OK ALREADY!

Ok, he's a good guy. I received a bunch of phone calls in support of Bill Dudley who I beat up on yesterday. Look, folks, I don't dislike the guy--I was just having some fun ay his expense. But it seems to me when you're in a position like the head of the NY Fed you have to choose your words carefully. Dud didn't. As The Leader might say, he should look at it as a learning experience.

Anyway, things remain muddled in Euroland. Portugal's one year auction yesterday stank. Yield up and coverage barely 2x even with a yield around around 4.50%. Had a quick word with my buddy Hans who said interest was very low despite the coverage ratio. It was his view the buying was official not retail. We continue to slog our way towards the inevitable which is ok I guess except for the fact that when one finally reaches the point of acceptance one never know what's going to be out there to gum things up. I still have this nagging belief that the Treasury buying over here has a big element of out of one pocket, into another but there's no way it can be confirmed. It is looking more and more as though we might get QE III what with all the talk of a slowing economy but the real reason maybe be the threat that at some point no one is going to want to fund this mess at a level that is deemed acceptable. I have a really bad attitude about all this.

An interesting phenonomon is occuring in the FX market, have you noticed? One would think that with the terrible tragedy in Japan the Yen would be in free-fall. Not so, exactly the opposite is occuring. The theory seems to be that everyone over there is stocking up in anticipation of the vast amount of currency that is going to be require to get the country back on it's feet. Clearly, the "carry trade" is done or so I am told. I wonder, however, if this is going to affect the purchase of Treasuries by the Japanese who are, depending as to whom one listens, the second or perhaps largest holder of our debt. One thing on which I would bet is that their appitite for Treasuries will become even more focused towards the short end of the curve if focused at all. If you haven't looked at the maturity profile of our outstanding obligations lately, don't. It will scare the hell out of you with its shortness of duration and that number is becoming shorter every day. Another good bet would be not to go to bed Friday night with any kind of long position in the Yen. If the BOJ is going to move it will be on the weekend. I'm tellin' you guys, I don't like what I see and to make things even worse, Princeton would have beaten Kentucky except for three lousy back-to-back-to-back calls. Some days a guy just can't get a break.