Dazed and Confused

The yield curve is quite flat right now. This means that now two year government yields are
very close to rates on ten year instruments. This means that exercising optionality in ten year notes makes some sense and the two year/five year or two year/twn year swaps are quite cheap.

For home owners who have home financing using floating rates, this is not good news. A possible scenario could be the slowing of home sales, if not price reversals in hot markets like the two coasts and Chicago.

I'd argue that this malady is probably somwhat oil driven. When I think back to a few years ago,
I was able to buy regular unleaded gas in LaPorte, Indiana for only 89 cents per gallon. Last week I spent $2.73 for the same in San Clemente. And the price isn't much lower here in Chicago.
This bputs upward pressure on rates because it causes businesses to have to borrow more money o stay afloat. And it means ultimately that businesses need to increase prices to pay overhead.

But, if the Fed keeps focussing on inflation as a possible malady, we face the prospect of an INVERTED yeld curve. What does this mean ??

HIGHER SHORT TERM RATES THAN LONGER TERM (AN INVERTED TERM STRUCTURE) MEANS BANKS NO LONGER MAKE MONEY. Banks borrow from investors through checking and savings. But they "lend" money on the long end through mortgages and business loans.

Shades of Stagflation?? Think 1985 or "deja vu all over again".

So, we are seeing major consolidation among exchanges. This was entirely expected.
The only reason most exchanges exist now is because of outmoded regulation and good old fashioned pride.

Bank and exchange consolidation will continue almost ad infinitum.

I'd argue that the value of an exchange will continue to consoidate until it's
fair value is realized: a client front ent, rented server space at a server farm
and a few tech head consultants. IBM at its ISM division in Ontario runs exchanges already.

After all, what programmer worth his salt in java has not written a client server
application that does an online auction ?? It is easy.

I have two friends who have purchased CNG cars. These guys live in San Clemente, California. They purchased these cars because the cars use domestically produced natural gas, not gasoline that comes from terrorist oil. In addition, CNG is more efficient and on a per gallon basis the fuel costs less than gasoline, which is in the $2.70 range.

Oregon proposes tacking ALL cars via GPS and "metering" all roads. Each vehicle will be taxed ACCORDING TO MILEAGE. This effectively makes ALL roads TOLLROADS, including your friendly neighborhood side street and even the dusty country road.

More importantly, this removes incentive to ever buy a fuel efficient vehilcle. It is hoped by Oregon that ADJACENT STATES adopt the tax (CALIFORNIA). Of course, a Blue state like Illinois would not be far behind.

What is next? Maybe bicycles should be taxed? or maybe we should have chips installed in our skin so that the politicians can tax us on walking???

(Click the link above to read the Heartland Institute Description of the Proposed tax)

Generally speaking, it can be shown that short term, stock day trading strategies do not perform
well enough to merit great attention. Thgis is largely due to short term volatility and transaction costs. See the link above.

I am looking into getting a NASDAQ level 2 screen right now, but this is to view order flow and analytics, primarilily.