Re: Neglected prophets!

["ÁÎ×Ó¹â HenryC.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

Max Sawicky wrote:

>
> By all means let's have more prophesy, specifically
> in re: two questions:
>

Three.

>
> 1.  Why, in light of the shrinking supply of public debt,
> was the recent Treasury bond sale a "disaster"?
>

Because the market, including the Treasury, was scrambling to buy long term,
while the sale was with short term instruments that the Fed was and expected to
continue pushing up rates.

>
> 2.  Why won't Fannie Mae's and similar stuff become the
> new safe harbor?
>

Fannie Mae's, so called agencies, have been privatized. Thus they do not carry
the full credit of the US. Also agencies have a a size characteristic tied to
the economy, unlike federal debts which are independent of business sycles or
growth.  Finally agnecies do not have countercyclical impact.

>
> 3.  Why aren't banks begging me to refinance?
>

Becuse consumers are smart enough to not take 30-year loans under these
conditions.  Besides all their mortgage holdings have been sold a
Mortgage-backed securities.  The profit formula has shifted from borrowing shot
term to lend long term at higher rates, which was the main cause of the Asian
crisis, and the problem with REITs and the entire sub-prime lenders industry,
to the reverse of borrowing long term to lend short term at higher rates.
Where the inverted yield curve normalized, there will be a lot of bancrptcies
for finance comoanies.


Henry C.K. Liu