For those of you still expecting a recovery, hopefully this will change your minds:
Of course this number will invalidate the bank stress tests if it is confirmed in the official numbers the Labor Department will release on June 5. Furthermore, nervous bond market investors are demanding more yield now that there is no longer any such thing as fiscal restraint:
Why worry about what "bond vigilantes" want? Because it affects your household wealth, and thus consumer spending:
I'm not shorting any banks or even XLF this time because the U.S. economy may be crossing some kind of event horizon. This bear market rally has gone on much longer than I anticipated and I have no idea what further tricks policymakers are going to pull to keep banks and the U.S. economy artificially alive. They want very badly to defy gravity.
Nota bene: Anthony J. Alfidi is short uncovered calls on SPY, EFA, IWM, and VWO.
Unemployment in the U.S. probably surpassed 9 percent in May for the first time in more than 25 years, underscoring forecasts that the economy will be slow to pull out of the worst recession in half a century, economists said before a report this week.
Of course this number will invalidate the bank stress tests if it is confirmed in the official numbers the Labor Department will release on June 5. Furthermore, nervous bond market investors are demanding more yield now that there is no longer any such thing as fiscal restraint:
The 1.4-percentage-point rise in 10-year Treasury yields this year pushed interest rates on 30-year fixed mortgages to above 5 percent for the first time since before Bernanke announced on March 18 that the central bank would start printing money to buy financial assets. Treasuries have lost 5.1 percent in their worst annual start since Merrill Lynch & Co. began its Treasury Master Index in 1977.
Why worry about what "bond vigilantes" want? Because it affects your household wealth, and thus consumer spending:
Federal Reserve Chairman Ben S. Bernanke’s efforts to bring down borrowing costs to revive the housing market and help the economy are stalling. Mortgage rates are
almost back to where they were in March before the 30-year rate fell to a record and sparked a refinancing boom. Mortgage delinquencies rose to a record 9.12 percent of U.S. home loans and house prices dropped the most on record in the first quarter, industry reports show.
I'm not shorting any banks or even XLF this time because the U.S. economy may be crossing some kind of event horizon. This bear market rally has gone on much longer than I anticipated and I have no idea what further tricks policymakers are going to pull to keep banks and the U.S. economy artificially alive. They want very badly to defy gravity.
Nota bene: Anthony J. Alfidi is short uncovered calls on SPY, EFA, IWM, and VWO.
