Would someone like to comment on what happened with the bond market today?

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Any new info. or commentary on the panic yesterday and today's action? Also, what would it mean if Goldman Sachs tanks?

-T.

-- Richard Teal (rittme@aol.com), February 04, 2000

Answers

Well, I'll give it a try, even though I'm a commodities guy.

I read a great article on this topic by Aron Task at Jim Cramer's website, www.thestreet.com (which is an excellent site). He put all the dots together pretty well in my opinion.

About a month ago Bill Gross, who is a LEGENDARY (see New Market Wizards by Jack Schwager) bond trader who runs money on the west coast, figured out that with all these surplusses running in the govt budget program, they weren't going to need to issue near as many 30 year bonds. Now a lot of folks like banks, insurance companies etc etc use the 30 year bond to hedge different interest rate scenarios.

Gross accurrately determined that there was a supply crunch comming for 30 year bonds. He surmised that most institutionaly minded folks were so busy worrying about y2k, that they were missing the boat on the comming undersupply of bonds. In the meantime, he bought the shit out of it. Loaded up on the 30 year and then headed to wall street to sell the "big brains" some spread product to the tune of tens of billions. They bit. Now they're biting it, bigtime. Lord knows what else they did on top of the spreads they bought from Gross, but suffice it to say, when the Fed announced there would be a whole lot less bonds floating around this year and the next ten years, the collective investment community promptly shit it's collective pants. To give you an idea of the scale that's likely involved here, there are roughly 23 dollars in the bond market for each one measly dollar in the stock market. That's a lot of kwan.

So that's what I'm seeing from here, an old fashioned squeeze play, albeit an outsized one, but then again Gross runs 186 billion out there in Newport Beach land and he has some large friends as well. Plus, he correctly set the Fed up as his patsy defacto partner. How cool is that?

For a better explanation, go to Gross's website and read his Feb investment newsletter.

http://www.pimco.com/outlook00/feb00.pdf

Not certain what happened out there today, but am certain inflation is here to stay. Commodities will continue to rise.

On the oil front, there seems no end in sight to the problems. Richardson was out making mealy mouthed crude bear bleatings again today. Looking for heat to absolutely collapse once boats get into the harbor. Pray for some warm weather for EC folks.

-- Gordon (g_gecko_69@hotmail.com), February 04, 2000.


If Goldman-Sachs tanks? Yee-Gad! Alan Greenspan would have a micardial infarction (heart attack)! Seriously, markets would panic big time.

-- Mad Monk (madmonk@hawaiian.net), February 04, 2000.

This is the tip of the iceberg!

-- dinosaur (dinosaur@williams-net.com), February 04, 2000.

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