Briefly, I want to talk about treasuries and what a "bubble" in treasury means other than ability to finance government debt.
Many treasury-based investment funds exist. I'm in a couple of them. I've been in one of them for just over a year. Its value has remained essentially flat over the last year, which has been of course dramatically better than the stock market, and, for that matter, almost all funds of all sorts.
These funds provide liquidity through buying and selling both newly-issued treasuries and already-existing treasuries to other investors interested in holding treasury bills for some period of time. To oversimplify things, higher interest-rate treasuries yield higher prices on these markets all else equal, than lower-interest-rate treasuries. The market is currently flooded with low-interest-rate treasuries. Treasury bills have been strongly sought, pushing rates very far down.
Should this be a treasury bubble (as it appears it is), and should that treasury bubble burst, far fewer people will be buying treasury bonds, and rates paid on them will go up quite a bit. This will happen for newly-issued bonds, sending debt financing costs through the roof, as often mentioned. This will also send the liquid-market value of low-interest (previously-issued) treasury bonds through the floor, because they'll be competing in the resale market with bonds paying much higher interest. Accordingly, funds based on treasuries and treasury market liquidity will tank.
While I am not an investment advisor and this is not investment advice, I would take growing reports of decreased interest in treasuries by large government actors very, very seriously. I would also ask myself why these countries buy so many US treasuries (answer: to sterilise their massive trade surpluses with the US and keep the value of their currencies down, hello China) and I would pay very, very, very close attention to plummeting US imports and Asian country exports. I would also pay serious attention to any failed Western government bond auction.
That's certainly what I'm doing, anyway. I'm paying very serious and careful attention to these matters.
Here, a short news update; there's lots more, and you may get a second post before morning:
Mish has an interesting breakdown of the ADP report on unemployment I linked yesterday; contraction was particularly sharp in small and medium-sized businesses; I speculate that large businesses are only now starting to get to their layoffs, as per the Alcoa and IBM reports from yesterday. CNN has market reaction commentary here, if you want to hear the MSM reaction.
In tech, PC maker Lenovo is laying off 2500, and Gawker is reporting that Google has cut around 6,000 contract/vendor and intern positions since October. Dell Ireland is laying off 1800 to save costs.
Macy's sales were down a sharp 4%, but that's actually better than the Thomson Reuters consensus forecast. Despite that, they're closing 11 stores. The strange flip side is that Wal-Mart's sales rose only 1.7%, which is still a rise - they were the only major retailer expected to show one - but much lower than expected. They're issuing lowered guidance moving forward.
Barnes and Noble sales fell 7.7%, Saks fell a brutal 19.8%, Target fell in line with Macy's - interesting - at 4.1%, J.C. Penny sales fell 8.1%, while Kohl's beat expectations at only -1.4% and The Gap did much worse than expectations at -14%.