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Thursday, April 22, 2010


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Not to diminish the magnitude of the sovereign debt problem but I still get the feeling Treasuries are shunned more out of fear of imminent inflation than US default. Considering what I read about how the US military still calls the shots globally I can imagine a whole pile of other debt out there, miles ahead of the US in the default queue, turning turtle long before US Treasuries. Of course the real test will come when global equities descend from high orbit. Until then, unlike Bloomberg, I will reserve the right to be wrong.


There is no possiblity of actual default of US sovereign debt. Effective default via monetization is another story.

PIIGS and CA / IL / FL do not have that luxury.

Mamma Boom Boom

Will Obama make it thru 4 years or will the births finally take him out?


Mamma, if by "births taking him out" you mean a court removing him due to proof he is not a Natural Born Citizen, no. Forget about this. 

I think the rupture to the political fabric would be huge if this argument were successful. Even if a case could be made, I cannot imagine a US court taking on a President like that. The proper way would be to file a quo warranto motion in the DC Circuit, but I cannot imagine the US Atty taking that on to initiate the process.  It would take a political calamity that weakens Obama like Watergate did Nixon for anything like this to be more than fringe.

The tactic that is slowly being figured out is to challenge his eligibility for the 2012 election. I do not know if this will be successful. The easier argument than place of birth is the interpretation that NBC is not the same as native born - it means a second generation citizen, born in America of American parents. Obama admits his father was not an American, which means under this interpretation of NBC that he is not an NBC. Apparently in a 2004 debate with Alan Keyes he admitted that he was not eligible for President, but pointed out that he was running for Senate at the time, which had no NBC requirement. But for this to work that standard would have to be unambiguous. In four prior Supreme Court decisions, they repeated that mantra ("born in America of American parents") or its equivalent, but the cases are over 100 years old and did not directly read on a Presidential eligibility (although one came close, back in the early 1900s). 


Generally good Q1 results so far, but some slightly raised eyebrows ... IBM, Boeing, Microsoft, Amazon. I thought the following snippet was of interest. 'Investors were looking for a bigger revenue gain than the average 7.4 percent that companies have posted so far, particularly given easy comparisons with the year-ago period when the U.S. was in the depths of recession, said Peter Sorrentino, who helps manage $13.3 billion as a senior portfolio manager at Huntington Asset Advisors. The market may stall until profit is driven more by rising sales than cost cuts, he said. 'Ultimately you have to have a revenue growth story. Let’s see results, let’s see end demand.' If Q2 and Q3 are the same, the markets will start to fall in anticipation. My guess is that, ceteris paribus, there is not much more upside but we may have a few months of bumping against a ceiling before a steady decline.


If bond funds and foreign governments are cutting back on their treasury buy would it be unreasonable to assume that higher rates are around the corner? If so, TIPS might pop sooner rather than later but might not do so until rates start moving.

Mamma Boom Boom

Yelnick, thanks for your input.

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