Wednesday, August 26, 2015

If I were a conspiracy theorist, ~and I'm not~, but I play one today.

Last night Mr S. and I were talking about China and I said to him - boy, China is really spending a lot of money to prop up their markets. I hope we don't get a margin call.

You see, for a little while I've been feeling like we could have an "accident". Meaning that something happens in the market that is so out of the Fed control that rates actually spike by a lot without the Fed doing anything. Then we went on to have to long discussion about what happens if China were to actually start selling all those treasuries they bought from us. It's like a triple layer chess game trying to figure out how that might play through the market. And I don't understand bonds as well as I'd like.

Not too long after that Mr S. went over to Zero Hedge and saw that we are kinda getting a margin call. Here. They talk about it again today.

Mr S.'s theory was if China did start selling too many bonds into an illiquid market the Fed might actually have to raise rates to attract buyers. I don't know what the probability of this is, but it's not zero right now.

All that money China is spending has to come from ~somewhere.

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