March 19, 2008

FLASH: The 3-month US t-bill is now paying 0.47%. That's right, 0.47%. The bond market is telling you something REALLY f*cking scary right now


One more time, until you can say it from memory:

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

Get to cash. Get to cash right now. Don't worry about the rate. Don't worry about short-term currency movements. Just get liquid. Fast.

69 comments:

Anonymous said...

I don't get it. If the dollar is depreciating then wouldn't foreign investors demand higher rates (ie lower bond prices)?

Anonymous said...

When gold sells off you know investors are worried!

Cash and a short position with a sale price locked in is my choice.

The stock market is waking to the fact that earnings are deteriorating and companies will have a difficult paying off debt and keeping employees.

Be very worried! The Fed is!

Anonymous said...

If you get into cash aren't you just going to lose a whole lot of your cash through inflation?

I know a lot of people are saying that deflation is on it's way but how do you justify that assertion when the Fed is pumping liquidity constantly?

Anonymous said...

Sorry dude.

We're still in distress. Bear's collapse wasn't a big enough unexpected failure to move us into panic. Citi will need to go down the tubes.

Asset prices are still too high across the board. Even taking the 10-15% drop in the dollar into account doesn't get you there.

keith said...

This is a call to get to cash for a matter of weeks. Don't worry about inflation over the next few weeks. Worry about getting crushed as EVERYTHING sells off.

I mean EVERYTHING.

Anonymous said...

Step 1: Buy Treasuries
Step 2: Boycott WalMart
Step 3: China says fruck ju.
Step 4: Treasuries now worth less.

We are screwed.
Might as well listen to cramer.

Anonymous said...

do you mean get your cash out of a regular bank too? It is safe there right as long as the bank is FDIC insured? Rabobank?

Anonymous said...

Help me out, guys. Where should I put my cash? I don't trust the FDIC to pay up if my banks fail. Are there any banks that can be trusted? Tell me what you think. Thanks.

Anonymous said...

Money market funds are NOT safe or FDIC insured

Anonymous said...

What if your money is invested overseas?

Anonymous said...

Keith, as usual you are scaring the crap out of me...

Anonymous said...

I think that by this time next year any inflation thoughts will be gone.

Japan tried everything to restart their economy - including the zero interest rate policy. None of it worked. Here comes the Japanese deflation.

Lady Di said...

Stay with FDIC insured banks up to $100,000 max. Money market accounts are not safe if they are backed by mortgage securities.

Mish has a good blog entry today about holding cash (and gold) during this deflationary period.
I recommend reading it.

Anonymous said...

No question banks are beginning to freeze funds invested in bank notes or other interbank investments. I have funds frozen at Wells Fargo Investments because they can't sell the paper. The funds still earn but I can not access them. Fortunately I don't need access to the funds. The investment is earning and paying interest but they are frozen.

corvinus said...

The free market is demanding ZIRP for 3-mo T-bills. It is actually leading the Fed!!

Konnichiwa, Japan!

Anonymous said...

Yeah, but you also had the Weimar Republic, the Continental and many many other examples of very destructive hyperinflation throughout history that you can read about here:

Episodes of Inflation throughout History
http://www.sjsu.edu/faculty/watkins/hyper.htm

http://en.wikipedia.org/wiki/Hyperinflation

Why are people so terrified of deflation? Isn't that just a contraction of the money supply? Doesn't that just lower prices?

mrinvester said...

don't know what the deal is but Pentagon Federal has %5 percent CD's still, if you can leave your money there for 7 years!

https://www.penfed.org/index.asp

I did a three year CD with them a few weeks ago for 4.25% since my local credit union was doing 3.0%.

If their rates stay high, I'll be getting a ROTH CD from them.

Anonymous said...

Everybody please stop worrying! I had a family member get his stimulus letter from the gov today and he said he believes it’s going to work.

I put a lot of faith in my family members opinion because he watches fox.

Anonymous said...

Keith,
So does the call to cash imply:

Cashing out all mutual funds.

Cashing out my 401K

Liquidating any cash value in life insurance policies?

Cashing out all stocks?

And where the hell do I put all my dollar cash? In a freaking pillow case? Some sort of Pulp Fiction-like brief case that glows in the dark?

You're stressin' me, man! You're stressin' me!

Not HOC said...

Keith - FXY, FXF are OK right?

Please advise!

You are scaring the shit out of us!

james said...

great. my 401k dosen have anything safer than a money market.

Anonymous said...

I just don't buy this whole deflation deal. Yes, there's deflation in the housing market and the stock market but with the Fed pumping liquidity to save the bankers, save the realtors and fund big government and foreign intervention the price of everyday goods can only go up.

Deflation in the price of your house isn't going to make you starve if you just mail in the keys and go rent something. Hyperinflation in commodities will put you out on the streets and make you and your family starve.

Hyperinflation is what you should really be worried about buddy boy.

james said...

And can someone explain exactly what the means in dummy-captain talk?

Malcolm said...

@ anon...

Be nice to Cramer. I think he's going through some sort of memory-breakdown.

In less than 48 hours, he did a 180 on the Visa IPO. How do I know? I have it on video, of course.

http://www.youtube.com/watch?v=2p1Qcf8Zy_w

beware_y2k said...


This is a call to get to cash for a matter of weeks. Don't worry about inflation over the next few weeks. Worry about getting crushed as EVERYTHING sells off.

I mean EVERYTHING.


The apocalypse is finally here? I'm gonna go lock myself in my bunker, I'll be back in a few weeks to see how it went.

Anonymous said...

Where's Andrew Hac?

OhGodHelpUsAll said...

"Bear's collapse wasn't a big enough unexpected failure to move us into panic. Citi will need to go down the tubes."

google the internet and you'll find that Bear was in control of $13 trillion in derivatives and that's no small thing! [one such source]

Luckily, Greg Palast is on the trail and notes this about Spitzer:

“Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.” [SOURCE]

and, as you know, Bear Stearns was all about making a big bet on sub-prime.

Additionally, one of my favorite bloggers writes:

What follows is my own view, I can only claim to speak for myself. However I have consistently stated that the crisis would take place at the point where the monetary system itself was in play, and this meant a real estate crisis, since this is the monetary basis of the United States. [SOURCE]

In summary, we all know that Bush did nothing for new orleans (he called the poor economic refugees) and he destroyed Iraq; thus, why should we-- unconnected, poor americans, expect any respect from him?

i.e. I certainly hope that the Sptizer investigation wasn't used to silence a "truther" about the con and subsequent asset seizure by the fed; i.e. it's really insane that bush allowed his friends on wall street to do it in broad daylight

Anonymous said...

what good is cash if the dollar continues to fall in value?

JesusCrispy said...

Short term treasuries are being used by those who got alot more money in the bank than the 100K FDIC will insure. Either they go to a bunch of banks and deposit 100K in each and remember where the hell they stashed their millions or they buy a bunch of treasuries. We'll call it a short term cash dump. This goes to show how scared the rich are of bank and market failure.

Anonymous said...

So are my put options safe (apart from the risk inherent in puts)? The broker uses JPM for the trading accounts - which has $91 trillion derivatives exposure - the accounts are SIPC insured.

Anonymous said...

Read this article about hyperinflation and tell me that the USA doesn't perfectly fit the conditions for an environment where hyperinflation can take off:


http://en.wikipedia.org/wiki/Hyperinflation

Anonymous said...

Wrong! I just borrowed $200K against my (previously paid in full) house at 4.25%, and dropping all the time. I will move it to Europe or Asia, and bring it back after the dollar collapse.

Anonymous said...

The TED Spread is now around 240 bps. This is waaaaay toooo high folks! This means only one thing: The stock market is in deep trouble. Stay tuned...
MAX

Anonymous said...

Who's Mish??? I want to know about holding cash. Also anyone know any banks that are not going to go down if this whole thing really collapses??

Anonymous said...

FDIC is $100,000 max on single accounts, $200,000 max on joint accounts and $250,000 on IRAs.

You don't have to move money if it's a joint account over $100,000.
Google FDIC Insurance to see details.

Anonymous said...

"If you get into cash aren't you just going to lose a whole lot of your cash through inflation?"

Would you rather slowly lose a bit of your milkshake to evaporation, or have Daniel Day Lewis drink it up?

TM said...

I know a lot of people are saying that deflation is on it's way but how do you justify that assertion when the Fed is pumping liquidity constantly?

It's justified by two main arguments:

1. The money the Fed is pumping out is meager in comparison to the money being consumed by the credit crunch (think about how many billions went up in smoke in the Bear Sterns deal alone).

2. The "velocity" of money is at least as important as the supply. Money has to change hands repeatedly for inflation to affect prices. You can pump out as much money as you like, but if nobody uses the money, then prices go nowhere. The Fed is offering banks nearly free money, but the banks are afraid to use it to write new loans. This is what happened in Japan.

Anonymous said...

Just amazing!

NY Gov. Eliot Spitzer was forced to leave for having screwed a whore, but no one is doing anything to oust those idiots who are screwing America day in and day out! Something to think about..

MAX

Jim said...

What Does Mish Know? Unlike Japan, we've got a depreciating currency known as the dollar; this will continue to push price of many goods higher. World demand for goods has also gone parabolic since the late 80's demand crash. So while houses and U.S. paper assets may deflate, don't expect much overall relief on the U.S. inflation front even as our economy sinks. I think they calls this S T A G F L A T I O N. Mish needs to get a clue. Was he even born during out last bout with staglation?

Anonymous said...

Who is Mich?

tater said...

This is a call to get to cash for a matter of weeks.

For, like a month, Keefer?
But, i'll lose the 12 cents that I would have made in interest from my money-market account.

Anonymous said...

Keith,

Can you give some more detailed information about this entry?

I am not a bond man so I do not understand the significance of 0.47%.

Also, if things are truely ready to crash, should we sell the market or brokerages short or buy put options to sell them at high prices after they have fallen?

satan said...

http://tinyurl.com/33yxx8

(ohio.com)

Middle class hanging by thread as rich get richer, poor get poorer

The cost of living is outpacing income in Ohio. One local couple, who think they are doing everything right, learn how easily a family can fall into bankruptcy. Their journey may sound familiar

By David Giffels
Beacon Journal staff writer

Published on Sunday, Mar 16, 2008

THIS COULD BE YOU.

This could be you sitting in the living room of a house that you'd never notice otherwise, a low brick suburban thing, the inside walls painted with care by the people who've made it their home, with a dog resting on the floor and a pair of cats trolling for attention.

This could be you telling your story, about a husband and wife who tumbled off their middle-class foundation, who thought they did everything right, who keep spreadsheets and budgets, who pay all their bills, who work hard and bring home a decent paycheck, whose debt is not out of the ordinary.

Anonymous said...

Forget about the metals here boys. Get to cash and get to it quick. Unless of course your shorting the market. Even then, you have to be careful.

It's very easy to get burnt right now.

People are liquidating so fast, that they are putting all their eggs in the 3 month US T bill. It means most investors are scared of everything else. They want money as liquid as they can.

Dny

Anonymous said...

>> Help me out, guys. Where should I put my cash? I don't trust the FDIC to pay up if my banks fail. Are there any banks that can be trusted? Tell me what you think. Thanks.

"People who keep their money in banks deserve what they get: screwed."

--Henry Ford

Afterthought said...

Why keep your money in a low-yielding bank in this climate of extreme risk?

You can forgo the interest until things settle.

Anonymous said...

Ok, I was literally about to send in the paperwork and check for $4K to open a RothIRA with Vanguard.

Now you've got me thinking I should just sit on the cash for a bit..

Anonymous said...

Put half in gold and half in cash.

Next, go down to the beach, relax and sip your long island ice tea.

Anonymous said...

Here's what I got

20% BEARX
25% Cash (dollars)
15% Euros (FXE)
8% Yen (FXY)
8% Swiss Franc (FXF)
5% Equities (mostly PM miners and energy)
13% Gold (GLD)
6% Silver (SLV)

No debt.

Frack! Can I be any more in cash? Feedback, anyone?

I was thinking of going to my local bank and just taking out $5k to have at home.

Jymkata

Anonymous said...

Fantomas.

Fantomas my little child.

The scourge is upon the land.

Run like hell.

Anonymous said...

Wait, but a few weeks ago, you posted the "whisper" that insiders were buying stocks more than anytime in the past decade. You also made posts suggesting that stocks could be poised for a upturn and advised, invest accordingly.

Now, you are predicting a market crash within a few weeks.

You are good. If you are correct, you shouldn't be running a bubble blog. You should be one of the richest people on planet earth.

Anonymous said...

What about those with 401ks - what should we do?

Anonymous said...

Re: Gold. Buy the dips.

Gold shot up real fast and I've been waiting for a correction to add to my position.

The Big Picture has not changed. The banks are insolvent, the USD is way below its very long term support of 80, the middle east war rages on, peak oil is either here or will be real soon.

Very short term we have financial panic where everything including large positions in paper gold get dumped to shore up balance sheets.

Look for very choppy markets in PM to continue, but the long term primary PM bull market will continue for years.

Gold may touch 750 again, if it does it will be time to back up the truck!!!! Then again don't hold out all your powder for 750, because it may never drop below 850 ever again.

ben's butt boy said...

This deflation crap is just another head fake from our central bank friends, so don't fall for it. They are in a coordinated effort to slam gold down to $850 and prop the USD so $1=100 yen.

Lighten up on investments and get ready for an '87 style 20%-30% market crash when Fannie, Freddie, WaMu, Citi, and Lehman all come up snake eyes and the Fed has to cover their insolvent asses with a $ trillion or so of fiat paper. Bargains await those who are patient and ignore the silly game Paulson, Bernanke, Gross, and others are playing.

Buzz Saw said...

The big crash is coming, blah, blah. When is it supposed to be coming? Three weeks? ::YAWN:: Time for a bagel.

Peter T said...

The bond market tells the Fed to cut even further.

satan said...

http://tinyurl.com/2akj8k

The Great Unwind has begun, Citigroup warns

Avoid leveraged companies, countries and consumers, bank's strategists say

By Alistair Barr, MarketWatch
Last update: 9:51 p.m. EDT March 19, 2008

SAN FRANCISCO (MarketWatch) -- The Great Unwind has begun, Citigroup Inc. strategists warned on Wednesday. As markets and economies de-leverage across the globe, investors should avoid companies and countries that have grown to rely too much on borrowed money, they said.

That means favoring public-equity markets over hedge funds, private-equity and real estate, while leaning toward emerging market countries and away from developed nations like the U.S., the bank's global equity strategy team advised.

Anonymous said...

All of you HP fools don't get it that during times of crisis, money will blow to the U.S. Then the so called "sub prime crisis" will be over and our economy will boom again. We are a shiny city on top of a hill that the entire world envies and looks up to.

Noodles said...

Hey Keith, just some more fun and profit for your day...

http://tinyurl.com/3exfvg

Big Cheese said...

This is a call to get to cash for a matter of weeks. Don't worry about inflation over the next few weeks. Worry about getting crushed as EVERYTHING sells off.

I mean EVERYTHING.
--------------

Gawd Keith. You make us sound like a bunch of sheeple ready to stampede. What ever happened to critical thinking and informed decision making?

You bring up some good points that should be thought through and perhaps exercised but why the Kramer like demand for action?

-BC

Anonymous said...

satan said...

The Great Unwind has begun, Citigroup warns

SAN FRANCISCO (MarketWatch) -- The Great Unwind has begun, Citigroup Inc. strategists warned on Wednesday. As markets and economies de-leverage across the globe, investors should avoid companies and countries that have grown to rely too much on borrowed money, they said.

That means favoring public-equity markets over hedge funds, private-equity and real estate, while leaning toward emerging market countries and away from developed nations like the U.S., the bank's global equity strategy team advised.

Yes, stay away from indebted companies such as Citigroup. This is just too funny LOL.

Anonymous said...

Anonymous said...

What about those with 401ks - what should we do?

Rollover your 401k to a Traditional IRA, making sure that the IRA is not in mutual funds. Keep it liquid. Yes, you will take a hit of 10% if you are not 59 1/2 but you will avoid the taxes and your cash will be safer.

Anonymous said...

Anonymous said...

Who's Mish??? I want to know about holding cash. Also anyone know any banks that are not going to go down if this whole thing really collapses??

Read everyday grasshopper

Mike Shedlock at:

http://tinyurl.com/2y45m9

Anonymous said...

Jim said...

What Does Mish Know? Unlike Japan, we've got a depreciating currency known as the dollar; this will continue to push price of many goods higher.

Mish knows Jack Shit.

Anonymous said...

We are a shiny city on top of a hill that the entire world envies and looks up to.

I'm going to shove a fist up the ass of the next person that uses that "shining city on a hill" phrase to explain how everything will be OK.

Anonymous said...

What the fook is a shiny city anyway?

Andrew Hac said...

Quote from Senorita "Anonymousata":

.....
All of you HP fools don't get it that during times of crisis, money will blow to the U.S. Then the so called "sub prime crisis" will be over and our economy will boom again. We are a shiny city on top of a hill that the entire world envies and looks up to.

March 20, 2008 6:30 AM

#####

The hill that you refer to in your fiery jalapeno post is "The Fool of The Hill"... and you live there, so by a mathematical deductive theory: YOU ARE A GOD_DAMN FOOL...

Heeeee, heeeee, heeeee !!!!!

.....

This is the funniest nation on the planet Earth. No doubt about this. No BUT, IF, WHEN, WHAT, WHY. WHO, or HOW...

A story from "OCRegister" described a JaneZinfandel, 38 years old, was having a position as senior funder, responsible for approving or denying loans. Before that in her fat-ass youth 20s, she worked as a waitress and a bartender. This is funny as hell.

And you asked yourself the question over and over again "Why is the Americano so toasted ? ". Well, the answer is: This pitiful nation is comprising mostly of Joe6Pack and JaneZinfandel whom muddles through life having no clue as to why their existence on this planet Earth matters to them or the people around them.

This is an apt analogy like having a cable technician dude managing a project of building the nuclear reactor. Can Joe6pack get the nuclear reactor built ? Hell yes, this is the Americano nation, right. And anything is possible if Joe6Pack put his fat-ass and his bacon-grease sizzling brain to work.

Yes, the Americano is as toasted as a snapper turtle skewered from mouth to ass on a green bamboo stick all sizzling, sputtering, fat popping over a bed of white hot charcoal.

Grilled snapper turtle is YUMMY !!!

Jim12Pack said...

Andrew,

You are having a little trouble with your grammar. I suggest Berlitz language tapes, and Strunk and White "Elements of Style." I am not sure what kind of accent you have, but I will figure it out sooner or later.

Anonymous said...

"Short term treasuries are being used by those who got alot more money in the bank than the 100K FDIC will insure. Either they go to a bunch of banks and deposit 100K in each and remember where the hell they stashed their millions or they buy a bunch of treasuries. We'll call it a short term cash dump. This goes to show how scared the rich are of bank and market failure."

Very well said.