One Last Super-bubble

Discussion in 'Financial Futures' started by lemeeeplay, Dec 27, 2008.


    (Reuters)— Like the sorcerer’s apprentice, Federal Reserve Chairman Ben Bernanke and his predecessor Alan Greenspan have unleashed a series of ever-larger asset bubbles they cannot control.

    Now the Fed’s decision to cut interest rates to between zero and 0.25%, coupled with a promise to keep them there for an extended period, and the threat to conduct even more unconventional operations in the longer-dated Treasury market risks the biggest bubble of all, this time in U.S. government debt.


    The problem is that if the unconventional monetary policy works, and the economy picks up, the Fed will come under pressure to “normalize” rates and reduce excess liquidity to prevent a rise in inflation. The resulting rate rises will inflict massive losses on anyone who bought bonds at today 2.25% rate.

    Bizarrely, Bernanke and Co are in fact inviting investors to bet the policy will fail, the economy will remain mired in slump for a long period, deflation will occur and interest rates will remain on the floor, as Japan’s have done since the 1990s.


    Don't let the article title deter you. It is all about interest rate swaps.

    Soooo, destroy the last decade with interest rates near zero. Then, destroy everything else with a massive run-up. Numbers are staggering, hundreds of trillions with a T.

    Once unthinkable, now unstoppable.
  3. I am starting to think that piggy back riding this bubble might not be a bad idea. I missed out on the last few bubbles because I was trying to outsmart the market and the short the top.

    Now I am thinking, why not join the crowd? I could ride the ZB up and use a 10% trailing stop. If ZB goes up 10% from here, I'll be in break-even point.