THE DOT - if this turns orange or red be alert

Wednesday, July 16, 2008

oil technical update - the inflation reality is ging to crash bond markets soon

Oil made a top as expected in the 146/8 area and also the time-frame is good for a top around full moon ( one month before full moon lunar eclipse being exactly on Neptun).
The oscilating sharp swings speak of exhaustion behavior and we printed a weekly 13 combo. we came from the 60 area, giving us a 80-6 move up which needs to give half back. The least would be 38,2% correction that gives us a of 35-44 dollar down, which marks our 100/10 target area over the course of 2-3 months.



The most manipulated market in the world are Bonds, with phony inflation numbers, which are way too low. Almost all states with debt have managed to reduce their cost of finance dramatically. Assume inflation at 7% in America (should be pretty accurate), just to take one example and they need to pay a premium or real interest should be above inflation, so let's assume they have to pay 150 bp over the curve. The interest burden would be at 8.50%. Currently, they pay close to 3%, which saves them $500 bil. a year on $10 tril. The pathetic part is that the investors would usually not except that since they also lose money on the Dollar, so America should, by common sense, pay even a premium, since their banks are technically bankrupt. This inflation fraud also helps the corporate world, which borrows money along the Treasury curve - they even benefit double, as all wage negotiations have been done based on too low inflation. Hence, over the years they effectively have lowered the (expenses) salaries. Altogether, this is a trillion dollar fraud scheme. Mr. Greenspan is one of the architects and Mr. Clinton has played his part in this rip off of the century.

I remember for the entrance of the EU currency, one criteria - inflation - had to be below a given watermark. Overnight, Italian inflation dropped into the target zone (a miracle). The Turkish economy secretary (Simsek) said one true thing this week, that we have negative interest rates all over the world. This is true for a few yeas now. The problem is that the Bondfund mangers play a vital role in this. Although they should know better, they invest along these phony statistics. Pimco recently said that those inflation numbers are not describing the real situation and even some senators have said the same. Central banks and foreign investors, like the Chinese and Arab sovereigns, have no other choice but to make a bad investment to finance the shopping of USA.

I remember for the entrance of the EU currency, one criteria - inflation - had to be below a given watermark. Overnight Italien inflation dropped into the target zone (a miracle?). The introduction of the Euro was anyway a weird thing like the prices you had to pay were the same (Mark to EURO is roughly 2:1) only the salary halfed to see it from a German perspective. since that Euro inflation is evry high against all the statistical claims, in germany within 10 years prices doubled for may things except the usual suspects (TV,computers but that is only true in comparrison to the old tech standard - I bought an IBM notebook top notch at that point of time for 5000DM roughly 2500Euro the best 15 inch screen apple costs the same at least and flatsreen TVs cost even more).

The Turkish economy secretary(Simsek) said one true thing this week, that we have negative interest rates all over the world. This is true for a few yeas now. The problem is that the Bondfund-mangers play a vital role in this. Allthough they should know better, they invest along this phony statistics. Pimco recently said that those inflation numbers are not describing the real situation and even some senators did the same. Central banks and foreign investors like Chinese and Arab sovereigns have no over choice but to make a bad investment to finance the shopping of USA.


At some point soon the Bond markets have to wake up to reality. Basically, on the paper it might look as one makes money with Bonds but actually in real terms, you lose money every year. The FED was very clever in getting the focus on so called core-inflation. That is nonsense by any means and has nothing to do with reality.

Finally only one thing is left to say Bonds are radically overvalued, a huge bubble which will burst soon. States reduced their interest payments on hehalf of investors over at least one decade and this bubble real estate market (USA, England ,Spain, Ireland etc.) gave people the illusion of having some wealth. Now reality bits hard and questions will be asked. The Bush administration has done one of the biggest wealth distributions with an undemocratic approach. The flow was to the few privelidged ones - away from the many hard working ones. The stars say now is time for adjustment.

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