Dave, the thing with interest rates is the last easings haven't worked their way through the system as of yet, (it takes 6-9 months) and the FED knows that they eased too much already, and they screwed up. So they have to start raising rates as early as June to off-set their screw up.
Maybe they can walk the razors edge, maybe not.
That is the bet we have make/take.
There is inflation, look at health care, look at home & auto insurance, housing itself, and gasoline is up here in Chicago 40% in the past 2 weeks...As you said, there are no current serious
widespread inflation
problems, just those sectors I mentioned, but if you read what they are saying, if they don't raise soon, there will be. They simply lost it after 9-11 and floated way to much liquidity into the system.
The most important thing to remember is the FED is there to protect the banking system, not the stock market.
That is why they call it the Federal Reserve System, and I bet many still don't realize the FED is a private and not public entity..........
The market indexes went up too fast, now earnings have to catch up to the valuations, and they won't for some time, so you get market dumps as stock valuations have to come back to reality.
From todays WSJ>
Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum, said two threats were making investors sidestep Wall Street: interest rates and earnings season.
"There's a nervousness about interest rates, and now the market's becoming a little more sensitive to earnings expectations," Mr. Hyman said.
Last week, the Federal Reserve declared that inflation was as big a risk as was economic weakness, making the first step toward reversing last year's intense rate-cutting campaign that pushed the federal-funds rate to a 40-year low.
As money flowed out of cyclical stocks because of interest-rate worries, investors had few sectors they felt comfortable going, he said -- earnings outlooks are still murky, especially in the tech sector.
"For the continuation of the bull market, there have to be other sectors to pick up the slack," Mr. Hyman said. "In this case, there's little place to put that money."
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From Bloomberg this morn, I know it is odd, but it goes to point>
Indian Bonds May End Longest Rally in a Decade: Rates of Return
By Bharat Ahluwalia
Mumbai, March 22 (Bloomberg) -- Indian bonds may be about to snap their longest climb in a decade because the government is planning to sell more debt and the central bank probably won't cut interest rates much further after three reductions last year.
``We're coming to the end of the bond rally,'' said Subir Biswas, ABN-Amro Bank's treasurer in Mumbai, who has sold all bonds maturing in six years and longer. ``I expect many investors to reduce their holdings.''
The 16-month gain in India's government debt market, the third-biggest in Asia after Japan and South Korea with $106.5 billion in bonds outstanding, was the longest since the nation began lifting interest-rate controls in 1992. Biswas and others who say the best is over are scouting for alternatives, including shorter maturities and corporate debt.
Investors may have a tough time matching what they've made in government bonds, which returned 26 percent in the last 12 months, according to ICICI Securities and Finance Ltd. Indian bonds had their best year in five in 2001, with the yield on the 11.5 percent security maturing in November 2011 falling 300 basis points. A basis point is 0.01 percentage point.
The move caps the longest and steepest rally for India's bond market in the last 10 years, according to ICICI analyst Sanjeet Singh. Yet the end may be near.
BTW, I like India as an investment, and have investments there, and many do not realize they will soon overtake China population wise. |
