Jim,

The rate of acceleration of the downtrend is historic. This is carnage. This is dangerous to the US dollar. Not much else to say.

Regards,
CIGA Eric

Dear Jim,

Here is a well done summary of the virtual insanity of those who have priced bonds as if they deserved almost no return for taking a big risk in US paper. PT Barnum’s quote was correct when it comes to US Treasury paper. His quote was "There is a sucker born every minute.”

Your pal,
Monty

The bond bubble is an accident waiting to happen
The bond vigilantes slumber. As the greatest sovereign bond bubble of all time rolls into 2009, investors are clinging to an implausible assumption that China and Japan will provide enough capital to keep the happy game going for ever.
Ambrose Evans-Pritchard
Last Updated: 12:22PM GMT 12 Jan 2009

They are betting too that debt deflation will overwhelm the effects of near-zero interest rates across the G10 and nullify a £2,000bn fiscal blast in the US, China, Japan, Britain, and Europe.

Above all, they are betting that the Federal Reserve chief Ben Bernanke will fail to print enough banknotes to inflate the US money supply, despite his avowed intent to do so.

Yields on 10-year US Treasuries have fallen to 2.4pc – a level that was unseen even in the Great Depression. This is "return-free risk", said bond guru Jim Grant.

It is much the same story across the world. Yields are 1.3pc in Japan, 3.02pc in Germany, 3.13pc in Britain, 3.26pc in Chile, 3.47pc in France, and 5.56pc in Brazil.

More…

Jim,

Here are the corrections from yesterday (I should know better you told me to let the break tell me when).

I let the curve tell me when (if by chance this is the right fit) so my mistake for saying the end of 2012

Regards,
CIGA Alex

Dear Alex,

You ask about the high 2012 potential, not 2010.

The answer is this chart maximizes along the upper trend line at Alf’s mark of:

Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $3,500 to $2,500 (a 29% decline);
Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE).

Jim

Dear Extended Family,

Trader Dan says it all:

"Don’t like the current psyche – stick around another week or so; next week it will probably be hyperinflation only to be followed by a return to the barter system the week after that, and then a round circle back to deflation once again. Don’t feel bad if you cannot understand what the markets are saying right now – the market itself has no idea what it is saying. Maybe it is attempting to get in touch with its inner child or some other sort of nonsense. Thank fund managers for clearing things up for us all."

Dear CIGA Browsers,

Let stay alert for the answer to last week’s request from Hedge Fund Association lobbyists to the Security Regulators of the USA, Great Britain and Australia seeking freedom from reporting Short Positions as part of the 13-F regulation interpretation.

Form 13F
What Does Form 13F Mean?
An SEC reporting form filed by institutional investment managers in accordance with the provisions of section 13(f) of the Securities and Exchange Act of 1934, which states that all institutional investment managers who are managing over $100 million on the last trading day of any month of the calendar year must disclose their holdings on a quarterly basis.
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