12 replies to this topic

[dcengr]

Fed's trying to stimulate the economy by lowering rates... People decided that just means more inflation so they're dumping bonds and raising rates? Or did foreign buyers decide the dollar is in the gutter so they've decided to dump US bonds? Or was there just too much froth in US bonds lately? Or? That's a pretty big dump in treasuries today...

[ogm]

Fed's trying to stimulate the economy by lowering rates...

People decided that just means more inflation so they're dumping bonds and raising rates?

Or did foreign buyers decide the dollar is in the gutter so they've decided to dump US bonds?

Or was there just too much froth in US bonds lately?

Or?

That's a pretty big dump in treasuries today...

All of the above.

Bonds had a huge rally. So some dump shouldn't be surprizing.

EVERYONE is worried about the dollar too. I mean absolutely everyone. On every message board, TV, bloggers, articles, you name it. Probably means dollar will bounce soon. Too much attention being paid to it.

[Douglas]

The 70% Market Vane and 75% Consensus sentiment figures and the peak in the small traders' Commitment of Trader bullishness a couple of weeks ago all point to a top in the bonds of some significance. With a little good economic news or an inflation flutter, a 100 handle on the near contract seems very possible in fairly short order.

[DonBart]

EVERYONE is worried about the dollar too. I mean absolutely everyone. On every message board, TV, bloggers, articles, you name it. Probably means dollar will bounce soon. Too much attention being paid to it.

http://www.blogpulse...l...p;x=31&y=11

[Jnavin]

"Sell on the news" is what we used to call it, way back when.

[James Quillian]

Fed's trying to stimulate the economy by lowering rates...

People decided that just means more inflation so they're dumping bonds and raising rates?

Or did foreign buyers decide the dollar is in the gutter so they've decided to dump US bonds?

Or was there just too much froth in US bonds lately?

Or?

That's a pretty big dump in treasuries today...

I will be first to admit that haven't thought of or heard an explanation that sounds totally on the mark.

It looks like tons of money wants to be safe and if not safe short. And if not one of those in the last asset on the rise like gold and oil.

A rapidly declining dollar is highly inflationary. Declining interest rates are very bad for the dollar.
Money is being offered but if no one wants to borrow, interest rates will decline.

My guess is that something very bizarre is going on and a lot of people, includiing myself are going to be surprised at the outcome.

As time goes buy we are forever discovering deminsions of economics that have not been previously thought of.

Maybe we are about to learn that bubbles do structural harm to capital markets. Are there problems when money made through investing becomes more desirable than money made through working? Who wants to produce goods and services when it is easier to just push prices of assets up?
What about incentives? Economists never have studied how things like supply side tax cuts change incentives to increase fiscal spending.
What happens when conservatives get elected to office and then find it more suitable to commander government to accomplish personal economic goals than to carry out their original purpose?

Its going to be interesting.

By the way, have you done any interesting backtests lately? All of the ones you have posted have been real interesting.

[pdx5]

Fed's trying to stimulate the economy by lowering rates...

People decided that just means more inflation so they're dumping bonds and raising rates?

Or did foreign buyers decide the dollar is in the gutter so they've decided to dump US bonds?

Or was there just too much froth in US bonds lately?

Or?

That's a pretty big dump in treasuries today...

China, Japan, OPEC, and others are reducing dollar holdings.
Iran & Syria have totally liquidated all dollar denominated assets.

Now with B-52 Ben having dropped fed funds rate by 10% even
individual bond holders are spooked about impending inflation
spikes and dumping treasuries.

Is there anyone here who likes prospects for stocks as long
term interest rates go higher?

[89S10]

Actually, the yield curve looks pretty normal now.

http://www.bloomberg...ates/index.html

[dcengr]

By the way, have you done any interesting backtests lately? All of the ones you have posted have been real interesting.

Yes.. I have a study that shows 70%+ chance that oil prices are going to take a crapper soon... if only for a few days.

Otherwise, the few correlations I'm looking at very keenly are:

1) Rise in rates, especially junk bond prices.. keep a very close eye on that one
2) Rise in VIX (or lack of dropping VIX)

Plus my favorite indicator.. not that its useful or anything, but certainly entertaining... the very rapid drop in prices of consumer electronics.

Just bought a nice big ole LCD monitor for a song and a dance, because all LCD prices are dropping like flies. You can now get a 1920x1080 LCD monitor, 32" (which is a TV but its still a computer monitor) for like $1000. Thats about 50% diff in a year.. wow I gotta say.

[SandStorm]

Fed's trying to stimulate the economy by lowering rates...

People decided that just means more inflation so they're dumping bonds and raising rates?

Or did foreign buyers decide the dollar is in the gutter so they've decided to dump US bonds?

Or was there just too much froth in US bonds lately?

Or?

That's a pretty big dump in treasuries today...

We are looking at the same credit fallout /risk-repricing effect.

Sure, the soverign debt of the US is the most secure. The US Treasury has never defaulted.

But foreigners are not stupid. They know that the way we are trashing the USD is just a trickier way to default.

Currency devaluation is our last move, before we finally have to control our spending and face the consequence of debt deflation.

Either that or create worldwide chaos, in which the case our super military might will ensure our dominance once again.

Edited by SandStorm, 21 September 2007 - 04:56 AM.