Aly-Khan Satchu

AIG's Bold Move and Why I'm Shorting the Long Bond

I would take the other side of your Trade. I feel we live in simply unprecedented times and the reversion to the mean idea is a mistaken one in this context. We are asphyxiating asset prices via the withdrawal of credit. This is not a small one time thing but a major long term one.

I would urge you to look at Japan post bubble as the precursor to what will eventually play out. Moreover, the only real tool in the tool box for resuscitating the Banking sector is going to be via a steepish yield curve, a positive carry environment [and the carry will get a lot juicier when Fails are punished which I am sure is imminent] and ultimately via a Bernanke put. By that I mean Bernanke will have to underwrite the yield curve via outsize buying [as and when required].

I think the tectonic plates have shifted in this regard and very little can jolt this trend.

Aly-Khan Satchu
rich.co.ke