Pimp My Bonds

So now the market is freaking out that the ten year has surpassed 5.25% on the day that Maestro (a.k.a. Alan Greenspan) at a mortgage conference says it’s not a problem that China is selling Treasuries.

Greenspan just can’t stay out of the limelight. Shortly after PIMCO announced Greenspan is doing consulting for “the authority on bonds”, Bill Gross predicts the ten year will hit 6.5% in five years. Now that’s really sticking your neck out there!

It certainly was a case of his irrational exuberance that has now brought us to the mother of all bubbles. He drops rates to 1% to create a housing bubble. As the rate between ARMs and fixed began to narrow, he told the public they were crazy not to take out adjustable over fixed loans. Greenspan was concerned that if the government cracked down on predatory lenders that borrowers might get a false sense of security from a lender that advertised itself as “Fed-inspected”. (Funny that he doesn’t have any problem with the fact that the public as well as most of the financial world is under the illusion that Fannie and Freddie’s bonds are government guaranteed!) Since Greenspan’s own money (at least during his Fed chairmanship) was invested in Treasuries, there’s no question that he personally profited from the bond bull market.

It’s interesting that Greenspan’s upcoming book is titled “The Age of Turbulence” as that is how the US and world markets will react later this summer when all the bubbles he created – real estate, bad loans, stock buybacks, hedge funds, private equity, burst under the inflation he never chose to count.

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