Markets getting battered again but the big news is the plunge in US Treasury yields. A few weeks ago I called for a 2 handle on the 30 year and lo and behold here it is with the 30 yr trading like the 10 yr would LOL. 10 yr yields are at a pathetic 1.75%. We may possibly see even LOWER yields on treasuries confirming that the US is going "Japanese" with low or no growth, low interest rates and falling asset values. Better to go Japanese as opposed to going "Greek" with Greek 1 year bonds yielding an astronomical 100%. This is what happens when a country goes broke, when no one wants to lend you any money.
Gold and silver and getting the shit kicked out of them as well (metals on sale!) with crude trading at $80 this morning. Markets are still within range with the lower range at 1100 on the S&P 500. If we break 1100 then its geronimo time with 1000 being the next resistance level. The Bernank let markets down when he failed to announce more monetary heroin leading the markets to tank shortly after the FOMC minutes. The next fed minutes come out in 6 weeks from now and with Europe in the shitter there is little upside catalyst for the markets until then.
As big of a basket case the US is it still has the world reserve currency so in times of deflation the dollar rockets higher. Right now the USD has broken out to a 7 month high and if the deflationary pressures continue to the dollar can easily rocket even higher, possible seeing 90 on the USDX.
6 month chart of the US dollar index. The latest pop is substantial.
That would be great as crude oil will plunge alongside with the metals granting us a sweet buying opportunity. In the end, however, policy makers will follow the path of least resistance and will press the PRINT button when things get too difficult. I expect QE3 to be announced no later than January 2012.
On a final note, I find it despicable that student loan borrowers are locked in at 8.5% on their loans while homeowners can refi at pathetic 4% rates. With the 10 yr treasury at 1.85%, there is no reason why a 10 yr student loan can't be adjusted to 4%. Seriously, the congress critters need to wake the fuck up and let people refi at these incredible rates.