The simultaneous dump in T-bonds, stocks, and the currency
is a "sudden stop" phenomenon, a currency crisis. This happens
when vast amount of capital leaves the country, compared to GDP.
US is huge, though, and such things are not very likely.
UK had a pound drop, but it was never as drastic as in developing
nations, not even when Mr. Soros broke it. If money just
stays in the country, it will normally run from one asset to
another, with no sharp Black Swans. We will see the clownbuck
decline over time.
Yes, folks out there are scared, but where will they be
running. Gold? I do expect a white swan there at some point,
sooner rather than later. -g-
One HAS to watch for T-bond crash because of the 500 Trillion
in interest rates Swaps. We have to watch for a breakdown
of correlation between interest rates and stocks
(anticorrelation between stocks and treasuries).
So far we had some significant lags, but no breakdown.
Overall, with all derivatives outstanding out there I
can pretty much guarantee that the Black Swan will be
quite screwed up, which makes it difficult to trade. Like gold
tanking a lot last year -g-
In particular, should we bet on the T-bond crash now, or
will T-bonds rebound as stocks correct? |
