DON'T BUY LONG BONDS FOR THE NEXT TWO WEEKS.
Wait till this auction settles before taking on long term assets.
FED MOTIVATION
Why on earth would the encourage banks to create more money? MZM is growing fast enough to fuel inflation without this help.
Gold is making new highs. The last time gold was up here, the Fed was still increasing the Funds target.
The bond market is facing a quarterly refunding next week where investors will have to choose between long bonds at 4.75% or short-term instruments at the same rate. Any fear of inflation will make this auction a disaster.
TACTICS
Stay with money market arbitrage.
Extend the maturity of liablities today. Don't wait.
Bond futures are at resistance. This is the time to sell bond contracts.
Do not take on long term assets.
STRATEGY
Warn the board that inflation is coming.
