Thursday, June 12, 2014

Two newsbits: put them together and something interesting happens

Two newsbits for today, the synthesis of which might be interesting for you to ponder:

Reformed Borker (Bork Bork Bork!) - WTI crude breakout. Josh brings in the opinion of Peter Boockvar, a very shortspoken fellow who I kinda miss:
As most of the robust oil producing fields are far away from the violence right now, the immediate response is more psychological than anything but who knows where this goes. While of course this oil jump may not be sustainable if things calm, the rise in oil prices is also happening just as the inflation figures in the US have been ticking higher and Europe may get what it wants but for the wrong reason.
Is that it? All of a sudden people are paying attention to inflation? Wow! Hey, Josh? I wonder, is there some sort of yellow metal that you buy to protect against that sort of thing?

Bloomberg - $460 billion bond shortfall will suddenly teach people about supply and demand. How the hell can anyone expect bond yields to go up?
The supply of bonds worldwide will fall $460 billion short of demand this year, underpinning support that confounded forecasters and sent the fixed-income market to its best start to a year since 2003.

Debt issued by sovereign, corporate and other borrowers will decline by $600 billion to a net $1.8 trillion in 2014, as demand reaches $2.26 trillion, according to New York-based JPMorgan Chase & Co., the world’s biggest corporate bond underwriter. Demand has pushed down average bond yields to levels unseen since May 2013 as economies slow, borrowing is reduced and central banks signal no rush to start raising interest rates anytime soon.

The imbalance helps explain why most forecasters have gotten it wrong this year when predicting bond prices and yields. The market received a boost on June 5 when the European Central Bank became the first major central bank to charge fees on deposits and unveiled other plans to support an economy threatened by deflation.
It's the Summers/Piketty Crisis of the Rentier Class. So what happens? Do they just move their capital into stocks, driving dividend yields lower? Or into real estate, driving another bubble?

And hey: if inflation is going up, above Treasury yields, that makes yields negative. What happens to the gold price in that case, according to Wall Street Whitey's massively outdated and wrong but still oversubscribed thesis?


  1. "As most of the robust oil producing fields are far away from the violence right now" ?!?

    Iraq is not a major oil producer? Those guys with the US arms intended for Syria are not using them in the wrong country?