Heinz on Abbey Conehead and Treasuries
Date: Tue Sep 21 2004 15:46
trotsky (Abby Joseph Cohen) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"we believe the stock market is not properly pricing in the good news that has already occurred"
she really said that just now. and that's GS's, 'chief stock market strategist'? if i'm not mistaken, the stock market discounts the future, and rarely what 'has already occurred'.
it's little wonder that those following her 'top recommendations' in late '00 got a 90% haircut - she must have made those recommendations with her eyes firmly fixed on 'what has already occurred' as well.
Date: Tue Sep 21 2004 15:21
trotsky (Aurum@phony LT rates) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i don't think so. history has shown that even when all the central banks act in concert to force a specific outcome ( a great example is the 'fixed exchange rates' and 'gold at $35 to $42' schemes that came apart in the 70's ) , they can't stem the tide of the market.
this is to say, they can for a limited amount of time, but never in the long term. some schemes work longer than others, but one only has to look at how the Pound fell out of the ERM in the early 90's to realize that with capital flowing more freely than in the 70's, such schemes should actually come apart faster nowadays than back then.
this is not to say that the recycling of dollars by the Aisan nations isn't a factor in bond pricing - it clearly is. but if private sector market participants were convinced that the CBs act in desperation to keep rates artifically low, they'd all take advantage and sell their bonds to them at the artificially high price ( just as they bought gold at its artificially low price in the late 60's/early 70's ) - which would destroy the scheme very fast.
however, looking at the Fed's flow of funds reports and the leverage amassed by many major bond traders, there seems to be no rush to the exits - on the contrary. note also that futures speculators recently ( not anymore, but at the recent lows in the bond market a few weeks back ) held a record net SHORT position in bonds and notes, i.e. took action forcing the market lower, in expectation of even lower prices down the road. the fact that they haven't succeeded implies that there is strong underlying demand for bonds from several quarters, not just the Asian CBs.
btw., i believe that eventually this CB demand will be replaced by even more domestic demand for bonds - as ageing boomers hunt for income. |
