8 Year To Late Don"t You Think?

Pope criticises US for ignoring diplomacy before Iraq war

Pope Benedict XVI made a veiled attack on the United States for failing to listen to the international community before starting the war in Iraq.
In a carefully-worded speech to the United Nations� General Assembly, the Pope underlined the need for diplomacy.
�Multilateral consensus continues to be in crisis because it is still subordinated to the decisions of a few, whereas the world�s problems call for interventions in the form of collective action,� he said, adding that international rules must be �binding�.
He continued: �There have been painful lessons for the US, the UN and other member states. I think in the end everybody�s concluded it�s best to work together with our allies and through the UN,� the Pope said.
Archbishop Celestino Migliore, the Vatican�s UN representative, said the Pope wanted to attack �the false notion that might makes right�.

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Treasuries Massacred; Yield Curve Steepest On Record

Bernanke cannot have his cake and eat it too. If the economy is recovering the yield curve should steepen. And steepen it has. The Yield Curve Is Steepest On Record.

The difference in yields between Treasury two and 10-year notes widened to a record on concern surging sales of U.S. debt will overwhelm the Federal Reserve�s efforts to keep borrowing costs low.

The so-called yield curve steepened to 2.75 percentage points, surpassing the previous record of 2.74 percentage points set on Aug. 13, 2003.

Ten-year notes have lost 10.3 percent this year, according to Merrill Lynch & Co. indexes, while 30-year bonds have lost 27.5 percent. Two-year notes have gained 0.2 percent.

Rising 10-year Treasury yields are pushing yields on mortgage bonds higher, prompting holders of the securities to sell government debt used as a hedge to protect portfolios against rising interest rates.

As mortgage rates rise, the expected average lives of mortgage bonds and mortgage-servicing contacts extend as potential refinancing drops, leaving holders with portfolios of longer-than-anticipated durations. Duration is a measure of bond price sensitivity to interest-rate change.

�The back-up is mostly related to convexity selling by mortgage investors,� said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG�s Private Wealth Management unit in New York. �This will be a test for the Fed.�

Yield Curve 1999 - Present



click on chart for sharper image

If the economy is recovering, the Fed should welcome this steepening. However, what if the yield curve is simply reacting at the thought of Bernanke monetizing Obama"s massive deficits and the various stimulus plans?

I doubt the economy is recovering but it is may be getting worse at a lesser rate. Moreover, if the curve flattens, it sure will not be because of intervention, it will be because the so-called recovery has stalled. Heaven help Bernanke if the economy worsens and the yield curve continues to steepen.

Regardless why the yield curve is steepening, Bernanke"s belief that he can control both the long and short end of the curve is seriously misguided. The fact is he cannot really control either, at least for long.

Twilight Zone Treasuries

Flashback April 23 2009: Twilight Zone Treasuries

The Fed said at its last meeting it intends to buy $300 billion in Treasury securities over six months in a bid to lower long-term borrowing costs and revive economic growth.

$TNX - 10 Year Treasury Note Yield




click on chart for sharper image

Professor Fil Zucchi on Minyanville had this succinct comment:

"Today the Federal Reserve printed $7 billion dollars and used it to buy an equivalent amount of 7 and 10 year Treasury bonds. As I publicly asked before, if Mr. Fed can"t rig the price of an asset by buying it with printed money, why should anyone else buy it?"

Those wishing to keep an eye on these price rigging attempts can follow the Federal Reserve Bank Permanent OMOs: Treasury link.

Bernanke"s Hubris

It is ridiculous for the Fed to think it can control the vast $trillion treasury market with pea shooting efforts at $7 billion a pea. However, as the charts above show, the Fed announcement hugely distorted the market in smaller timeframes.

As Prof. Zucchi says "If Mr. Fed can"t rig the price of an asset by buying it with printed money, why else should anyone else buy it?"

Other than the initial pop, the Fed"s silly attempt to game the system may have caused so much mistrust that it is putting upward pressure on yields.

Treasury Yields Where To From Here?

A couple of people wrote me today saying I have been wrong about treasuries.

Let"s backtrack for a moment to set the record straight for those who think I have been bullish on treasuries all year. Although the strength of the selloff this year has been surprising, I stepped aside in December.

Prior to that I was hugely bullish, more so than anyone I know.

Mish Treasury Calls

Sunday, January 20, 2008: Time To Short Treasuries?

Kass Says Sell Bonds Short.

Kass: The bond market is in a bubble that is reminiscent of (and quite possibly as extreme as) other bubbles during previous eras. From my perch, the only issue is the timing of this trade.

Mish: Timing is indeed everything and perhaps there is a temporary selloff. But the primary trend is for lower yields. Perhaps much lower yields. There is no bubble in bonds. Not yet.

...

Anyone who wants to short treasuries with impunity on this economic backdrop can be my guest. For the record, I have no grudge against Kass. He puts out a good column that I frequently agree with. However, I take the other side of this debate.

There is no bubble in treasuries if you look closely at the fundamental issues. Those who want to see how low treasury yields can get and stay there, need to look at Japan. Yields in the US are going to go far lower and stay lower longer than nearly everyone thinks.

Thursday, June 26, 2008: Is The Inflation Scare Over Yet?

Those focused on the CPI failed to see any chance of the Fed Fund"s Rate at 2.00 again. On the other hand, those focused on the destruction of credit from an Austrian economic perspective got this correct. That is just one reason why it makes more sense to watch the credit markets than the CPI. The second is the CPI is so distorted it is useless.

In my opinion, it is very likely new all time lows in the 10-year treasury yield and 30-year long bond are coming up.

Wednesday, November 19, 2008: Misguided Bets On The Yield Curve

Someone from one of the big brokerage houses emailed me last week saying the yield curve would steepen. My response was "Why should it?"

A bet on the yield curve to steepen is a bet the economy improves. Why should it? An even better question is "How low do 10 year and 30 yields go?" Certainly 3% or lower on the 10 year and even 30 year are in the realm of possibilities. That"s how nasty this recession is likely to get.

Tuesday, January 06, 2009: Reflections On 2008, Themes For 2009

It is quite possible the lows in treasury yields are in. Unlike 2008 where I was constantly beating the drums for lower yields, 2009 could be different. Here are the facts: 3 month and 6 month yields hit 0% and the 10 year came close to hitting 2%. Could there be lower yields still? Yes, quite easily. Is it worth playing for other than as a hedge or part of an overall investment strategy? No.

Thursday, March 26, 2009 Quantitative Easing Begins; "Operation Twist" Revisited

Appearance vs. Reality

Yields may drop. If they do it will not be because quantitative easing is working. If yields drop from here, in spite of the massive supply of treasuries stemming from Obama"s sky high budget, it will be because the economy is in worse shape than anyone thinks.

Those hoping for a second half economic recovery should be hoping yields rise, not sink.

"Operation Twist" failed. So will "Operation Twist Again" in one way or another, or perhaps multiple ways. For example there is no specific reason mortgage rates will drop even if [treasury] yields do. Default risk is simply too high.

Are Yields Going Up Or Down From Here?

Yes they are. I guarantee it. If you want to know which way short term, I do not know, nor does anyone else.

Monday, April 06, 2009: Fed"s Effort To Roll Snowball Uphill Is Failing

Bernanke thinks he can manipulate treasury yields by purchasing long dated treasuries. He can"t. The market is simply too big.

The Fed"s problem is that it cannot force rates where it wants no matter how many treasuries it buys, short of owning them all. If the Fed is buying treasuries at an unnatural price, supply will be unlimited.

Friday, May 15, 2009: Nonexistent "pre-recovery" in Manufacturing Suggests US Treasuries a Buy

Yield Curve as of 2009-05-15



Treasuries Are A Buy

I went cautious on treasuries in December, but it"s now time to become bullish again. Talk of "green shoots" and "pre-recoveries" is way overdone. Let"s come back to this chart in September and October. My bet is the yield curve will be flatter and yields on the high end (10 year and 30 year) will be lower than today.

In September and October we will see if I was right or wrong, but looking back I am quite pleased with 2008 calls culminating with taking the treasury chips off the table in December 2008 (via public blog comments) and officially posted January 6, 2009.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Suck Eggs McSame McBush, who is Presidential? Obama That"s Who

Get a load of the excitement and smiles

Senator Obama With U.S. Troops in Kuwait

Senator Obama Opening Remarks in Kuwait



Obama Meets Afghan Leaders, Makes Stop in Kuwait

Now watch this drive...



McCain: 100 years in Iraq "would be fine with me"

McCain: Bringing Troops Home from Iraq "Not Too Important"

Confirmed: McCain pulls all ads.

Source: MSNBC First Read

Virginia-based firm Smart Media, which conducts media buying around the country for the McCain campaign, sent out this urgent memo this afternoon addressed to "All National Managers."

RE: Suspend all McCain for President Advertising
"As you are aware, the John McCain for President Campaign has suspended all campaigning to address the current national financial crisis. Effective 5pm today, September 24th, 2008, all advertising for the McCain for President Campaign must cease. Please notify your stations immediately."
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Palin Implicated By Witness in �Troopergate� Probe

Source: The Public Record

An Alaska woman who owns a company that processes workers� compensation claims in the state has told an independent investigator that she was urged by the office of Gov. Sarah Palin to deny a benefits claim for Palin�s ex brother-in-law, a state trooper who was involved in an ugly divorce and child custody dispute with Palin�s sister, despite evidence that the claim appeared to be legitimate, according to state officials who were briefed about the conversation.

Murlene Wilkes, the proprietor of Harbor Adjusting Services in Anchorage, had originally denied there was any pressure by Gov. Palin�s office to deny state trooper Mike Wooten�s claim for workers compensation benefits.

But she changed her story when she was subpoenaed by Steven Branchflower, the former federal prosecutor who was appointed in July to probe allegations Gov. Palin, Republican presidential candidate John McCain�s running mate, abused her office by abruptly ousting Public Safety Commissioner Walt Monegan, state officials knowledgeable about her conversation with Branchflower said.

Monegan has said Gov. Palin pressured him, several of her aides, and her husband, Todd Palin, to fire Wooten. Branchflower�s investigation centers on whether Palin fired Monegan because he refused to fire Wooten.

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Cuban government shunned, saying in a statement Monday that it cannot accept help from ``government that blockades them.""

Cuba rejects U.S. supplies, asks for suspension of trade embargo

Source: Miami HeraldCuba rejects U.S. supplies, asks for suspension of trade embargoResponding to criticism, the U.S. offered $2 million in supplies. Cuban officials asked for a suspension of the trade embargo instead.

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Bush, Cheney, Ashcroft, Powell, Tenet, Rice, and Yoo Have All Committed War Crimes Punishable by Life in Prison, Death Or Impeachment

Anyone who violates the Geneva Convention by engaging in murder, torture, or inhuman treatment is guilty of a crime under U.S. law.

Specifically, the War Crimes Act of 1996, a federal statute set forth at 18 U.S.C. � 2441, makes it a federal crime for any U.S. national, whether military or civilian, to violate the Geneva Convention

The statute applies not only to those who carry out the acts, but also to those who ORDER IT, know about it, or fail to take steps to stop it. The statute applies to everyone, no matter how high and mighty.

Indeed, anyone who is a policy-maker who helps create, promote, or justify policies that violate the Geneva Convention is guilty under 18 U.S.C. � 2441. See this, this, this, and this.

What Does This Mean?

Well, according to the Associated Press, Cheney, Ashcroft, Powell, Tenet, and Rice all approved torture, and Bush knew about and approved what they were doing (see also this).

In addition, in addition to Ashcroft, other high-level Justice Department officials such as John Yoo approved of and justified torture.

All of these people are guilty of war crimes under 18 U.S.C. � 2441.

18 U.S.C. � 2441 has no statute of limitations, which means that a war crimes complaint can be filed at any time. The penalty may be life imprisonment or -- if a single prisoner dies due to torture -- death. Since the U.S. military has admitted that they have tortured some prisoners to death, that means that Bush, Cheney, Ashcroft, Powell, Tenet, Rice, and Yoo could all be sentenced to life in prison, or even death.

Additionally, violation of the war crimes act almost certainly constitutes a "high crime or misdemeanor" which would allow impeachment of such officials.

Indeed, many high-level officials in the U.S. and abroad have stated that those who crafted the torture policies are guilty of war crimes. For example, Colin Powell"s former chief of staff stated that Dick Cheney might be guilty of war crimes. And Former Malaysian premier Mahathir Mohammad is calling for an international tribunal to try western leaders for war crimes over the Iraq war.

And for those who question whether waterboarding is torture, see this, this, this, and this.

Indeed, waterboarding is not the only form of tortures which has been used by the U.S. recently.

Finally, Donald Rumsfeld appears to have also committed war crimes. For example, the general in charge of the notorious Abu Ghraib prison in Iraq stated this week that Secretary of Defense Donald Rumsfeld and other top administration officials ORDERED that inhuman treatment and torture be conducted as part of a deliberate strategy. This confirms what the Pullitzer prize-winning reporter who uncovered the Iraq prison torture scandal and the Mai Lai massacre in Vietnam previously wrote.

Alberto Gonzales probably also committed war crimes by promoting and covering up torture.