July 20. Watch out below in stocks…

–I casually mark ten year treasury yield to ten yr inflation adjusted note at the end of pit trading (supposedly an indication of ten yr inflation). This entire year, even as rates have gone inexorably lower, the spread has never gone below 204 bps. The high has been around 244. Now 216. I’m not sure that it means anything, though I feel that there’s not much more upside in the long end of the curve. What is clear is that grains are exploding to record highs. Food costs at the retail level will follow. Oil was up 275 yesterday. Property taxes are going higher. All necessities are likely to become more expensive relative to gadgets.
–Not only does the flat curve and prop trading ban negatively impact the banking industry, here’s a piece from Reuters: “Lenders like Bank of America Corp and Wells Fargo & Co say they are facing mounting pressure to buy back bad mortgages they sold to investors, signaling that banks’ home-loan headaches could continue for years…Investors like Fannie Mae and Freddie Mac have been pressing banks to buy back bad mortgages for years, but in recent months those requests have intensified…”
–Curve was somewhat steeper yesterday. Heavy buying in front end contracts.
Click this link http://gregmankiw.blogspot.com/2012/07/progressivity-of-taxes-and-transfers
Short article about tax payments LESS gov’t transfer payments for 5 income levels. Interesting to note that the middle quintile now RECEIVES $1.05 in transfers relative to $1 paid in taxes…up until 2007 this “middle class” was a net contributor.

Posted on July 20, 2012 at 7:35 am by alexmanzara · Permalink
In: Eurodollar Options

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