Investors: The $1 Billion Armageddon Trade Placed Against The United States (NYSE:SLV, NYSE:GLD, NYSE:TBT, NYSE:TLT, NYSE:SPY. This means someone is confident that the United States is either going to default or is going to lose its AAA rating.
That someone is willing to bet the proverbial farm that U.S. interest rates will be going up. I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out. This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn’t. The number of shops or even central banks that can take on this level of market risk is extremely small.
Paulson already scored big – about $6 billion big – on a similar trade years ago when he bet against subprime mortgages, the investments that helped bring down Lehman Bros. and many other investors. Written by Jack Barnes From Money Morning. A visualization of US debt (credit card bill) stacked in 100 dollar bills. Why High Interest Rates Are Good for the Future of the Housing Market and for Those Buying Houses by Matthew Sercely. By Matthew Sercely Many politicians today speak of the dangers of allowing interest rates to rise.
Some claim the entire housing market will come to a standstill. Others speak of the hardship of new buyers managing to buy houses if interest rates go up. It is no great surprise to any good student of economics that such fears are groundless. 1. The first and most important reason that high interest rates would be good for the housing market is that it would lower the price of housing to what a normal individual can afford. Prices of houses are not truly determined by what one is willing to pay for the house; it is determined by what one is willing to pay per month for the house. Thus, on the margin, the price of housing is determined by the cost of borrowing.
These lower prices would obviously make life very difficult for many people who own houses and are underwater. U.S. Commercial Debt Meltdown. Jim Sinclair | JSMineSet.com Now the credit derivative implosion problem has worked its way into the commercial paper market which since last week has declined by $90 billion.
The word is that the commercial paper market for all purposes is closed down, yet Professor Bernanke sleeps on. No one can say with a straight face that a shut down commercial paper market will fail to shut down the US Economy. It will. The Dow was down 300 points until rumors of a secret meeting being held at the Fed made their rounds. This is the real thing. I would certainly suggest your funds be in T bills according to your preference of Cando, Swiss or USD. This is a time to be careful of all financial houses because the Fed could remain asleep at the switch. If you want a comparison of the last time commercial paper dropped by a number like $90 billion, in 2001 the Fed promptly dropped the discount rate by one full point. The system financially is hanging by a thread.
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