MMLP.  It took a big hit today off no news.  It is a low volume stock so profit takers moved this big.  It really has a bunch of segments all profitable and pays a nice distribution.

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