unprecedented divergence in TIPS vs T-Notes

the two outliers, or ‘tails’, scenarios for the FED:

1)they FAIL to stimulate reflation, and the macro-deflation becomes dominant … or …

2) they go too far, and spark a hyper-price-inflation episode.

These two ‘tails’ are exhibited in the overlay chart on display below plotting the path of the iShare for the Treasury’s Inflation Protected Securities, or TIPS (symbol-TIP, blue line) … against … the yield on the 5-Year Treasury Note (red bars) … revealing a MASSIVE ‘divergence’, and break in the normally tight positive correlation between the two ‘markets’.

The PROBLEM for the Fed … can be seen in the width of the disconnect, which represents the level to which Treasury yields ‘could’ rise, if inflation were to become more prominent, with the TIPS implying a 5-Year Note Yield closer to 4%, than the current 1%. We wonder … how many T-Notes would the Fed need to buy, to keep yields from rising, and crushing the fragile macro-consumer-economy ???


via Time Loves a Hero – John Mauldin’s Outside the Box – InvestorsInsight.com

Inside Job

A great Pixar movie manages to do two things at once: it entertains and delights the kids, while also giving their parents a fresh view of life with a remarkably adult perspective. Inside Job is similar, in a way: if you don’t really understand what happened during the financial crisis, it will explain that to you very clearly. If you do know what happened during the financial crisis, however, it will do something else: it will rekindle the anger and dudgeon that you might well have lost over the past three years of being buried in the financial weeds. Ferguson doesn’t do that Taibbi-style, by calling people names: he’s more effective than that and this film will surely galvanize the anti-Wall Street wings of both the Democratic and the Republican parties.

via Inside Job