Chris Martenson Politely Calls Treasury Auctions a Shell Game
Chris Martenson who is an analyst I trust had the following to say back on April 5th in his blog about our record breaking Treasury auctions:
The Shell Game Continues...
Here was his conclusion to his entry from this date:
"With a stagnant Custody Account reading and underwhelming TIC reports, it seems unlikely that foreigners are going to be able to digest the volume of Treasury auctions that are coming up this year. We've already seen a nice breakout on yields. With everything I know about Fed policy at this point, I can assure you that a sudden jump in rates on the long end was not in the Fed's plans for last week.
My concern is that the mysterious indirect and direct buyers that have been showing up at Treasury auctions lately may be none other than the Fed itself or its proxies, hidden by some slight shell game or another.
There simply seems to be no other explanation, given the perilous state of the global economy. Where is all this capital coming from, if not central banks? From earnings? From exports? From legitimate economic savings? From private individuals (during a major stock bull run)? None of these explanations matches the volume of borrowing that we are seeing in the US Treasury market, let alone worldwide.
The simplest explanation is that central banks are somehow providing the necessary liquidity to support the various governmental bond auctions that are happening around the world. The US story does not add up and provides enough of a smoking gun to suggest that there are (at the very least) non-transparent buyers for the massive, record-breaking Treasury issuances we've been seeing lately.
If, or when, these deceptions are revealed, I predict that we will experience a pretty significant market dislocation that will take the form of a chaotic bond market, with yields that rapidly gyrate higher, currency perturbations that will shake markets, and an extended banking holiday, with capital controls imposed until a nightmarish derivative mess is unsorted.
Of course, these are just my hunches at this point. Something is very much 'not right' in this story, but over the years I have learned that strange market conditions can last longer than you think possible and that things always seem to unfold more slowly than you might initially suspect.
So I am prepared for two possible scenarios: 1) a sudden change in the markets, and the alternative, 2) no change at all for ten years or more. The first requires active financial and physical planning, while the second requires developing the right sort of mental patience. It is a tricky psychological balancing act, to be ready for anything and nothing at the same time. I imagine that being on patrol in Baghdad during hostilities was sort of like this, where nothing happened for 99% of the time, but then IEDs made the other 1% of the time very, very interesting.
What will happen next? Nobody knows. My advice remains the same as always: Stay tuned to the world's markets and happenings for clues about what's unfolding, but make the necessary preparations to increase your resilience to whatever might happen next.
The current market environment, where everyone is seemingly convinced that a recovery is now all but assured, is both encouraging and concerning. Encouraging because that's most likely true. Concerning because sharp breaks almost always happen during periods of complacency, when everybody seems to be looking the other way. In short, when everyone is complacent, I get concerned, and when people get concerned, I try to remain calm.
For now, there's a level of complacency about Treasury auctions that I find very disturbing. There's really no way to make the story add up properly - I mean, how could it, with $1.5 trillion in new borrowing for two years in a row during economic weakness? - yet almost nobody seems to be concerned about the implications of that line of thinking.
That is exactly the territory where great fortunes are made and lost. At the very least, my wish is for you to preserve what you have and to be able to maintain an even keel and positive outlook, no matter what the future brings. "
I don't think I would always use the polite words of shell game, but I don't want to digress. He importantly states that this is territory where great fortunes are made and lost. I don't like to lose - that is why I'm betting on gold. Gold coins as an investment are great in this atmosphere. Chris Martenson is clearly showing us the use of helicopter money. Don't get tethered to helicopter money at a time like this - buy gold! Call your gold hot line at Lear Capital now!