Friday, October 17, 2008

Treasury Auctions Soar

Good Evening Everyone!

Sorry I am late today. I have lots going on over the next week so I might not be able to hop on here too much.

I picked this interesting report up on government treasury issuances:

My Take:

I guess after you have just spent over a trillion dollars bailing out Wall St, you need to raise some cash.

As you can see, the Government is raising money via selling treasuries at nearly three times the pace they were a few years ago.

Now the feds will try to spin it by saying that they need to do these auctions because they need to satisfy the strong demand for treasuries as the stock markets continues to collapse. That may be partly true, but I think the real reason is because the Treasury needs cash badly in order to fund the bailouts.

If they were doing it for demand reasons, then why the big sudden spike in Sept/Oct? Stocks have been plummeting for the whole year. If these auctions were done because people were running out of stocks and into treasuries, then why the sudden spike in the the last 6 weeks?

If this rise was based on a rotation into treasuries, this chart should show a slow gradual rise throughout the year instead of a giant spike.

The spike "coincidentally" occurred right as the bailouts were announced. Coincedence huh?..Yeah right. I think this demand argument is a crock and nothing but a smoke screen.

The real reason for the auctions is we need to fund the bailout of the criminals. My question here is why in the hell do foreign central bankers continue to fund our corrupt government by buying treasuries? We can't consume anymore. We are now nothing but a country of debt slaves.

China would be better off keeping that money at home and using it to fund their country as the whole world falls into a deep recession. China should be marketing their toys to the billions of Chinese rather than focusing on a US consumer thats drowning and debt.

Countries are going to start needing cash to to take care of its people as the whole world gets swallowed up by this black hole of debt. When this happens, demand for treasuries is going to fall off a cliff. 10% interest rates are right around the corner when this happens.

Think about it. Why buy the the paper of a government that's going to eventually default on itself. Its obvious we can't control ourselves. I mean look at this sickening news story from the UK today:

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40.4bn), a substantial proportion of which is expected to be paid in bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup will pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted widespread criticism. The government cash has been poured in on the condition that excessive executive pay will be curbed.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased today when Germany's Deutsche Bank said many of its leading traders would join chief executive Josef Ackermann in waiving millions of euro in annual payouts.

In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP MorganChase $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the amount accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of September by 3% to $3.7bn.

Days before it collapsed into bankruptcy protection a month ago Lehman Brothers revealed $6.12bn of staff pay plans in its corporate filings. These payouts, the bank insisted, were justified despite net revenue collapsing from $14.9bn to a net outgoing of $64m. None of the banks the Guardian contacted wished to comment on the record about their pay plans."

Final Take:

Its obvious these crooks have an addiction to money. If this story doesn't anger you I don't know what will. German executives have suffered a "come to Jesus" moment and agreed to walk away from these pay packages.

Our crooked bankers continue to take the money and run. Lehman was paying out bonuses right up until the day the declared BK. How do they have the nerve to take this money after destroying the economy? They have successfully conned every American into borrow themselves into oblivion and now they want to get rewarded for it! This behaviour is sick! Their obsession with money is beyond belief.

What in the hell has happened to this country? Is this what capitalism is? Commit fraud and then pay yourself 10's of billions of dollars as a reward? I feel like I am watching an episode of the Sopranos when I watch these bankers operate.

Bottom Line:

We have a long ways to go before this all gets straightened out. I am sure all of you saw that Warren Buffet announced that he is buying American stocks today! Uhhh..Haven't we seen this move before?

The same thing was attempted in 1929:

"John D Rockefeller announced he was buying common stocks. The exchange declared a holiday to help the sleepless floor clerks rest and then climb through the mountains of unfilled orders. But the market fell and fell again. And in the middle of November the deluge hit rock bottom. In two weeks, thirty billion dollars no longer existed on paper or in life - which was just about the money the United States had spent to fight the First World War. "

Continue to keep an eye on treasuries and the credit markets. Things have loosened up slightly. The problem is they need loosen up dramatically.

If this credit loosening stalls, investors will get spooked. Be very careful trading right now. I haven't taken anymore positions until the picture becomes more clear.


Avl Guy said...

The story on excessive exec pay-outs will gain currency each's too 'rich' of a story for the media to comepletely miss/flub. We'll see if public outrage does what Paulson & Co., and Wall Street, lack the spine and character to do.
And I still cant believe I read in the CalculatedRisk blog that Obama is considering Jamie Dimon to replace Paulson; Jamie is as sullied as the rest of em. Heck, Phil Gramm is looking better each day..LOL

Jeff said...


I agree

That story needs to go viral. I hope the MSM does pick that up.

I am going to throw up a fast money clip tomorrow. They are all over this story.

I think it has legs. I think the deeper this recession gets, the more angry people will become.

When this is all said and done. Many will be in jail.

Jamie Dimon? Uggghhh say it ain't so. Lets put Mish in there. He will clean that place