You can excuse the average investor if, this week, he found himself and his thoughts drifting, perplexed and panicky. The inexplicable was found lurking everywhere starting with the normally spineless Democrats handing President Obama a historic legislative victory on healthcare reform, Sunday. Opponents feared that the $1 trillion price tag, and the disputable commandeering of 17% of the annual national budget was too ambitious, and that the increase in taxes necessary to cover an additional 32 million Americans health insurance would impede economic growth.

The stock market continued rising into the close; on Tuesday, up 102 points, on below average volume. The respective 17 month highs were 10,752.41 on the Dow Jones Industrial Average; 1,174.17 for the Standard & Poor’s 500 Index, and 2,415.24 on NASDAQ. Some call this a melt-up rally, a term describing a short squeeze in search of a pullback, which never comes, especially during end of the quarter window-dressing buying. If you don’t take any profits now at least buy SPY or QQQQ puts for portfolio protection in April.

But another inexplicable event occurred. Bloomberg reported that the 10-year US treasury swap spread closed negative for the first time ever. Ft.com/Alphaville provides a concise definition:

“A negative swap spread means the Treasury yield is higher than the swap rate, which typically is greater given the floating payments are based on interest rates that contain credit risk, such as the London interbank offered rate, or Libor. The 30-year swap spread turned negative for the first time in August 2008, after the collapse of Lehman Brothers Holdings Inc. triggered a surge of hedging in swaps.”

The negative spread widen on Wednesday accompanied by a below average 5-year treasury auction priced at a 2.605%. The 10’s and 30’s sold off by the close at 3.83% and 4.72%, respectively. The treasury auction calendar is stuffed with offerings as far as they can see. At some point, the market will lose its appetite for governments. It may be happening now, if so, buy puts on TLT.

Another head-scratcher Wednesday was Pimco’s bond maestro Bill Gross comments on CNBC professing his affection for equities: “Let's suggest the economy looks good, that risk assets— whether it's high-yield bonds or whether it's stocks—have a decent return relative to the potential of declining bond prices," he said in an interview. "I'll go with the stock market."

We also learned what we already knew when S & P lowered Portugal’s credit rating, that the western world is broke. Before I forget, this day also included Google (GOOG) and Go Daddy quitting China, the US accusing China of currency manipulation, and financial regulation reform disappearing into a Washington DC black hole.

But enough about inexplicably strange; let us return to good old-fashion butt-ugly economic data. Negative housing data again filled the landscape pointing towards a funky economy in 2010 for the average citizen. The Mortgage Broker’s Association purchasing index, ending March 19, rose 2.75% while its refinancing index fell 7.01%. The average 30-year mortgage increased 10 basis points to 5.01%.

February new home sales fell 2.2%, to an annual rate of 308,000. Two years ago, the annual rate was above 600,000 homes. Supply swelled to 9.2 months while the median price of a home rose 6.1% to $220,500 and the average price up 5.1% to $282,600. The first-time home buyer tax credit ends in five weeks.

Finally, the US Census Bureau, 2009 State Government Tax Collection Data was released. State revenue was down in 2009 versus 2008 some $66.9 Billion dollars. Fourteen states saw their tax revenue fall 10% or greater. The fourth quarter figures are available at the end of March.

Cabaret Voltaire posted on 25-3-2010 @ 09:34 TWO STARS so far


I just can't buy the idea that greed is out and deed is in. That truly sounds like a sucker move.

Do you think the Democrat government, which likes to dis-empower you and control you, is suddenly going to manipulate the stock market up so everybody gets easy money and lives happily everafter? LOL! [...]

FiatLux posted on 25-3-2010 @ 10:22 ONE STAR so far

Yep, that`s a good look at it. We will be able to take care of the thousands who are still without jods and no money. We will be able to watch the manufacturing side of our economy die off, as we watch the health care side grow.

FiatLux posted on 25-3-2010 @ 10:22 ONE STAR so far


Hey, i do not get offended by being youse guys punching bag.

but there's too much to outline, dissect, counter/inform... the spin on the substance makes it clear you won't get convinced by me or a bevy of lawyers clattering away.

Am i to take it that you would prefer and even go out of your way to get a dull, dreary, monotonus, job in the Manufacturing Industry (that our fathers wanted to climb away from)... come on ->
most all the USAs manufacturing has already gone overseas...
we are a Service Economy not a industrial /Manufacturing economy.... except for 'building' those big macs, which is actually classified as a industrial application by Government

i am recognizing the first glimmers of a national push to accomplish 'something',
it will not get as parabolic as the race-to-the-Moon, which you've never experienced the public unity and aspiration of the whole nation, as we all felt mobilized in a great cause ~sorry bout that~ but perhaps this time, once the predator capitalists and the vulture banksters and financial elites are given a real short leash....then perhaps the real HCR can blossom

thanks,