14 Jun 2010

Bob Wenzel Sounds the Alarm

Financial Economics 6 Comments

When you have a little kid you get to watch a bunch of Disney movies that would otherwise classify you as a sissy. (This includes the Little Mermaid, which is a really great movie–I mean, I forced myself to watch it for the little kid.)

Anyway, I forget the name of it, but when my son was really sick a few years ago we watched a movie with a young Asian woman who ends up being a great samurai warrior or something like that. In the beginning of the movie, the sentries need to warn the people that invaders are coming, and so they have a string of warning fires that they light. In other words, the guy on the outer perimeter spots danger and lights his fire, then the next guy in sees it and lights his fire, etc.

I am merely doing my duty now in the blogosphere. For all I know Bob Wenzel has been spooked by his own shadow, but when he sounds the alarm I have to relay the message:

The continuing mystifying decline in T-Bill rates continues.

The yield on the one-month T-bill is now at 0.005 %. This is a drop of -0.014 or -36.842%, from Friday. Less than a month ago, on May 20, the one month was at a 52 week high, yielding 0.165%.

The decline in rates means, somewhere, somehow, very serious money wants to be in a totally risk free, virtually no yield position. Yet there does not seem to currently be the panic anywhere in the world that would justify this flight into T-bills.

This kind of activity doesn’t happen without something breaking in the markets somewhere big time, very soon.

I don’t have any special insight into what the chink in Geithner’s armor is, but this whole “recovery” is held up by bubble gum and Bernanke’s charm, as I’ve written elsewhere. I have been expecting another collapse in the stock market. Let me put it this way: After the bubble popped, stock and other prices began falling down toward reality in late 2008. Then the Fed and the Treasury did what they could to reinflate the bubble. So I fully expect it to deflate once again.

(Note that I am talking about asset prices here, not the prices of consumer goods. Don’t worry, I’m not trying to wriggle out of my CPI-inflation call. I think stock prices are going to tumble in the near- to medium-term, and that consumer prices are going to skyrocket.)

6 Responses to “Bob Wenzel Sounds the Alarm”

  1. John Goes says:

    Agamemnon would have been the more erudite reference to chain signal fire concept.

    • bobmurphy says:

      I don’t recall any fire scene in the movie Troy, so I don’t know what you’re talking about.

      • Yancey Ward says:


  2. Mitchell Powell says:

    I think the movie title you’re looking for is Mulan, a thoroughly enjoyable movie.

  3. Daniel Hewitt says:

    Yep, it’s Mulan. Bob doesn’t have any daughters, so we can forgive him for his lack of knowledge about Disney princesses.

  4. fundamentalist says:

    Could the demand for safe investments be driven by monetary policy? The Fed is desperate to pump money into the economy, but no one wants it except for the carry trade. Once the Europe situation calms a little, look for that money to head to the stock market, then Katy bar the door.