Oh boy, P. I love economics...
You are 100% right on everything you said. bingo.
But let me just say 2 words.
Mercury Finance.
A stock close to your heart. We all know about the reason it tanked (putting it mildly), but by the reports I have read, the stock was wildly overpriced beforehand.
Consumers were defaulting in greater numbers, making Mercury's numbers worse. The point is, defaults are rising across the board, banckruptcies are in the news due to their numbers. Consumers are strapped because they are stretched to the limit on credit, AND because rates are too high. Consumers drive 50% of this economy.
In this scenario, any raise in rates by the Fed will cause an economic downturn, making the bond get giddy with glee. Which is exactly why the bond has been rallying for a few months.
Actually, the balance right now is so finely tuned between rates and inflation and growth, that very little has to be done to tilt the see-saw.
You're so right, we are in a Goldielocks era. Someday the 3 bears are going to show up and ruin the party. |
