Weber a game changer?

I was very surprised at the so far only rumored, but 99 delta certainty of the departure of Axel Weber as both Bundsbank chief but also as shoe-in candidate to succeed Mr. Soft Trichet at the helm of ECB later this year.

Every way I turn and analyse this event it becomes the biggest surprise in central banking in my life as a trader, and secondly this is hardly the kind of issue Ms Merkel wants on her hand ahead of the EU Council meeting end of March which by definiton and by virtue of politicians and policy makers raising the expectations for an ALL IN SOLUTION to Europe debt problems is the most important EVENT this year for Europe and its future.

Weber seems to lack support primarily in the PIIGS countries, surprise/surprise, which is CLEAR sign no one wants to take the medicin the market needs. Weber was the long-term safety net of this political/economical alchemy experiment with debt!  This is the link to Weber speech the other day which gives some insight into his thinking:  Weber speech
Bottom line:   The market is at EXTREME EUPHORIA - and this Weber thing could be the single event which changes the balances in the market, but more to the point my main game right now: Higher Marginal Costs continues as seen by the next two charts:

Treasury Yield moves - source: Dshort.com

and.... yesterday we hit 15/16 year trend line.....

30 year US Yield (trend channel back to 1980...)


I have given up on predicting the demise of the stock market but from the cyclical aspects of the basic analysis I make it's clear we have higher than normal odds of Mid-February being top in this run.

Stay long cash.

Steen

Silver - im concerned..

ST risk here in Silver .... I'm as surprised as anyone but with 10 year auction today (where the higher damage was biggest last 24 hrs) and tech. support about to break we could have big move down, however, there are good support in stocks which these days are close substitutes for 'tangible assets'.

Nice eve,

--

There is only one headline worth my time this morning: 10 year yield in 3.25! Up a stunning 30 bps in one trading session

Market and in particular Investment Banks are caught long 7-10 y. US Treasury fixed income - the IB in their naivety buys everything Ben Bernanke says and I mean everything... its like being at a party with Bono and everyone thinking he is God.... .......and this despite Bernanke NEVER has been right about anything and I mean anything.

Furthermore the investment banks have two reasons for expanding their balance sheets going into year-end (Hat tip: JR)...:

1. Expanding the balance sheet to hide their loss'  (Bigger balance sheet means ratio of trouble issues becomes smaller)
2. The Free ride from FED and Treasury.........Funding @ zero - and now buying 320 bps with put option from Bernanke (or it seemed to be a free lunch.......!!!)

Come January 1st  -ALL of the investment banks will be busy selling the same "stock" of fixed income to get balance sheet down and capital ratios up to meet new regulatory requirement.

Bernanke even admitted in the 60 min he has no clue! No clue!  He even issues 100 pct certainties!!!!!!! (BB the tosser' quote on 100 pct control of inflation) - Let me remind him there is only two certainties in life: Tax and death.

This tax-break have ZERO IMPACT on economy despite everyone busy upgrading their growth forecasts as 2 pc of all Americans owns 45% of all assets! There is NO WEALTH EFFECT as the rich and famous are busy leaving the country or at the very least buying Gold, Silver and tangible assets - I do not know Blackstones Scwartzman personally but bite me if this "wife asking him to move to Paris for six month of the year move" is not related to tax and being fed up with the incoming massive tax increases in the US? :-)

I am not naive enough to believe that the market and investors are finally waking up but.... it seems people are starting to realise that the gains in the stock markets are not enough to pay for increase in inputs costs and devaluing purchasing power........Clock is ticking ..... Q1 will see the market down 20 pc to bare minimum 1000.00. Stay long this market at your own peril.

I'm fed up and has been for a long time, now it seems I am no longer alone, this is good news for you, your family and the world - maybe finally we will do something structurally? ......

Model morning....

More later but here is the model-run:

Inflation:  -105 bps (WTD: -135 bps)      
Note: Interesting how yield is up but inflation down = Debt risk?

Benchmark: -127 bps (WTD: -60 bps)

Inv.Bk 60/40: -113 bps (WTD: - 45 bps)

Doom-and-Gloom: +118 bps (WTD: -107 bps)
Note: Getting hurt by FI position which is closed on the close of business.
IEF sold w. loss @ 89.45

Macro Old Style: + 60 bps (WTD: -120 bps)
Note: Bought USDJPY yday - YCS ticker

The big move was the massive 10 YR spike in rates. (Click on chart for larger versions)

Same chart but weekly: