John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (18486)

12/1/2016 4:55:27 AM

From: John Pitera

2 Recommendations of 33421

To: ggersh who wrote (125442)	11/30/2016 12:13:57 AM
From: John P	1 Recommendation Read Replies (2) of 125542

Hi ggresh, a number of good questions and interesting points. Why 100 year bonds.... an obvious reason to issue is that you think that rates are low... why to buy..... one is that you have participants looking for yield. Back in 1988, a German gentleman who was running Chase's Long dated FX book was asking/telling me about how a company ( I believe it was Seagram's....the Bronfman family company) was issuing 100 year bonds... .. he was saying why would anyone buy a 100 year bond.... he pondered that it was to avoid income taxes or to obscure where income had come from. when you create a market for longer term bonds you can then create products and derivatives off of them. Also, let's say rates rise for 3 years to 7% on a 100 year bond and then will fall significantly, and in a fast fashion ( market crash... pick your reason) the long duration of a 97 year bond is going to make it appreciate more dramatically.... than a 30 year bond.... you get more leverage, so to speak without creating synthetic leverage which occurs in futures, ETF 2X and 3X funds and that can have benefits. Also they are supercharged to fall dramatically in price in a rising rate environment.... and it is a direct US Government obligation... no CBOT or CME or other parties involved to muck up the process or create more systemic risk. people loose faith in paper currencies and in central banks ability to control markets.... it happens many times in history... and it will happen again. Message 30866407 The US Dictator Wouldn't Confiscate Your Gold, Right? I mean there would have to be a law or something and it would have to be run by the Supreme Court, right? No way by executive order right? JP

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To: John P who wrote (125460)11/30/2016 7:06:09 PMFrom: ggersh Read Replies (2) | Respond to of 125542 Hi John

It didn't take to long now did it. -g-

anthonybsanders.wordpress.com
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o: ggersh who wrote (125518)	12/1/2016 4:50:30 AM
From: John P	of 125542

Hi ggersh, of course not.... you know they they throw me a $50 starving artist freelancer fee to float this stuff out there and give a veneer of plausibility / substance to the debasement of the financial markets -g- “DUKE” MNUCHIN STRIKES AGAIN! SUGGESTS 50-100 YEAR US TREASURIES (DROPS A DURATION BOMB) The US has a staggering amount of Treasury debt outstanding that has doubled in size (actually up 105% since October 2008). And as interest rates rise, the US Treasury will have to figure out how to refinance the debt as it matures. In an interview on CNBC Wednesday, Steven Mnuchin said about the current mix of U.S. debt issuance: “we’ll look at potentially extending the maturity of the debt because eventually we are going to have higher interest rates and that is something this country is going to need to deal with.” Prodded further, he indicated that he may look at issuing debt that doesn’t come due for as long at 50 or 100 years, among other options, a much more distant maturity than the longest-term 30-year bond that’s currently outstanding. So, Treasury Secretary in waiting, Steven “Duke” Mnuchin is following the UK and France’s model of 50 year sovereign debt. His suggestion was brought on my rising Treasury rates that could literally break the back (and fiscal budget) of the Federal government. So, longer duration bond issuance from Treasury? Duke Mnuchin just dropped a bomb on Treasury investors.

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