I read at least one analyst suggesting that the recent ‘flight to quality’ that caused the 10yr rates to drop was an illusion created by Goldman Sachs as they purchased the 10yrs themselves
Why would GS want to create the appearance of a ‘flight to quality’ in the US Treasuries?
The analyst’s answer was that having a ‘flight to quality’ (or the appearance of it) happening in the bonds might keep some money from flowing into the precious metals (which are already threatening to break to new highs)
The money managers on Wall Street and elsewhere are mostly lemmings – if ‘everyone’ is buying the bonds then they will buy the bonds too – even if they lose your money, they will still get their Xmas bonus and keep their job – the only thing they have to worry about is doing less-well than their peers (ie, if Joe loses 10% of your mutual fund’s NAV he will be OK as long as most of the other mutual fund managers also lose around 10% NAV)
This lemming-like behavior from the money managers allows market movers like GS to play games that benefit themselves financially (like going long 10 yr bonds before creating the illusion of a flight to quality in the same market)
At some level, GS has become an extension of our government – Hank Paulsen, the US Treasury Sec, came from GS – the head of Canada’s central bank came from GS (getting ready to merge Canada with US?) – and another GS person currently heads one of the international banks (BIS?) – I haven’t decided how to interpret GS reports when they come out (like ‘Sell Gold Short in 2008’) but I am being very leery about all GS activities at this point
A prime example of GS shenanigans occurred back before the last Congressional elections – GS maintains a commodities index and prior to the elections the gasoline portion of this index was nearly 10% (numbers are from memory) – GS, for whatever reason, decided to modify this index and reduce the gasoline portion to around 2% – at that point, all the mutual funds and hedge funds that were basing their portfolio on the GS commodity index had to reduce their weighting of gasoline to match the change in the index
About $7 billion dollars worth of gasoline futures contracts were sold and, of course, the price of gasoline went down
The American consumer got cheap gasoline going into an election and GS was probably short gasoline futures prior to driving the market down with their ‘manipulation’
